Many people are quick to
    point out that transactional printing is a declining market, but then again,
    most printing markets are. Overall book manufacturing is shrinking; direct mail
    is significantly down compared to its all-time high in 2006; magazines,
    newspapers, you name it. The main difference with the transactional market is
    that it is dominated by digital printing. In most other print markets, while
    conventional ink on paper processes continue to dominate, digital print volume is
    increasing to accommodate shorter print runs and just-in-time inventory. By our
    estimation, in recent years, the transactional printing market in North America
    has declined at a rate of about two percent to three percent per year—not a
    disastrous decline but enough to shake things up. We recently reassessed the
    transactional market in North America to gauge how it fared during and in the
    wake of the recession.

    Although the recession drastically
    impacted direct mail and other print markets where spending is discretionary,
    transaction mail initially fared better. There was clearly some impact as
    transaction mailers consolidated mailings and, in some cases, cut back on the length
    and frequency of statements but nothing compared to the drop-off in direct
    mail. Over the last few years following the official end of the recession,
    however, direct mail has picked back up, but transactional mail has not.


    Top-line numbers for mail
    volume in the US are down dramatically in recent years but don't necessarily paint
    a very detailed picture. US domestic mail includes First-Class consumer mail
    (single-piece), First-Class business mail (presorted transaction mail and
    standalone First-Class advertising), Standard Mail (all of which is sent by
    businesses) and miscellaneous other mail and packages. Each of these mail
    categories, however, fared quite differently before, during and subsequent to
    the recent recession. Electronic diversion clearly impacted consumer mail much
    earlier and in more dramatic fashion than business mail. From 2006 to 2010,
    consumer (single-piece) mail lost about 35% in volume, while business mail
    (First-Class and Standard combined) lost about 15% in volume. From 2010 through
    2012, consumer mail continued to fall precipitously at an annual rate of about
    -9.0%, while the rate of decline for business mail slowed to about -2.5%.


    First-Class business mail
    is dominated by transactional mailings, such as bills, statements and confirmations.
    Most of the advertising mail sent First-Class is in the form of ride-along
    inserts with transactional documents. TransPromo has made relatively little
    impact on insert volume since overall adoption has been modest. In addition,
    insert advertising has benefitted from the US Postal Service's (USPS's) extra
    ounce incentives. Standalone First-Class advertising, however, dropped
    dramatically during the recession. First-Class secondary advertising (inserts)
    decreased by only 0.3% between 2007 and 2009, while standalone First-Class
    advertising declined by 26.4%.












    Figure 1: First Class & Standard Business Mail Volume.
    2006-2012

    (Source: USPS data, INTERQUEST),
    Click here to enlarge image»


    From 2006 through 2010,
    First-Class business mail declined in volume at an annual rate of about -1.7%,
    while Standard Mail declined at an annual rate of about -5.3%. From 2010
    through 2012, the rate of decline in Standard Mail improved to about -1.7. The
    drop-off in First-Class business mail volume, however, has shown little to no
    improvement and its rate of decline (-4.0% from 2010 through 2012) is more than
    twice that of business mail. These numbers highlight the fact that First-Class
    Mail volume is largely consumer-driven, and once consumers adopt paperless
    bills and statements, they are unlikely to return to paper
    , while Standard Mail
    volume largely reflects discretionary advertising expenditures.


    During the recession,
    advertisers quickly migrated to cheaper online media, but transaction mailers,
    by necessity, continued to send bills and statements. Yet, the recession did
    serve to reenergize the efforts of mailers to find ways to reduce the cost of
    transactional mail and to entice customers to accept paperless delivery. So
    while direct mail will probably grow as the economy improves (knock on wood), we
    expect the decline in transactional print volume to accelerate to a rate of four
    percent to five percent annually.












    Figure 2: Estimated Reduction in Print Volume Due to
    EBPP

    (Source: INTERQUEST).
    Click here to enlarge image»


    We typically interview and survey the largest trans-actional providers
    for our studies, since the market is top-heavy, with a relatively few major
    players generating the majority of volume. For the most part, these providers
    have weathered the downturn in transactional volume through consolidation and
    by gaining volume at the expense of competitors and outsourcing
    . In recent
    years, however, we see a heightened awareness among large providers of the
    long-term impact of electronic displacement on print. In Canada, more than
    two-thirds of the transactional print providers we recently surveyed indicate
    they have experienced a negative impact from electronic bill presentment and payment (EBPP) on their
    transactional print volume—up from 60% a year earlier. In the US, only about
    one-third (32%) of the respondents indicate that electronic delivery has not
    negatively impacted their transactional print volume, 60% say there has been
    some impact on transactional print volume and the remainder are not sure. About
    40% of the respondents indicate that the impact has been less than five percent
    while about 47% estimate the impact has been from five percent to 10%.


    Although a great deal of
    attention has been paid to TransPromo, or using bills and statements as
    delivery vehicles for promotional content, it is by no means making a significant
    impact. It is growing but from a small base. It is, after all, very difficult
    to do well, and not all providers or clients are willing or able to make the
    effort. Beyond TransPromo, there are many opportunities in the use of full-color
    inkjet printing
    to improve the legibility and effectiveness of documents and to
    eliminate pre-printed forms. Most large transactional providers are also
    offering a variety of other value-added services, such as EBPP and multi-channel
    delivery.


    The outlook for the transactional
    market is not all gloom and doom, as many would have it. Volume will continue
    to contract, as it will in many other print markets. It is, however, a very
    important market—one of the largest served by digital printing and the source
    of a recurring revenue stream for providers. Inkjet is making a big impact on
    the market, and vendors of finishing equipment continue to innovate and improve
    the manufacturing process. Numerous opportunities remain for both service
    providers and corporate in-house organizations to reduce costs, increase
    productivity and expand their service offerings, but they will have to do so in
    an increasingly competitive climate.





    DAVID DAVIS
    is a director for INTERQUEST, a market
    and technology research and consulting firm in the field of digital printing
    and publishing. He has more than 25 years of experience in the printing
    industry and is the author of numerous industry reports, publications and
    educational programs on a variety of industry topics. Contact Mr. Davis at 434-979-9945
    or visit www.inter-quest.com.