2008 CAS/Commercial State of the Industry Report: Excerpts: Commercial Sign Sales Dip

The worst year wasn't catastrophic.

(The complete report is found in the August issue of Signs of the Times. See below to order the issue.)

As with last month’s Electric State of the Industry (SOI) Report, we anticipated the worst while awaiting results for this, the non-electric, sign-industry report. And, in some ways, we did get the worst. For the first time in a decade of estimating a CAS/commercial, sign-industry size, we see a drop from 2007’s $6.0 billion to $5.8 billion (also the sales volume for 2006) for 2008.

However, even though the federal government has now officially declared that the current recession began in December 2007, for the sign industry, the noticeable decline seemed to begin in the fourth quarter of 2008. Consequently, even though many results reported here are negative, they only represent a year with one terrible quarter. When we get the results next year for 2009, odds are, the data will be even more sobering.

As I write this, however, just before the half-year point, I see glimmers of hope that I believe aren’t rose-colored mirages. I just returned from the International Sign Assn.’s annual Supplier/Distributor Conference, where I spoke with a few sign companies, product manufacturers and suppliers. If any one statistic can serve as a barometer for the sign industry, I believe it’s vinyl sales, because that material affects 95% of the sign industry.

A vinyl manufacturer told me sales are now back up to last August’s level, following a disastrous November and December. A large distributor told me consumable sales remained consistent, but that equipment sales were on life support. A sign-company owner told me projects he’d bid on a year to a year and a half ago were now being processed.

I want to believe the majority of all businesses have now come out of the storm cellars, ready to take some kind of action. Either fold up the tent or hit the ground running. Wait and see is no longer an option.

This year’s CAS/Commercial SOI Report is a condensed version of prior reports. We deleted many questions for which responses changed negligibly, year after year, such as what percentage of your sales are banners, vehicle graphics, etc. Sometimes, companies don’t want to record bad results on paper, but, fortunately, our number of responses has remained steady, so the data here is solid.

Keep in mind, when we say “this year,” we mean 2008 data, and “last year” means 2007 data. Here are some of the highlights:

• Respondents’ average increase in sales volume, from 2007 to 2008, only 1%, is by far the lowest ever reported. The previous low was a 7.8% increase, from 2000 to 2001 (Table 5). Companies more than a decade old actually saw their total sales decline by an average of 3.3% in 2008.

• The 31.3% of respondents who suffered a sales decline from 2007 to 2008 is the highest ever (Table 6). The previous high, 24.1%, occurred from 2002 to 2003.

• In a slightly revamped table, an unprecedented percentage of respondents (85%) report using digital imaging (Table 8).

• Strangely, the average number of employees per respondent, 6.8, is the highest ever (Table 10). The previous high was 6.0 in 2006.

The respondents

We can start off on a good note because, the average sales volume per respondent shot past last year’s average by nearly $60,000 (Table 2).

Sobering sales

Even though the recession didn’t become widely apparent to the sign industry until the fourth quarter, its effects were conspicuous. Each year, we ask respondents if their sales volumes changed from year to year. Previously, the lowest-percentage increase in sales was the 7.8% average sales increase reported for 2001, compared to 2000. For 2008, compared to 2007, the average sales-volume change was a paltry 1.0% increase, with a median of 0% (Table 5).

Nearly a third (31.3%) of the respondents reported a decline in sales in 2008, whereas the highest percentage previously was 24.1% from 2002 to 2003. Table 5 also shows that older sign companies were affected the most. For those in business more than a decade, more than 35% suffered a decline in sales in 2008, but, among the younger companies, the average hovered around 23.5%.

Similarly, although companies less than five years old enjoyed an average sales increase of nearly 14%, the oldest companies averaged a 3.3% decline in sales (Table 5). The in-between companies averaged a 3% increase. Table 6 shows many of these aggregate fluctuations over the past three years.

And, expectedly, things look to be worse in the current year. Generally, when respondents are asked to predict their sales volumes for the current year (they usually provide this information in April), optimism prevails. This time last year, while, admittedly, things appeared relatively stable, respondents predicted an average 10% increase in sales in 2008. As noted above, it materialized at only 1%.

This year, when predicting sales at year end, respondents are expecting only a 1.3% sales-volume increase, on average (Table 7). Last year’s prediction of a 10% current-year increase had been the lowest ever. As with all of the results in Table 5, the older the company, the more dire the outlook. Companies more than a decade old expect sales to drop by 4.3% in 2009, and companies less than five years old foresee a nearly 15% sales increase (Table 7). The in-between companies are in between.

Similarly, 38.6% of the decade-old companies expect a 2009 sales decrease, but less than half of that percentage (16%), among the newer companies, anticipates a sales decline (Table 7). The median for all companies more than five years old is 0%.

Digital imaging

Tables 8 and 9 are “new” tables that ask an old question differently. Previously, we asked respondents which decoration methods they employed, including digital imaging. This year, we focused on digital imaging.

For all three sales-volume categories, significantly more sign companies are using digital imaging. Overall, that percentage jumped from 70% last year to 85% this year (Table 8). The smallest companies jumped from 41% to 69%, and both of the larger categories rose from 83% to 89%.

Similarly, to address which decoration methods are handled inhouse or outsourced, we again focused on digital imaging. Here, the figures are similar to those of last year.

The workforce

The most curious statistic in this study pertains to employees. Given declining sales and an uncertain future, one could anticipate a sharp decrease in employees. However, in stark contrast, the average of 6.8 employees is the highest this study has ever seen, having eclipsed the 6.0 figure for 2006 (Table 10).

Of course, given the results in Table 5, this doesn’t mean their sales increased that much; it’s simply that bigger sign companies responded to this year’s study. Nonetheless, it remains a silver lining amidst other stormy results.

Plus, this increase held true across all three sales-volume categories. The average number of full-time employees for the smallest sign companies increased from 1.5 to 2.0; from 2.8 to 4.3 for the medium-sized companies, and from 11.1 to 13 for the largest companies.

All told, this caused a return to normalcy with regard to the telling statistic of sales per employee. Last year’s $134,000 can only be viewed as an aberration, as the only time this figure has included six numerals. This year’s $95,577 (Table 11) is very consistent with figures of $94,500 for both 2005 and 2006 (Table 12).

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