Mail partners vital for printers – Print21 magazine feature
Direct marketing and essential mail are a foundation of the printing industry. A huge mailing house sector complements the efforts of printers who supply marketing collateral to almost every type of industry. Despite the growth of the internet, mail is still a vital communication channel and a lucrative revenue stream for the industry. Cameron Boggs puts his stamp on the sector.
Most commercial printing is marketing collateral and much of it eventually finds its way into the post stream. Nevertheless, there is a deep divide between printers and mail houses. Despite the exception that proves the rule, printers do not provide substantial mailing services while mailing houses do not produce printing, apart from addressing the envelope and, latterly, barcoding it in bright marketing colours.
There is a massive synergy between the two sectors; the sum total of their collaborative efforts keeps mail as a major channel for communicating with customers and prospects. Mail houses exist in a supply chain, downstream from clients and printers, upstream from Australia Post.
Many printers like to offer their customers a complete service and that includes mailing. It does not take long though before they hit the limits of small-time equipment and part-time services. Small-to-medium sized printers purchase blank envelopes from the big manufacturing companies like Candida and Australian Office. They usually restrict their in-house mailing to relatively short runs. For instance, Sydney-based CBD digital printer, Jaeger Sprinting, does mailings of up to 5,000, and that appears to be about the size of most printing companies’ involvement. Over that and they will look to outsource to specialist mailing companies.
Full-scale envelope printing and mailing is an industry sector in its own right. Outsourcing or subcontracting to a dedicated provider is the most economical approach to high volume work, particularly if the mail needs to be bar-coded or QR-coded to meet Australia Post’s regulations. Bulk mail contractors are accredited by Australia Post as Bulk Mail Partners (see box) and are able to access reduced mailing charges by pre-sorting and franking.
By and large, mailing houses do not print content because of the potential for a conflict of interest with their print customers. Unless a mailing house began as a complete mail solution provider or has grown as big as, say, The Camerons Group, expanding into content printing would likely cost them clients.
Power to the post
Essential mail is the largest segment of commercial mailing; pre-sorted bulk mail comprises 51.7 per cent of Australia’s domestic letter volumes. The sector is dominated by the big three in essential mail—Salmat, Computershare and SEMA—which between them account for over 80 per cent of the traffic. These provide a complete service, printing and mailing billions of bank statements, utility bills and government communications every month.
These players are currently in the process of upgrading their printing equipment to high-speed inkjet. This sea change is getting rid of offset-printed ‘shells’ in favour of producing high-speed, one-pass, inkjet colour documents. The inkjet printing technology now allows essential mail producers to target relevant offers to customers on their bank statements and utility bills—the so-called transpromo.
Outside the essential mail category, there is a large and growing direct marketing sector. This provides the major part of the commercial printing industry’s involvement. Full colour catalogues, brochures, fliers and coupons are created and posted by the billions every year. Most commercial printing companies will be aware of this segment but only a few base their business on providing a complete printing and mailing solution.
Specialists in the direct mail industry since 1963, The Camerons Group manufactures and prints a range of content and envelopes from full-colour correspondence to custom windows. For the past seven years, the company has run a complete one-stop mail production division, Camerons Print and Mail (CPM), providing content and envelope printing to the local market as a package offer. The primary manufacturing division makes up 60 per cent of the Group, with CPM balancing turnover at 40 per cent.
Along with the rest of the industry, Camerons faces international competition from lower cost countries. About 12 months ago, one of its largest customers, Readers Digest, took most of its envelope and content production offshore. However, according to Troy Cameron, general manager of Camerons Group, direct mailing has a bright future.
“It is a critical part of the marketing mix and will continue to be so. Printed envelopes complement other forms of promotion,” he said.
Envelope maker folds
The recent fall of long-standing envelope manufacturer, Australian Envelopes, came as a surprise to the sector. Sent into administration after the business could not pay its debts, its 300-plus workforce was left stunned and unemployed after the announcement. Estimates had put Australian Envelopes’ market share at up to 50 per cent. Local envelope manufacturers have since done a good job of taking up the volume required with significant sales increases reported across the field.
“The fact that plain stock sales are up compared to last year indicates [we] have collected overflow work,” says David Patmore, managing director, Express Envelopes.
The company has absorbed eight former Australian Envelopes staff, two in Sydney and six in Melbourne. “A lot have been taken up by the industry, but some have gone in different directions,” says Patmore.
Another Sydney-based mid-tier mailing house, TMF Services, intends to use the opportunity to expand its operations into Queensland. Five of the seven former Australian Envelopes staff it has taken on will run a new factory in Brisbane using two Halm Jet presses.
“One door opens as another closes,” says general manager, Brad Fensom. “The envelope market definitely hasn’t shrunk, but when one of the largest suppliers in the country goes into administration, people look for alternatives.
