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In the first of a new series of league tables, Peter Crush looks at the Top 20 companies in the fast-growing direct mail sector.

Failing companies, margins being squeezed and new business being hunted like vultures to a carcass. It’s a familiar story in many areas of print, but perhaps not direct mail, which many believe to be exempt from stagnation. Of all print’s sectors, direct mail has – on the surface, at least – remained just about as solid as it ever has been. According to the latest census from the Direct Marketing Association (DMA), expenditure on mail grew by 6% during 2002, rising to pounds 2.2bn, which is equivalent to nearly 5bn items of post.

This money is all feeding its way through to printers one way or another.

And that’s why PrintWeek is launching its first Top 20 League Table by sales for the biggest direct mail printers (we’ve done our best to extract the DM turnover from the total sales of the larger print groups, though in some cases this has not been specified), but the picture is not quite so harmonious as some figures seem to suggest. The battle between the one-stop-shops and the specialists is intensifying. There is fear of jobs being lost to overseas printers, and then there is the involvement of the middlemen, driving down margins, and all looking for a nibble of the spend too. As a spokesman for third-placed Communisis sums it up: ‘We’re battling, we’re chasing everything that moves. These are very lean times.’

The incongruity of the market (high mailing volumes, but unsettled times for its printers) is demonstrated by two of the largest printers, Polestar Direct and Vertis, both seeing dents in sales (the former by over pounds 12m), while the smaller companies below are beginning to build volume.

While the DM industry is blooming, it seems that in the drive to cut the cost of mailpacks, it is the printers who are left to bear the brunt.

‘Last year we were experiencing cuts in our margins in direct mail print by 15-20 says Kevan Coleman, chairman of K2. ‘Today we are seeing the full impact of what we call ‘reverse auctions’ – where you start off with a figure, but instead of it going up, it is going down. It’s setting new rules for pricing, and I think ultimately, the client is missing out on added value.’

Rise of the intermediary

Coleman says the rise of dedicated procurement businesses is having a dramatic effect, particularly on direct mail print, where there are many more processes involved that can suit going to different houses to complete the job. According to David Laybourne, managing director of DPS Direct Mail, the rise of the intermediary has been one of the factors that has seen the company working 70% through agencies and 30% direct. That said though, he argues that if the model is there, nimble printers will work their way around it.

‘Because we print less than 2m mailers at a time, the average being more like 250,000, we can offer lots more segmentation services – printing variations of the mailings with different messages, and the buying departments seem to like this,’ he says. DPS has won several large DM contracts – Esure, Vodafone and The Teacher’s Council – all through the procurement pitches, and Laybourne believes that while the process is a draining one, once you have won the business, the working relationship does settle down after that, and everyone in the process is after a long-term commitment.

Just how the bigger printers are suited to this is debatable. According to some, the problems of the larger houses (or at least the decline in sales) is indicative of the fact that their prices are no longer as competitive as other suppliers. Peter Frings, managing director of Target Direct, says: ‘A few years ago, you’d be going to the likes of Vertis to take away the uncertainty, but I’m much more interested in the likes of the smaller specialists – Howard Hunt and John Blackburn.’ Frings says he will place work with printers like Mail Solutions if