CONTACT THE EDITOR-IN-CHIEF
Dave Vagnoni Twitter: @VagnoniASI Email:
[email protected]
FROM THE EDITOR
FIVE FOR THE FUTURE
WELCOME TO THE 2018 COUNSELOR STATE OF THE INDUSTRY ISSUE! This year’s SOI report, like past editions, is full of data, analysis and advice you won’t find anywhere else. As we begin our annual coverage, take a close look at the five numbers below. We’ve identified them as important in the market today and ones we’ll be using as baselines to help predict the success of the promo space moving forward. Ready to get started? Let’s do it. Enjoy SOI 2018! – Dave
35%
This is the number just about everyone expects will drop each year, and yet in 2017 it actually went up. It’s the average profit margin for distributors. With online sellers aggressively competing for orders, distributors often talk about margin pressure. If this is what pressure looks like, the market is in a good position. Eventually, as printing becomes a bigger promo revenue stream, this figure will likely fall, but anything north of 30% is a considerable industry win.
28%
Wouldn’t you love to know what your customers are thinking? Of course you would – but you have to ask. The above number represents the percentage of distributors who survey their clients, a staggeringly small figure that needs to improve. Information is one of the greatest forms of commerce nowadays, and judging customers’ needs and wants based on the past is a losing proposition. If you’re surveying clients, you’re ahead of the pack. If you’re not, now’s the time to act.
For expanded coverage, visit asicentral.com/soi2018
2
Savvy firms are always on the hunt for new niches to target, and the $90 billion incentives market is as good as any. Yet only two out of every 100 distributors are tapping into this potentially lucrative revenue stream. Here’s your chance to sell higher-end, brandname promos and give your company an agency-type feel. You may even have customers who buy incentives from another company, not realizing you offer them too. Let them know and then reap the benefits of big-dollar orders.
40%
Chances are good you’re on social media – 225 million Americans are. Here’s the question, though: Are you leveraging these platforms for leads? About four in 10 distributors say they’re just beginning to develop a social media strategy. No doubt your customers are on social and they’re searching for connections and creative ideas. Being active, helpful and friendly on social media is your ticket to becoming a standout and the market’s ticket to a new level of sophistication.
$5.07 billion
End-buyers in the Western U.S. bought this amount of promo products in 2017, a 3.8% increase compared to the prior year. States like Washington, Utah, Colorado and Nevada all recorded 2017 GDP growth well above the national average, and with lower unemployment their economies are on solid footing. To push promo industry sales gains to 4% and beyond, distributors need to run up the revenues in the West region. If they do, 2019 distributor sales will approach $25 billion.
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
27
STATE OF THE
INDUSTRY
2018
I
n every business market, there are opportunities and challenges – the promo industry has its share of both. On one hand, distributor sales are at an all-time high, margins are healthy, and traditional sellers are successfully diversifying their offerings to meet end-buyer demands. On the other, Amazon is threatening to disrupt the market’s supply chain, hackers have promo companies in their crosshairs, and large distributors are
lengthening the gap between them and their smaller competitors, using better technology to make gains. So where does this leave the market? And what specific steps can distributors take to thrive in a changing and complex space? This year’s State of the Industry report aims to answer these questions. On the following pages, you’ll find a wealth of information to guide your most important business decisions. See what
UP-FRONT INTEL NEW HEIGHTS
Total distributor sales have increased every year since the end of the Great Recession.
3.2% rise
$23.6
(in billions)
$22.3 5.7% rise
$22.9
$21.5
$19.4 14.5% rise
28 | COUNSELOR | STATE OF THE INDUSTRY 2018
WORKING THE WEB
43% of distributors used the internet to sell promo products last year.
$20.5 $18.5
$17.4
MONEY MAKERS
$15.2 2009
2010
2011
2012
2013
2014
2015
2016
COMPARATIVELY BETTER
2017
More than four in 10 distributors improved their 2017 revenue vs. 2016.
Our in-depth look at key trends shaping the promo market and advice for leveraging them to build your business. By Shane Dale, Jean Erickson & Kyle Richardson; Research by Nate Kucsma
industries are spending more on promo products. Find out what single added service can boost your sales the quickest. Learn what marketing tactics are getting customers’ attention. Understand how to set your company apart and attract top talent. The bottom line: If you’re feeling a bit uncertain about an evolving promo market, don’t just try to survive. Instead, chart a course for lasting success. Turn the page to get started.
