Is price the only way to compete for a job?

Bengaluru-based Jai Chandra Peethambaram, managing director, Veepee Graphics, says, "The price undercutting trend was prevalent even before Covid, it has become much worse after 2021." His rationale is, "The number of SKUs has increased, but the volume has reduced. This change in the market dynamics has put a lot of pressure on the stakeholders." Veepee Graphics is in the trade shop business.

Jai Chandra says, "We are on top of the value chain. And there is constant demand for innovation and value addition on the design without compromising on the quality. Plus, there is pressure on short turnaround times. It is a shame that all this has to be delivered at rock-bottom prices. It has put tremendous pressure on our bottom line."

Industry pundits blame spare capacity, Others say it is the introduction of print management companies where price is all that matters. Manu Choudhary, director, CDC in Kolkata, says, "When a print product or service becomes commoditised and the customers find no additional value in our product and service, then price will decide everything." He adds, "If one day, CDC decides to produce for a FMCG superbrand and we decide to quote a lower price than their current supplier, I am very sure I will not get the order."  Taking the example of Pragati, he says, "Pragati is Pragati today because every day they defy the statement  that price decides everything."

Most industry forums highlight this. Be it the BMPA's Print Summit or KMPA's Print & Beyond. If you cut prices down to nothing, you’re making very little margin on the job. Speaker after speaker has highlighted that, other than price, the other top differentiators are a printer’s relationship with the customer, service, quality, and innovation.

But is anyone paying heed to this gyaan? Dhaval Dalal, CEO of Ruby Print-N-Pack, says, "In the current market conditions, we believe that quality, speed of delivery, cost-effectiveness, and special effects are equally important factors to sustain. Credit facility is also a significant factor that attracts customers." He feels special finishes help in winning business, but most jobs have fixed specs requirements, so differentiation is easier said than done.

Manu says, "If the customer understands and values the value that you are bringing to the table, there will be no price competition. Instead, there will be a high-value competition that is a win-win for everyone. More importantly, there will be profitability, and the quality quotient would go up." 

Industry veterans say that the price war in the printing industry has turned it into a race to the bottom over the decades. A print consultant told us, "The problem is the rise of new technologies, which is accelerating that process. If the cost of a pre-owned kit is lower than a brand new kit, that lowers the barriers to entry for any given segment. Also, with each new generation of kit being so much more productive and higher quality than the previous generation, something has to give." 

Price is the weakest link in the chain. Which is why Jai Chandra feels, "The packaging and label converters have to ensure it’s not merely quality which is going to make or break the business, but a concoction of factors which will be the differentiating factor." He feels that apart from a top-quality product, the packaging should have an allure to catch the attention of the consumer and boost the buying experience. He adds, "Ultimately, the packaging or label should leave a lasting impression for the consumer to come back for more." Instead of price, innovative packaging design coupled with embellishments is a necessity in these times.

Choudhary concurs, "It is much easier if everyone is playing the price game, and your company is playing the value game." Sometimes this value game is all about quality, sometimes it is differentiation. Similarly, accreditations are a nice way to showcase your clout to customers that your team and factory are committed.

We ask Jai Chandra, moving forward, what is his magic wand to solve the problem? He says that the interaction of the Veepee Graphics team with the customer has increased over a period of time. Jai Chandra says, "No more complacency and taking things for granted because if you cannot deliver, then someone is waiting to seize the opportunity. Rather than being a good or a great printer, you need to be a smart printer."

A print converter CEO in Baddi told us, "All this is true. But in our experience, the customer says-I want you to do the work because you're reliable, but I need you to match the lowest price. Under such circumstances,  I pitch between the two figures and hope for the best." 

PrintWeek's view: In the long term, competing on price is detrimental to the graphics art industry. Price pressure and undercutting are part of the reason we see so many insolvencies.