“Delivery times for printed envelopes have blown out for every supplier, Australian Envelopes use to quote deliveries between five to seven days, and we used to quote three to four days. We have now added two days to meet the increased demand,” he says.
Bolstering its position as a major market force, Australian Office’s successful assets acquisition of Australian Envelopes has the potential to make the business into the largest envelope manufacturer and supplier in the country. As a vertically integrated paper and envelope manufacturer, the Australia Paper division will be in a position to compete vigorously in the sector. According to Rob Graham, Australian Office group GM, the purchase has significantly increased the company’s envelope manufacturing capacity.
“The expansion and rationalisation of the combined envelope manufacturing and overprinting operations provides us with the opportunity to optimise our envelope manufacturing capacity to meet market demand. Our focus in coming months will be to maintain our high standard of customer service to our existing customers and to welcome new customers,” says Graham.
Australian Office is splitting the equipment it inherited from the Mulgrave facility between former Envotec sites in Notting Hill, Victoria, and Wangara, WA. It will also transfer a number of overprint machines to its Preston manufacturing site and other state-based overprinting facilities.
Smaller but stable
In an effort to slow the decline of mail volumes, the industry has focused on broadening the marketing appeal of envelopes. Buoyed by the fact that there is still a large percentage of the population that wants to receive physical mail, the market has evolved from being primarily transactional-based to a more direct mail business model.
“We know that we are in a declining market but remain hopeful it will stabilise in terms of volume, particularly in bulk transactional mail. If the decline in volume has not completely stopped, it has certainly slowed,” says David Patmore.
Express Envelopes has kept an eye on the digital technology of envelope printing but, despite the move to inkjet by the majors, Patmore is unimpressed.
“Nothing works well with pre-made envelopes. If some-
thing emerges, most companies would move that way. There is currently no digital printer that can cost-effectively handle commercial applications of anything more than 1,000 to 2,000 units,” he says.
Like the majority of envelope manufacturers, Express Envelopes does not produce content. As a flexographic and offset printer onto pre-made envelopes, Patmore figures that to do so would create a conflict of interest. He maintains that since the fall of Australian Envelopes, the main envelope manufacturing market is now down to the two biggest players, Candida and Australian Office. A second market tier includes such well-known entities as E S Wigg, The Camerons Group and Express Envelopes.
“In over-printing production capability we are probably on par with Candida,” Patmore concludes.
Mini moving billboards
Quality and accuracy of addressing, design, paper stock and print all make a difference to how a mail campaign can deliver business results and deliver return on investment. Printed envelopes are travelling business cards, portraying brands and organisational values. Often read, assessed and reviewed by more people than the intended recipient, they are a company’s micro-billboard.
Under pressure from competing media, the mailing industry is currently in the middle of a massive transition from offset, due to the disruptive impact of inkjet technology. InfoPrint and Océ both installed large high-speed inkjet presses for mail printing last year, advancing the trend away from offset.
Salmat made a double-digit million-dollar investment in late 2010 for Australia’s first pair of Océ Jetstream 2200 MICR machines to expand its transpromo and variable-data offering. Computershare followed shortly after with South East Asia’s first two InfoPrint 5000 high-speed inkjet presses at its sites in Sydney and Melbourne.
At the same time, smaller inkjet envelope printers have progressed beyond simple addressing machines. They can print spot colour using any customer font, logo or barcode to improve the impact of mail.
“Each envelope should be designed to invite the recipient to open and engage with the communication placed inside,” says Pitney Bowes’ director of marketing, Michelle Sheehan. “If the recipient does not open the envelope, it’s a wasted communication.
“Australian printers employ some of the most advanced design and colouring technology available and can produce extremely impressive aesthetic products. However, a strong design template can fall well short of its intended goal if they are not reaching the right people with the strongest customised message possible,” she says.
Competition on the equipment supply side has hotted up following French mailing supplier Neopost’s surprise takeover of GBC Australia for $53 million. Pitney Bowes, inventor of the postal franking machine, is re-inventing itself as an IT solutions provider.
One of the most innovative and efficient developments in mailing production comes in the form of MacroPro DM’s flagship product, the DTM8000. Balancing variable data with print, it creates an envelope and insert sheet from the same printed A3 piece of paper, eliminating the possibility of mismatching. Already employed by Australia Post, industry coverage of the unique direct mailing machine is picking up pace as it expands into Australasia and US markets.
Advancing technology has taken the mailing industry a long way since Edwin Hill and Warren De La Rue were granted a British patent in 1845 for the first envelope-making machine. Now available in an array of styles and printing formats, the humble envelope is much more than a sealed vehicle of communication; it is a branding exercise.
Complementing each other’s capabilities, the business symbiosis between printers and mailing houses maintains an abundance of print products at an international scale. Each market segment adds the weight of their equipment investment to a complete printed product landing in post boxes every day.