42%
34%
24%
64%
of distributors with annual sales of $250,001-$1 million reported their 2017 profits increased, the highest percentage of any revenue class.
INSIDE 30 TOP MARKETS 34 MARGIN MYTH 36 INDUSTRY RELATIONSHIPS OF 38 SOURCES NEW BUSINESS 40 &AMAZON: ANXIETY OPPORTUNITY OF 42 STORIES THE YEAR TOP 44 PRODUCTS OF 46 ERA DIVERSIFICATION PRODUCT OF 49 THE YEAR 50 CYBERSECURITY CHALLENGE SIZE 52 MATTERS 54 ORDERS ANALYSIS COMPENSATION 58 &SATISFACTION JOB
60 LOOKING AHEAD
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 | 29
STATE OF THE
INDUSTRY
TOP MARKETS
The two largest sectors for distributor sales maintain their spots, but the gap behind them is narrowing. BY SHANE DALE
LARGEST OVERALL: EDUCATION
“COLLEGES NEED TO DIFFERENTIATE THEMSELVES, AND PROMO PRODUCTS ARE A GREAT WAY TO DO JUST THAT.” MITCH SILVER, PRINTABLE PROMOTIONS
For the fourth year in a row, schoolrelated clients contributed the most to annual distributor sales. In 2017, 13% of distributor revenues came from the education market, through everything from simple logoed picture frames for preschoolers to elaborate virtual-reality mailers from colleges looking to win the attention of elite students. What’s driving sales? On some levels, it’s simply competition. “As someone who recently went through the college recruiting process with my daughter, I’m acutely aware of how competitive it is for a college to attract the best students,” says Mitch Silver, vice president of Printable Promotions (asi/299458). “Even for schools that weren’t at the top of my daughter’s list, she received ‘lumpy mail’ filled with promotional products. This was in addition to gift bags she received during on-campus visits. Colleges need to differentiate themselves, and promotional products are a great way to do just that.” But it’s not just collegiate customers who are caught up in this aggressive cycle. Silver says lower school levels are facing rivalries as well. “With the proliferation of charter schools and even entirely online REVENUE TREND EDUCATION
14.3%
13.0% 12.0%
2015
2016
30 | COUNSELOR | STATE OF THE INDUSTRY 2018
2017
K-12 organizations, various groups are using promotional products to draw attention to their institutions,” he says. “Public schools are ordering more and more products as they need to recruit classroom teachers, substitute teachers and even bus drivers.” With all the opportunity here for distributors, figuring out the right approach to selling might seem overwhelming – but it doesn’t have to be. “Go after one segment first,” says Mary Picher, owner of All in the Details (asi/117299). “Earn their trust, and more business from other departments and areas can be approached with success from within the institution.” Once they decide which submarket to target, Silver thinks distributors need to find a way to differentiate themselves from the crowded field. “For example, rather than sell a standard drawstring backpack, offer one that has a university map on it for visitation and prospective student days. Or think of clever, flat products that can be used as direct mail without increasing the cost of postage,” he says. “Just like in any other industry, decision-makers are likely loyal to their existing distributors, and you’ll need to do something different to stand out.” LARGEST RISER: RETAIL
Jumping into the top 10 largest markets, the retail sector now makes up 4.7% of distributor sales. In 2016, retail contributed just 2.4% to distributor revenues. So why the leap? Distributor Alex Benda believes retailers are beginning to value quality over low prices, benefitting promo firms through increased spend. “The quality of promotional items isn’t your grandpa’s promo,” says Benda, CEO of Oh Hello Promo (asi/287160). “The word ‘promo’ is often married with cheap products, but retail companies are REVENUE TREND finding out that times are changing and pro4.7% motional products, when done right, bring 4.2% quality, branded items to the market.” Jacque Lee, CEO of Silva Screenprinting (asi/326062), thinks consumer activism is RETAIL a driving force behind the quality-over-cost 2.4% trend in retail. “Brands that stand for something seem to have a higher perceived value 2015 2016 2017 and are worth a higher price point,” she says. “You have a shopping crowd that’s trying desperately to express their individuality by product examples, social media demonstrations and ideal brand consumerism. This focus is very contrary to the previous generation’s focus on ‘value’ items.” Some of Lee’s top retail success stories have come from her company’s understanding of a client’s social voice and offering products to match that voice. “The current expendable income shopper is more globally connected and searching for products that reflect both a global awareness and a more corporate transparency,” she says. “Being able to supply globally sourced, socially aware products that adapt with color, fashion and pop-culture trends is critical. It shows retail purchasing teams you’re looking out for their needs, and it does reflect increases in current buying trends.”
