Waiting for Darwin
In many ways, a marketplace is like a population of living organisms. With pressure, it evolves, and behavior changes. We've seen advances in communication technologies combine with a dynamic economy to alter consumer expectations. Services like on-demand, just-in-time and digital printing evolved to fill the niche provided by consumers' new-found need for speed. Players in the book space have been slow to adopt Internet print procurement solutions, but e-commerce companies are hopeful that the climate will change.
E-procurement, in short, involves securing print services over the Internet via auction or other Web-enabled methodology. Companies like 58k.com focus almost exclusively on online auctioning. Others, such as Noosh, printCafe.com, Impresse, Colla-bria and httprint.com are more diversified. They offer collaboration and project management services in addition to e-procurement. They believe their interfaces can handle, describe and track all aspects of a print job from start to finish, allowing all participants to communicate completely online.
In the last few years there has been a lot of hype about e-procurement. Tremendous investment capital poured in from Wall Street; the new business models would transform the face of print commerce. The mere existence of the technology would lead to its adoption. Well, it's been a few years and the book industry doesn't look much different.
Both book manufacturers and e-commerce executives agree that initial e-procurement expectations were unrealistic for these fledgling companies. According to Robin Michalisko, former director of marketing for Printbid.com, "There was no historical data. When most industries spring up, you can plot your future based on similar businesses. We all found out that spending in the marketplace doesn't necessarily drive activity and adoption. You can certainly create a buzz and drive your stock up, but there has been way too much value put on companies that haven't proven themselves." Printbid.com closed its doors earlier this year.
According to Carlos Diaz, technical sales manager, Quebecor World, "[E-procurement companies] are riding the Wall Street dot-com wave. That is the reason they have the capital. Because there is a lack of technical knowledge on the part of the investment community, they have been able to sell services based on speculation." Diaz also feels that investors misjudged the consumer, especially in the book space. "The [targeted] users are not the younger Internet-based generation. Are they predisposed to interface with one another in that way? No. Changing a this-is-how-we've-done-it mentality in the book publishing/manufacturing industry is difficult."
Andrew Schaer, vice president of marketing at printCafe.com, agrees: "Printing is a very cautious industry, particularly in the book area. No one is going to make changes unless they feel that the technology is exactly where they want it to be."
Prognosticators erred in assuming an entire industry would alter how it conducts transactions just because it could. There has been little movement towards this model in the book space, but e-procurement provid-ers believe time is on their side. Several factors have kept the two industries from meshing.
The primary hurdle is the strong relationship book publishers have with their printers. "In the book industry, literally all of the major publishers and printers have long-term contracts. At no time are they operating on an event or book-by-book basis. Three or four printers absolutely dominate the market," says Ned Gibbons, business development manager for Noosh.
Robert Hu, vice president, strategic marketing, printing and publishing, Collabria, a print e-commerce facilitator, adds that his company is not really targeting the book space because of these strong bonds. "Publishers make it a point to work closely with vendors. Relationships are much deeper than those in typical commercial printing where the investment is not as long-term," he admits. "The ability to manufacture a book efficiently and economically is core to their product so they have more incentive to map out better production routes."
The complexity inherent in book manufacturing is the glue that binds these strong relationships together. It's debatable as to whether e-commerce can work at that deep of a level. David Robb, marketing director for 58k.com, admits that their interface "really doesn't fully support the book industry. [For example,] Smythe sewing and hard-cover [finishing options] aren't on our menu. We concentrate on the commercial printing industry pretty exclusively right now, but there is tremendous overlap in these two businesses."
According to Diaz, a successful interface would be able to talk to hundreds of systems in prepress, press and the bindery. He thinks this initiative will remain unrealized for several years, not only because e-commerce providers do not yet possess the necessary technology, but because the systems themselves are not equipped to talk to one another.
John Edwards, president, Edwards Brothers, a book manufacturer, remains skeptical. He explains, "Internet auctions would make our business a commodity where price is king. Today, customer is king."
Diaz expresses similar concerns, stressing that book manufacturers' desire to avoid a price war without quality of service coming into the equation. In the eyes of manufacturers, the possibility of book printing becoming a commodity rather than a service is the biggest risk factor in adopting e-procurement. If that happens, printers which worked hard to develop a reputation for quality could go unrewarded.
Pricing for these services seems to range far and wide. Some require a transaction fee, typically around two percent. Others charge flat rates to set up and customize systems for clients, and still others operate on a subscription basis. Book manufacturers who operate at margins that are frequently less than five percent claim that any transaction fee that cuts that deeply into profits is unacceptable.
A lot of these dot-coms are still in business, so they must be making money, right? Even though the book space has been slow to adopt, there are other segments of the printing industry using these services consistently.
"Four to five percent of the industry uses e-procurement," says Michalisko. "Commercial printing is a $113 billion-a-year industry. Buyers consistently say they want the personal touch, but at the same time, 80 percent say that there are huge benefits to using online procurement with job specifications, management and communications packaged together. The hurdle is getting them to take the first step."
According to CAP Ventures, only 17 percent of print is currently procured via processes that are at least partly Internet-enabled. This number is expected to triple within two years, and grow to 80 percent by 2005.
Overcoming the obstacles
In order for the book industry to evolve into an e-procurement transaction model, there must be pressure. One possible source of pressure is the rise of e-books and electronic publishing. As content providers increasingly publish and sell wares online, book printers may find their presses less busy. Rising paper prices may also shrink profits, therefore, increased communication efficiency to fill open press time is a competitive advantage.
The e-commerce model's most serious obstacle is the complexity involved in book manufacturing. E-procurement and project management solutions are unable to deal with many of these complexities, but they are laying the foundation. Many of them have united to establish a job definition format (JDF) and defined standards for print procurement and e-commerce in the form of the PrintTalk initiative.
In contrast, Schaer disagrees with the idea that books are just too complex, claiming that software already exists to make these jobs feasible. According to Schaer, printCafe.com specializes in complex jobs: "Our print management systems and specification tool is customized for just that. When there is specification and quoting involved, you need sophisticated tools and streamlining to make it happen."
As far as relationships go, no one is suggesting that e-commerce facilitators would or should break long-standing ties. On the contrary, Gibbons argues that project management and collaboration augments relationships by improving communication. He adds that price will not enter into the equation as much as book printers believe. "We recognize that the book industry is unique," he explains. "The transaction fee as it is applied to the commercial printing market does not really apply to the book market. We have a number of different scenarios that do not require a transaction fee."
Improvement of technological capabilities, increased Internet familiarity and immersion in the commercial printing sector are necessary ingredients in the foundation of an e-commerce presence in the book space. Pressures such as e-books, paper prices and efficiency based profits will be needed to catalyze the change to e-commerce. Until then, online auctions for book printing will remain on the back burner.
E-procurement is only part of what many e-commerce companies do. Most focus on improving relationships between print buyers and vendors, with communication efficiency, job and project management. For book manufacturers, the prospect of stream-lining basic transactions is the most attractive service e-commerce offers. Full adoption of e-commerce to these ends may facilitate the evolution of an e-procurement model for the book industry, but it won't happen overnight.
By Jason van Steenburgh