Are paper prices going up, or going down? You might expect that the recession would force them down, but it isn’t that easy. Why even worry about it? The simple answer is because paper is such a large part of printing. Dick Stahle of Spectrum Press, a web printer, says that they are doing jobs where paper eats up 75% of the bid. Even on sheetfed jobs 50% to 60% paper expenses are not unusual. So, if as you might expect with the recession and all, if paper is going down, shouldn’t you expect to see much more favorable pricing?

Paper prices are a true commodity item and are generally ruled by the law of supply and demand. Currently we have a situation where several paper mills have closed. Mill floor inventories were sold at bargain prices. The printers who took advantage of those deep discounts could lower their prices, at least temporarily. Unfortunately we aren’t seeing much of that inventory in the market currently.

One of my local printers found themselves in a difficult situation because they took advantage of a great paper buy and passed the savings along to their customer. The sales rep admitted later that he didn’t discuss the reason for the low price with the customer. Big mistake. Shortly thereafter the customer came back and wanted to reorder. The mill closeout stock was no longer available and to say that the new price upset them would be an understatement. No amount of talking could persuade them that they should have been grateful for a previous bargain. Tempers flared and the customer took his printing business elsewhere because he, “could no longer trust them!” Wow, you’d think that once the situation was explained the customer would have been happy. No way. They get a big discount because of a windfall paper buy, then they expect it all the time, even if the printer loses money–how is that fair?

The truth is that mill closings decrease supply, which should in turn, increase the price. Prices however, haven’t changed much lately. They aren’t trending up or down. Why? Because demand is also down. It is also true that  the printing industry has been taking it on the chin during this recession/depression. Some say that nationally printing sales are down by as much as 40%. The decrease in supply plus the decrease in demand, equals status quo.

Supply and demand doesn’t tell the whole story. Print customers have also been suffering during this economic downturn. When there’s less capital coming in there is less ability to pay out, so they cut back on marketing. We don’t need that brochure right now, or the direct mail package can be simplified, or let’s squeeze  the printers for better prices. 

Printers all over the country have responded to this demand by lowering prices, often to dangerous levels. Some take no-profit jobs just to keep the presses busy. Once one printer cuts costs, competitors follow suit, or else risk losing business. In this scenario no one wins. The printing customer loses, because even though they might get a temporary advantage, in the long run they are unwittingly contributing to driving their suppliers out of business. When the recession ends, they will find that their choices of vendors have shrunk and prices will go higher than ever. The printer loses because lowering the prices to the bone removes any margin for error.  Printing as I’ve discussed in previous blogs such as Quality, Price, and Service–Pick Two (link), is a low profit, equipment intensive business. To leave a press idle is an enormous drain. Thus it is better to run it at break even, at least for awhile, than it is to go dry. No printer can survive long working at break even because break even doesn’t really exist. Sooner or later someone is going to make a mistake that will require a reprint. Since there isn’t any buffer, the bottom line quickly shifts from break even to loss.

For those print buyers out there, let me say that we know that things in this market are tight. There is a real temptation to make up for your slim profits by riding your suppliers or changing to new ones. Please be cautious and reasonable. Just because a desperate printer offers a great price doesn’t mean you should take it. The reason for that price could be that they are on the brink of bankruptcy, or some other problem that you don’t know about. The danger in this reckless pricing is that it establishes low water marks that can’t be sustained. You will want to keep the lower prices and maybe insist on it.  That’s just the nature of business, but resist the temptation. Try and work with printers and other vendors who run lean but still profitable businesses. Trust me, pardner, you won’t like your options if at the end of this downturn all the guys in white hats are gone, and the ones in black are all that’re standing.

When I became a broker, I dreamed I could serve customers best by hand-carrying their jobs to printers who were the best fit, instead of attempting to bend their jobs to fit the printer where I was employed.

On becoming a print broker: I dreamed I could serve customers best by leading their jobs to a printer who was the best fit, instead of attempting to force them to fit the printer where I was employed.

If you had a golden goose, in this case an employee that charged you nothing for their services, and you didn’t have to pay any health care costs, matching social security, expense reimbursement, or overhead either, wouldn’t you be dancing up and down with joy? You’d think so, but in the case of print brokers it isn’t true.

The golden goose is subject to be spat upon, derided, and treated, if not illegally, at least unjustly. Oh sure, when everything is going smoothly, that statement isn’t true, but in the real world, sooner or later some transaction is going to go south. That’s when printer’s bring out the steely knives and prepare to skin the goose.

For example, I have been doing business with a certain printer for approximately 20 years. Twenty years is the equivalent of an entire military career, to put it into perspective. For the whole 20 years they have been aware that I am a print broker. No surprises there.

The company was recently sold to a firm in California. It doesn’t bother me that the folks out-of-state don’t know me from Adam and are concerned about my business practices, they should be. What bothers me is that people I’ve worked with for twenty years aren’t defending me as hard as they can. In twenty years, the printer has never had to write off an iota of bad debt from any of my customers. Could any of their sales people boast the same record? I’d be willing to bet, not.

So what’s the problem? The problem is that the new owners want to make me as the broker, totally responsible for the customer’s debt.  Completely ignoring the fact that I neither receive the end product, nor gain any profit from it.  A generally accepted definition of broker is “A broker’s function is to arrange contracts for property in which he or she has no personal interest, possession, or concern. The broker is an intermediary or negotiator in the contracting of any type of bargain, acting as an agent for parties who wish to buy or sell stocks, bonds, real or personal property, commodities, or services. Rules applicable to agency are generally relevant to most transactions involving brokers. The client is considered the principal and the broker acts as the client’s agent. An agent’s powers generally extend beyond those of a broker. A distinguishing feature between an agent and a broker is that a broker acts as a middle person. When a broker arranges a sale, he or she is an agent of both parties.”