LARGEST DECLINER: HOSPITALITY
After representing nearly 7% of distributor sales in 2015, revenues in the hospitality sector declined in each of the last two years. In 2017, this market made up just 4% of distributor sales. Benda thinks sales reps’ inability to adapt to a changing demographic is the top reason for the sharp decline. “This is a rough one to hear, but what’s important to the hospitality industry has changed,” he says. “Having a luxury brand isn’t important to millennials, who make up 25% of the population.” What’s the solution? “Stop being reactive – dig deep and get creative,” Benda says, noting experiences are a driving factor behind millennials’ buying decisions. “With everyone documenting their trips, the right promo item might end up in more photos than your kids,” he says. For example, branded sunglasses or a T-shirt featuring a local landmark and your client’s logo could be featured in photos shared on social media during vacations. “Give people the first souvenir they’re going to bring home,” Benda says. Being a one-stop shop doesn’t hurt either. Mark Ziskind, president of CSE powered by HALO (asi/356000), continues to have success within the restaurant and hotel sectors by being a total solutions provider. “By making our clients’ lives easier with uniforms, name badges and promotional merchandise, they’re able to focus on their daily operational and marketing initiatives,” he says.
REVENUE TREND HOSPITALITY
6.9%
5.5% 4.0% 2015
2016
2017
4 WAYS TO IMPROVE SALES TO NONPROFITS Follow these strategies to tap into a growing segment that represented 7.1% of distributor revenues in 2017.
1
Participate in client events. “What’s worked for me is getting involved with the charities – going to their golf outings, going to their large galas every year, buying a whole table and inviting other customers to spend money for a great cause,” says Rob Marshall, owner of Universal Marketing (asi/349570). “The number of people I’ve been referred to because of my good-faith donations has been huge, and it’s only because I was trying to do some good along the way.”
more likely to feel their time and effort are valued and appreciated, and it also presents an opportunity to get involved with the local community and develop a sponsorship.”
3
Help them recruit. “If you’re able to think of products and distribution plans that can help increase membership and draw additional recruits, then you’re heading down the right track,” says Mitch Silver, vice president of Printable Promotions (asi/299458).
2
4
SECTOR SALES
FACTS & FIGURES
Give back. “I’ll offer to donate a percentage of proceeds back to a nonprofit, or offer a significant discount on their order,” says Kayla Wright, marketing director of Pro Design Graphics Co. (asi/590153). “In doing this, the nonprofit may be
A breakdown of end-user markets, with numbers showing the percentage each industry contributed to total annual distributor sales. 2017
2016
2015
Education
13.0%
14.3%
12.0%
Healthcare
8.7%
10.0%
10.9%
Financial/insurance
7.4%
6.8%
8.6%
Manufacturing/distribution
7.2%
6.8%
8.8%
Nonprofit/not-for-profit
7.1%
5.7%
5.1%
Associations/clubs/ civic groups
6.0%
7.0%
5.6%
Ad agencies/marketing companies
5.1%
3.9%
3.8%
Retail
4.7%
2.4%
4.2%
Technology
4.6%
4.9%
3.8%
Construction
4.4%
5.8%
4.3%
Hospitality
4.0%
5.5%
6.9%
Automotive
3.9%
4.2%
3.7%
Professional services
3.7%
3.7%
3.3%
Consumer products
3.6%
1.6%
2.1%
Government
3.6%
4.3%
3.1%
Real estate
3.2%
2.7%
3.4%
Elections/political events
1.4%
1.2%
0.8%
Utilities
0.9%
1.2%
2.0%
Pharmaceutical
0.6%
0.6%
Other
6.9%
7.4%
Help them retain. “If you have an idea for a retention plan that’ll keep the nonprofit coffers filled, share that idea and you’ll likely become a trusted resource for that nonprofit for years to come,” Silver says.
