Things were really sizzling again in the online print market shortly before Christmas. Cimpress ensured that the year ended with a bang by announcing it was taking Wir-machen-Druck.de over. But what implications does this takeover have for the industry? An op-ed article.
I admit it and am now certain to incur the displeasure of many online and offline print providers, because despite all the prophecies of doom, the takeover of Wir-machen-Druck.de by Cimpress is a smart move by the online print giant. There’s no question, Wir-machen-Druck.de has caused controversy in these parts and a couple of its network partners were not always happy with the partnership, but the bottom line is that Wir-machen-Druck.de is highly profitable. Now I hear the one or other provider moaning again, along the lines of “Oh – why weren’t we bought then?” –but let’s be honest, if you look at the figures, there’s little reason for a company like Cimpress to reject Wir-machen-Druck.de. But I believe that it was more than just the figures that did the talking here – in fact Wir-machen-Druck’s system is what appeals to Cimpress. Once the takeover has been completed, Cimpress will have acquired a well-functioning print network in the highly competitive German market in at a stroke. This has advantages – in essence the WmD principle is based on a partnership network of different producers – meaning investments, such as the other acquisitions made by Cimpress during the course of 2015, are to a large extent unnecessary.
Now some folk might tend to complain about the injustices of the market, but both founders of WmD, Samuel and Johannes Voetter, have bet on the right horse and will now become a part of the global Cimpress network. The two founders, who to date have been very publicity-shy, are still earning plenty of money on the side. The formula is actually rather simple – a concentration on sales, while production is outsourced. WmD has only begun to invest actively in print capacity and to take stakes in a number of companies in the last two years. The problems that production networks entail are also likely to be very familiar to the two WmD founders – Cimpress can now utilize this know-how to its own advantage.
“Cimpress is an important market player having a major impact on the image of the entire print industry, even if that is based on a strong sense of self-interest.” – Bernd Zipper
I have to admit one more thing: it’s been all over town now since mid-2015 – something has been going on between Cimpress and WmD. In fact you could say it’s about as secret as something that not very secret at all. So this takeover announcement can’t have taken industry insiders by surprise. The same can’t be said for the purchase price. And you may soon question whether such a figure is justified – after all we’re talking about a company that barely has any production capacity of its own. So now the harsh truth is being revealed to all those printing companies that virtuously invested for many years and stuck tenaciously with the “my printing press” business model. It’s not the machinery that represents the actual value of modern investment strategies, but rather underlying customer access and “business intelligence”.
Another reason why Cimpress wants to acquire WmD should however be viewed from a corporate history perspective. Robert Keane, with whom I recently had an in-depth conversation about this topic, changed his company’s policy at the beginning of 2015. The focus of the company’s investment and production policy is no longer on short-term quarterly business performance but on the establishment of a global production network that flies the Cimpress flag. Keane is acutely aware that that conventional print will not drive future print demand; instead the personalization and customization of print products – ranging from T-shirts via job printing through mugs or books – are the future and the guarantor of future returns. For this purpose Cimpress needs IT-architectures.
Of course this change in investment policy has its consequences. An investor, who might have invested 10,000 Euros in Cimpress five years ago, would now see an amount of 16,664.54 Euros on their portfolio statement. Had they invested 10,000 Euros last year, they would in contrast only see 10,637.95 Euros on their statement. In other words performance over the last five years has been +66.65% – while that over the last 12 months has been a meager +6.38%. That of course only suits short-term investors to a limited extent. This “low” can be attributed to the switch in strategy and to the massive amount of money that Cimpress has had to invest in order to develop and provide a suitable mass-customization platform in line with international market requirements.
Therefore Keane‘s move to acquire Wir-machen-Druck is a real positive for Cimpress. On the one hand investors can look forward to instantly increasing returns, while on the other the company has suddenly become the No. 2 in the world’s most important online print market, right behind local hero, Flyeralarm. Cewe, with sales of more than half a billion Euros, primarily in the photo business, is not included here.
But what implications does the takeover of WmD now have for the online print industry in Germany, Austria and Switzerland? The answer is simple – none. Well, initially. But Cimpress would not be the world’s largest online print provider, if it hadn’t grasped how to steadily build market share. What is definite is that Cimpress, or rather the “local brand”, Wir-machen-Druck, will continue to grow. It will be interesting to see whether it can maintain its strategy of having the lowest prices in the market over the long term. In other words, Wir-machen-Druck also needs to consider new product and service policy concepts. I believe that other acquisitions in different price segments could also be on the cards.
Cimpress is now a key player in the German, Austrian and Swiss market. Few print companies advertise on TV throughout the region, few companies promote “print” as smartly and few companies collaborate with so many external production partners as Cimpress. Therefore Cimpress is an important market player having a major impact on the image of the entire print industry, even if that is based on a strong sense of self-interest,. Who would have thought that ten years ago.
During the course of my research, I also spoke with Bernhard Heiligtag, the Cimpress executive that masterminded the WmD deal. He succinctly encapsulates the current situation. “As previously announced at the OPS 2015, the purchase of WmD has now helped Cimpress to usher in an era of coopetition in Germany. This open network, which enables members to place their production capacities at the disposal of other members and/or extend their product portfolios, can only be positive for the market, our partners and our customers.” It’s a clear signal to the market and to the competition as well. Keep watching this space, dear readers, we’re not done yet …
My take: The bottom line is that the acquisition of Wir-machen-Druck can be regarded as a smart and important point of entry into the German online print market for Cimpress. It also offers a side benefit in that WmD profits will significantly enhance Cimpress‘ overall performance and more German print providers will benefit from the online print giant’s entry into the market. Print companies that do not benefit directly as contractors will soon notice that Cimpress‘ direct entry in to the German market is enabling online print to play a key role in the “renaissance of print”, which will in turn deliver even more competition and better revenues in the medium term. That is provided they do their homework now.