The average price of digital printing services has increased slightly at an estimated annual rate of 0.3% during the three years to 2017. High competition and moderate demand growth have forced suppliers to keep price growth at a minimum. The market has a high level of competition due to low service specialization and low market share concentration. Because there are many providers competing for buyer business and services are largely homogeneous across the market, suppliers must offer prices low enough to remain competitive without jeopardizing the profitability of their operations.
Demand for digital printing services has been stagnant from 2014 to 2017. While the number of businesses has risen, increasing the pool of potential buyers of printing services, businesses have begun shifting operations away from print documents and toward digital documents, as indicated by the decrease in print advertising expenditure. The rapid adoption of digital products has placed downward pressure on demand for printing services. The number of broadband connections has been growing at an estimated annualized 7.3%, reflecting increasing consumer willingness to invest in digital products. As digital products have increasingly been used in place of paper products, demand for digital printing services has stagnated. Stagnant demand, in conjunction with intense market competition and declining paper costs, has prevented suppliers from raising prices at a faster rate. Increasing wage costs, however, have exerted an upward pressure on price leading to slight growth in the price of digital printing services.
Pricing conditions are currently favorable for buyers, and buyers should not feel pressured to procure digital printing services immediately. Because of low price volatility, it is unlikely that prices will fluctuate greatly in either direction in the coming three-year period. As a result, the time at which buyers choose to make a purchase will have little bearing on the price they pay.
The price of digital printing services is forecast to rise at an average annual rate of 0.5% from 2017 to 2020. While prices will grow slowly during this period, price growth will occur at a slightly faster pace than during the previous period. This increase in growth speed will occur as the price of paper, a crucial input component, reverses trends and gains in price during the three years to 2020.
Overall, demand for digital printing services is projected to remain stagnant. The number of US businesses is anticipated to continue growing, expanding the pool of companies that require digital printing services and increasing demand. However, decreases in print advertising expenditure will counteract this to keep overall demand growth stagnant.
While demand growth is expected to remain stagnant, the cost of digital printing for suppliers is expected to increase. Paper and wage costs for employees are projected to rise, exerting upward pressure on price. In order to maintain profitability, in the face of already low profit margins, suppliers will be forced to raise prices slightly during this period. However, the market will remain highly competitive, so suppliers will not be able to raise prices high enough to fully account for input cost increases without risking the loss of business. Although prices will increase in the coming years, buyers should not feel pressured to purchase services immediately because price volatility is projected to remain low. Thus, it is in the buyer’s best interest to take the time to find the supplier that best suits their needs and only purchase digital printing on an as-needed basis.