If I was a real estate broker and the homeowner defaulted on their loan would the bank attempt to collect from me? Of course not. That would be ludicrous in the extreme.

Why would a printer insist on making the broker personally responsible for someone else’s debts?

I’m baffled. I’m  particularly baffled at the reaction of friends who have worked with me for a whole career.

If someone could explain the logic behind this attitude by printers, I am all ears. As I see it, I bring printer’s work on a silver platter and it costs them literally nothing for my services. I do want a small discount. A discount equal to what they pay their sales representatives in commission. That’s only fair isn’t it? I ask for a level playing field, and for that I give up any benefits their in-house reps get. I know I’ve written about this before, but it’s a point so often ignored, that it needs to be hammered in. What is the real cost of matching social security, health benefits, retirements (401K’s), expense reimbursement, and overhead? If it doesn’t come to double or triple their commissions, I’d be surprised. My discount is the biggest bargain there is.

It is grossly unfair to demand that brokers pay for a customer’s obligations if their in-house sales reps aren’t personally liable too. But if they tried that one, the state Labor Commission’s would probably climb down their throats. Payrolled employees have safeguards. Independent contractors, like print brokers, are legally abandoned. There is no real protection for an independant contractor.

So why do they do it? Why do they try to kill the golden goose?  Because they can. I’ve had suppliers tell me that they work with other brokers and they don’t have a problem with the terms. I’m sad if that is true. If true it means that brokers are so used to poor treatment, that like the whipped dog, they keep coming back for more. It just doesn’t make sense. But then again, if business decisions had to make sense, the banks wouldn’t have been willy-nilly giving out non-disclosure loans for homeowners. Our whole economy has suffered because of that one.

In return, you might ask, what do I do to protect the printers? I have contracts with my customers stating that they accept the legal obligation the vendor. I have a contract, that if the printer doesn’t subbornly refuse to sign it, gives them third party rights in all transactions. And I provide any and all credit or other information, if terms are required. Do you still require my neck? Come on printers, stop trying to kill the golden goose. We are on the same team. Let’s work together.

 Question: If I order a reprint will the price be the same?

This came up recently when a customer realized that the address on her business stationery was out of date. You’d think a question like this would require a simple yes or no. You might think that, but you could be wrong. There are several variables that would affect the reprint bid, here’s some things to consider:

• The price might actually be less!

If the job was completed recently enough that the factors going into the bid hadn’t changed, your price could be less. Printing bids consist of two parts, fixed costs and variable costs. The fixed costs include prep work, press make-ready, overhead, and such. Every printing  job needs some amount of pre-press preparation to get the files ready to plate. If your job is an exact reprint, with emphasis on the word “exact,” a reprint could cut out some, if not all of the pre-press work, thus saving the printer and you money.

• What if I want some minor type change?

A minor change probably won’t cost as much as a major change, but unless your printer is willing to throw it in for free there should be a charge.

• How long ago was the job printed?

If it was last printed two or three years ago, they may no longer have the files and will have to start over. I work with a graphic designer who had purged her files on a five year old project. Without warning, her customer came back after five years and expected a reprint. I was called, and happily, I keep my records for seven years. To be perfectly clear we are talking about my job files, not customer art files. But because I was able to provide the specifications from the previous printing we were able to accommodate their request by recreating the original art. We did have to choose a new vendor because the previous one was no longer making that particular product. A lot changes in five years, you know.

• What about paper cost increases?

Paper and other supplies are not static. When paper, ink, plates, or other materials increase those increases must be passed along at some point. What makes commodities go up? Supply and demand is the easiest answer but not the most complete. There are a whole host of reasons that affect pricing and that’s why god made economists. Let’s just say that if paper takes a 6% bump (which is not unusual), you will see it in your bid.

• What else could increase cost?

Every business faces increases in operating expense. Good employees need to be rewarded with pay raises. Equipment breaks down and must be repaired or replaced. Insurance, taxes, and licence fees go up.

• The printer bid it wrong last time.

Printing is custom manufacturing. Every job the printer does is a custom job. When estimating a project the printer has to take into consideration the costs of materials, time, labor, overhead, and profit. With all these variables in play it is easy to make a mistake. When there is an error in the bid, the printer is often made to hold to the original bid price. Most printers, if the difference isn’t too onerous, are willing for the sake of goodwill.  If you don’t know this by now you should know that printers as a group are very helpful and understanding. I’ve seen them go much further than they should to please a customer. If you feel you are being treated unfairly by a printer, step back and ask yourself if that is really true. Maybe the fault is somewhere in the middle. And perhaps, perish the thought, the blame is more yours than theirs. The bottom line is that if the job was mis-bid last time, for whatever reason, you can’t really expect the same price on a reprint–can you?

• Did the printer have an advantage?

Maybe the printer bought some paper on a closeout discount, or ordered enough “house” stock to get a price advantage. Maybe an ink company made an offer that couldn’t be refused. There could be a thousand different reasons for the printer to have a better price one time and one not as good at another. Printing is a VERY competitive business. If you don’t take every opportunity to best the competition with wise buying you’ll lose. So if you see a reprint bid that is 30% higher than the previous one, it could be that they don’t have that advantage any more.

I’m sure I’ve missed some reasons in this list, and if anyone would like to add to it just let us all know by adding your comment.