2005 CAS/Commercial State of the Industry Report

The following is an excerpt from the 2005 CAS/Commercial State of the Industry Report. To purchase a copy of the full report from the Signs of the Times August 2006 issue click here

The bottom-line result of this year’s CAS/Commercial (non-electric) State of the Industry Report (SOI) curiously reaches a similar conclusion to that of last month’s Electric SOI Report, but it does so in completely opposite ways. This CAS study show the least amount of change in average sales volume in eight years, but impressive gains in the critical statistics of profit margin and sales per employee.

In stark contrast, the Electric SOI evidenced disappointing profit margins and sales per employee, but huge gains in the average sales volumes of respondents.

With an estimated 5% sales-volume growth from 2004 to 2005, the CAS/commercial sign industry grew less than its electric counterpart (6.5%), but it did so more efficiently and profitably.

In another contrast, this year’s CAS/Commercial SOI has no new questions, whereas the Electric SOI had numerous reformulations.

Keep in mind, when we say "this year," it means fiscal 2005, and "last year" means fiscal 2004.Table 1 shows exactly 400 responses, as occurred last year. Why? Because these results are obtained via telephone interview, even though potential respondents were sent the questions, prior to any calls, so they could assemble data and be prepared for a call. Smyth Marketing keeps calling people until it gets 400 responses.

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In yet another contrast, the Electric SOI’s results are tabulated based on respondents filling out forms, so its number of responses always fluctuates.

The average reported sales volume, $527,600, is the highest ever (as has been true each of the past eight years), but it’s negligibly higher than last year’s $524,418, less than a 1% increase. Fourteen more respondents report sales of more than $500,000 this year, but their average sales volume is $280,000 less, so these largest signshops still represent virtually the same percentage of the study’s total sales volume (78.2% versus 79% last year).

The median figure of $200,000 (which means half our respondents’ sales volumes are above and below this figure) matches the previous high from 2002.

Sometimes, you don’t need to have the same respondents from year to year to get good data. When individual shops are simply comparing their own past two years, the sampling becomes less important. And the average 13.7% sales-volume increase shown in Table 5a is the highest since the 14% from 1999-2000.

The percentage that enjoyed increased sales, 67%, is the highest since 1999. The percentage that suffered declining sales (15.9%) is the least since 2000. The median of 10%, which has occurred three times, is the highest since the 13% in 1999.

Table 7b similarly shows less inclination to buy equipment. The bottom-line percentage of 106.9%, the lowest in three years of study, means respondents expect to purchase barely more than one of the 14 types of equipment listed. Whereas, in the past two years, two items were selected by more than 23% of respondents, the highest this year is the 17.8% for digital printers, which have been the most popular item all three years.

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Despite the overall decline, laminators and sheetmetal equipment are at their three-year peaks, 6.7% and 2.7%, respectively. Only vinyl-cutting plotters have declined each of the past two years, from 12.3% to 8.4%, although they’re the fourth most-popular piece of equipment.

Table 9 examines the "marketshare" for each type of sign. For the eighth consecutive year, vehicle graphics claims the top spot, and banners were second, even though the latter’s marketshare has increased each of the past two years, from 13.5% to 16.3%, the only type of sign to do so (Table 9a). For franchises, banners are king, constituting exactly 25% of their sales. Rigid plastics slipped from second to fourth.

Nearly three-quarters of all respondents now sell digital prints. The 72.7% represents more than a 10% increase from last year. For the inaugural CAS/Commercial SOI study in 1997, only 30% of respondents sold digital imaging.

For the third consecutive year, 97% of the franchises (all but one) reported using digital imaging. Otherwise, the franchises showed major declines in the use of screenprinting (from 71.9% to 61.8%) and sandblasting (from 53.1% to 35.9%).

Overall, over the past two years, all decoration methods, except digital imaging and vinyl, declined (Table 10a). Vinyl, while it’s never fallen below 92.4%, recorded its highest percentage to date, 96%. Paint rebounded after having fallen below 50% for the first time last year.

When we combine Tables 1 and 20, we get the all-important, sales-per-employee Table 21, in which the $94,500 figure is nearly the highest yet in the decade of this study, falling just $800 shy of 2002’s $95,300 figure. Sales per employee are up for all three sales-volume categories as well, $117,400 for the biggest shops (up from $111,700 last year), $73,400 for the medium-size shops (up from $60,700 last year) and a C-note higher than last year for the smallest shops ($30,500 this year versus $30,400).

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Table 22b clearly shows that the increasing profit margin for the biggest companies has boosted overall average profitability. Similarly, when the sign industry has suffered overall declines, the largest companies have been the culprits. Only the medium-sized companies have declined for the past two years. As always, the smaller the company, the larger its profit margin.