Days of Delays?Equipment Purchasing Report
When will more of the industry's equipment purchasing intentions turn into purchase orders?
by Susan Friedman, Editor
OK, the hold-out's over; spending can start now ... right? According to packagePRINTING's 2001 Equipment Purchasing Survey, 60 percent of responding package printers have intentionally delayed most equipment purchases until the second half of this year due to the economy.
packagePRINTING's survey isn't the only one showing these stalled spending stances. According to Stephen Kodey, manager of economic and business research at Printing Industries of America (PIA), a first quarter PIA survey showed 33 percent of printers (commercial and packaging) planned to hold off indefinitely on capital investments until additional information about the economy emerges.
The jury's still out on whether a spending deluge is set to ensue in the coming months, but pP survey results suggest that not everyone in the industry has completely put the brakes on technology investments. Thirty-six percent of respondents say equipment purchases are definitely not on the back burner. What's more, 48 percent indicate economic conditions will not change their equipment purchasing priorities for 2001; that is to say, they will continue to pursue whatever equipment company and customer needs dictate. Thirty percent plan to prioritize one or two big ticket items this year, and another 30 percent plan to focus on smaller scale equipment and accessory purchases.
Then vs. now
Granted, the brisk purchase pace of 2000 is a tough act to follow. Nearly one in three converters responding to pP's survey spent between 1 percent and 25 percent more last year than what was budgeted. Nearly half spent exactly what was budgeted. Of those who underspent (14 percent), 12 percent did so because of a budget cut or freeze, with average reduction of 28 percent.
At the time of last year's survey, one in four respondents planned to increase their equipment budget up to 25 percent in 2001, and one in five planned to increase it up to fifty percent.
Those intentions appear to have been scaled back, with "less" now dominating "more" of package printers' 2001 spending plans. More than a third now expect to spend less than they did last year—and 16 percent of these printers predict budget cuts of up to 75 percent. Twelve percent plan to trim equipment expenses by up to 25 percent. Eight percent plan no equipment purchases at all.
Suppliers' shops better stay open, however. Twenty-six percent of respondents plan to keep budgets level with the past year's, and over a quarter plan to spend more. Of the latter set, 14 percent say they'll spend up to 25 percent more, and 4 percent plan to plunk down up to 50 percent more.
A dollars vs. cents climate?
The dichotomy in converters' current purchasing power is evident in their top spending plan picks—22 percent favor a $500,000 to $1 million budget for 2001, while 18 percent have less than $25,000 on the spending docket. Has the industry entered a climate of "haves" and "have-nots"?
Tag and label converters, the segment that clearly had the most enthusiastic spending intentions in 2000's survey, didn't form such a united front this year. Twenty-eight percent of these converters favored a $500,000 to $1 million dollar budget for 2000. Only 20 percent plan to spend this much in 2001, though it was the most-often cited equipment budget range.
Flexible packaging converters display the most diverse spending plans. In 2000, top budget ranges were $100,000-$199,000 and $200,000 to $500,000. This year, a $50,000-$99,000 range rules (31 percent), followed by $500,000-$1 million (25 percent).
The most conservative spending stances, by far, are afoot in the folding carton/corrugated camp. Of these converters, 45 percent report plans to spend $25,000 or less on equipment this year. Just over a quarter intend to invest $100,000 to $199,000.
Basic purchase parameters
Leading the reasons for equipment purchasing this year include replacing/upgrading old equipment, mentioned by 46 percent of converters, adding capacity, noted by 32 percent, and entering a new market, chosen by 28 percent. Only 4 percent report purchases intended to add digital capability to an aspect of their operations.
As in 2000's survey, return on investment is still converters' greatest reservation about equipment purchases, as cited by nearly three quarters of respondents.
Cash remains the most popular payment method, favored by 34 percent of respondents, followed by bank financing and leasing plans, each preferred by 28 percent of respondents.
Used equipment, on average, will make up 17 percent of responding converters' equipment purchases in 2001—a move downward from last year's average of 40 percent. Motivation to go with used is solidly centered in price (cited by 40 percent), followed by availability (cited by 20 percent).
- Companies:
- Printing Industries of America, Inc.