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Snapshot of the Sign Industry 3rd Quarter 2008
By Johnny Duncan
For SignIndustry.com’s annual ‘pulse taking’ of the state of the sign industry, we peeked and probed into various facets of the industry to get an idea of the state of our trade before going into 2009.
First, the good news: We had a chance to talk to many sign company owners and overall, most of the sign professionals we polled were optimistic about the future. It seems that even with the sub-prime mortgage news, failing banks, and rising oil prices, a lot of people in our industry are adapting and improvising to make their business a success. To keep it short and sweet, we only included a small sample of the consensus of responses.
What the numbers say
According to the Bureau of Economic Analysis (U.S. Department of Commerce), the economy grew at an annual rate of 3.3 percent in the second quarter, compared with 0.9 percent in the first quarter.
Reuters’ news service reports, (and this is the bad news) that GDP growth will slowly pick up speed through 2009, starting with 1.1 percent growth forecast for the first quarter and ending the year with 2.7 percent growth in the fourth quarter. Reuters also stated that while the U.S. economy will likely escape a full-blown recession, the odds of entering a recession in 2008 now stand at more than 60 percent amid a weakening labor market and pullback in consumer spending.
Robert F. Kennedy once said that the GDP “measures everything, in short, except that which makes life worthwhile.” Still, it is what everyone uses to gauge the progress (or non-progress) of the economy. According to the current GDP stats, we should finish these final three months of ’08 in pretty good shape, but with a recession still trying to push its way in.
What the people say
Obviously, the state of the economy has affected just about every industry in the U.S. The rise in fuel prices has impacted other areas of the economy raising prices on food items to electronics, and from clothing to medicines. The cost of running a sign business is no exception. However, many that we spoke with are coping and even prospering during these edgy times.
“We have actually seen an increase of 6% to 7% over last year, says John Barnes, Vice President of Barnes Advertising in Zanesville, Ohio. “We are very fortunate to be going strong with everything that has happened to the economy.”
According to the U.S. Economic Census Bureau, in 2008, the sign industry is an almost $11 billion market! An impressive number, especially if you have begun to feel the weight of the negative coverage of the economy. Of course, your shop might not be feeling like you’ve taken even a sniff of that large pie, but at least it provides hope and shows that there is business out there.
New technologies seem to be moving most sign companies along up to this third quarter, either through the use of advanced equipment or of actually producing and selling new technologies. “We have been growing steadily over the past three years,” states Eric Carlson, of Bullseye Custom Promotional Products and the inventor of the Stick Yard Digital Measuring System, La Mesa, CA. “Contributing to this steady growth is the use of digital technology to estimate, design and produce projects.”
“We’ve actually been impacted by two new technologies this year,” says Barnes. “The first is of course, the LED. The improvements along with the demand have made a tremendous impact on our business. The second is the Eco-Flex or the one-sheet posters. These are going to bring real cost savings for us in the coming years.”
For some, it is the use of improved technologies supporting business activities that keeps the business rolling. “The higher-end tech laser machines are the newest technology that is helping our business,” states LaRita Wills of Designs and Signs, in Nevada.
But along with the new technologies that make sign businesses run smoother and providing alternatives for customers, is the cost of these items. Since mid-March, with the price of oil steadily climbing, we began paying a premium for progress.
There seemed to be hope recently when the sluggish global demand for fuel helped lower oil prices, but the U.S. Department of Energy reported larger than expected draws in crude inventories in the wake of Hurricane Gustav and as of this writing, Hurricane Ike is slamming into Galvaston, TX hampering oil and refinery production on its way. These combinations will likely cause gas prices to rise again.
“For us, the price of materials (many petro-chemicals based) has jumped,” says Wills. “Along with this, many vendors have added a ‘fuel charge’ for deliveries. All of this rolls down to our pricing to the customer.”
The one-two-three punch of rising gas prices, banks and borrowers looking for a bail out, and the fear of a recession caused many sign customers to re-think their needs. As Barnes points out, “We’ve noticed that it now takes longer for people to make buying decisions. It used to be that the decision maker could make the call and give us the go-ahead for a specific project. Now that money is tight, the decisions go before a board to make the decision. We also notice that people are holding onto their money longer. They will go really strong for one or two months, but then hold onto the money for the rest of the year.”
Most of the sign businesses surveyed only had minor problems with sign ordinances this year. A lot depends of the location of the business and/or the customers. “We’ve not felt a huge impact on our business regarding ordinances,” says Barnes. “Although we were able to win a battle we had with a township near us (Clinton Township) that allowed us to finally install our billboards. It was more a case of the township interpreting sign ordinances and codes as pertaining to off premises signage. They had poorly written policies that were left up to their own interpretation. Although we won, the negative impact was our legal and accounting fees were higher this year because of the battle.”
Like sign ordinances, competition can be fierce or virtually non-existent, depending on the location of the business. “Many sign companies in our area have closed down due to the state of the economy,” states Wills. “Large building projects have cut back or been put on hold. The surviving sign companies have had to compete more vigorously for fewer jobs.”
Barnes Advertising hasn’t had to worry too much about competition. “Our competition has stayed pretty much the same as last year with the exception of a new LED rival, but that is to be expected because of the increased demand for LEDs.” But Carlson has had to put up a fight. “Competition seems to get more intense every year. The economic downturn seems to motivate people to sell for lower and lower margins.”
One other issue that was not included in all of the questionnaires that went out, but is still very important, is the condition of the labor force. A few respondents reported that they have held on to their employees and that turnover was not a problem. Some were even beefing up areas of their workforce in such areas as sales and graphic artists. This is a good indicator of how well their particular business is doing.
The most troublesome areas reported regarding the workforce was keeping up with the rising costs of Worker’s Compensation and other government requirements regarding employees. While these did cut into the pockets of the business, the overall success of those questioned was not hampered significantly.
Where are we heading?
“I believe that technology will have an increasing impact on the industry,” says Carlson. “Companies that quickly utilize new technologies and products and will continue to be competitive.”
“I’m hoping that we will see a more favorable economy and a spirit for change and growth,” states Wills.
And Barnes sees LEDs as the trend of the future. “We still see the trend in LEDs expanding. It is such a hot item right now and it doesn’t look like demand is going down anytime soon.”
In the past few years, this snapshot of the industry has revealed that the hope on the horizon lies in the technologies of the future. This year is no exception. Sign painting by hand is an art still highly respected, but more people are entering the market with computer and graphic arts skills that are generating even more development of user-friendly sign making equipment.
From the feedback we’ve received for this report (albeit non-scientific report), it is obvious that the sign industry is moving ahead stronger than ever and with a passion that surpasses other industries that are struggling under the weight of pricing pressures. From the folks that we talk to at trade shows, from the feedback we’ve received for this article, and from our message boards, it appears that 2008 was another banner year for our industry.
Share your stories with us. To submit your business growth, obstacles, and challenges, write to: Johnny@signindustry.com
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