1 2
While their individual rankings have changed, the six largest distributor markets a decade ago are still the six largest today.
Even though 2017 wasn’t a presidential campaign year, the elections market contributed 1.4% to distributor sales, the second highest number since 2011.
3 4 5 6
In terms of percentage of distributor sales, the healthcare sector has declined every year since 2012. Before 2017, the last time sales to ad agencies made up more than 5% of distributor revenues was 2009. The financial/insurance segment has alternated percentage increases and decreases each year since 2012. The three largest distributor markets generated $6.87 billion in sales in 2017.
SIZING THEM UP
The top five markets for each of three different distributor revenue classes. $250k in sales and under
$250,001-$1m
$1m+
Education: 14.5%
Education: 16.5%
Education: Education: 10.5% 14.5%
Nonprofit/notfor-profit: 10.1%
Financial/insurance: 8.9%
Healthcare: 8.3%
Nonprofit/notfor-profit: 7.3%
1.6%
Associations/clubs/ civic groups: 7.5%
Healthcare: 7.0%
6.0%
Construction: 5.6%
Associations/clubs/ civic groups: 6.4%
Healthcare: 9.7% Manufacturing/ distribution: 8.8% Financial/insurance: 7.1% Construction: Retail: 6.9% 5.6%
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
31
STATE OF THE
INDUSTRY
THE MARGIN MYTH
HIGHER GROUND
Distributors have reported better average profit margins each of the last three years.
While e-commerce players are as prevalent as ever, the theory that distributors are sacrificing profits to compete is more fable than fact.
34.8%
35.0%
34.5%
34.3%
BY SHANE DALE 33.6%
WITH THE TECTONIC SHIFTS caused by the e-com-
“MOST OF OUR CUSTOMERS BELIEVE IN LONG-TERM, FACE-TO-FACE RELATIONSHIPS.” ROB MARSHALL, UNIVERSAL MARKETING
merce era, distributors have faced a clear challenge in recent years: evolve into creative agencies or get left behind. Of course, even with deft shapeshifting, plenty in the industry figured margins were destined to shrink – but that hasn’t happened at all. Instead, the average gross profit margin among distributors has increased in each of the last several years, reaching 35% in 2017. What’s more, a higher-than-usual percentage of distributors reported increased profits last year, while a smaller percentage said profits went down. “It happens often where organizations say, ‘I found this online and it’s 20% less,’” says Mike Emoff, Chief Visionary Officer of Shumsky (asi/325300). “We’re seeing that the distributors who’ve gotten that business before are now losing that business, and that’s forcing them to be something they need to be in the future: a value-added consultative seller.” Emoff has outmuscled the lowerpriced online competitors by doing just that: playing up the added value his company provides. “What we offer that e-commerce sellers don’t are in-person visits and consultative brainstorming – things that require experience,” Emoff says. “It could be setting up a kiosk in their lobby. Think of when you go into a fancy hotel – it’s the things you can’t get at a low-end hotel that make it stand out.” Some online competitors also can’t promise the same standards that other distributors are able to provide. “We tell them ‘you have a choice. You
34 | COUNSELOR | STATE OF THE INDUSTRY 2018
Highest figure of the last decade
32.9% 32.4%
7 WAYS TO BOOST MARGINS BY CUTTING COSTS
Consultative selling and strong client relationships aren’t the only keys to lifting profits. Operating leaner and smarter can also create sizeable gains. Here are steps some firms are taking.
1
Buy instead of rent. “We recently purchased our building vs. leasing. This saved on general overhead costs and lowered our month-to-month expenses,” says Sara Webb, owner of InTandem Promotions (asi/231285).
2
Combine orders. “Mostly with apparel, we’ll combine multiple orders for free freight when we have suppliers that offer shipping at no charge for a certain dollar amount,” says Jessica Ibsen, director of customer delight at Fully Promoted Mandeville (asi/384000).
Lowest figure of the last decade
2011
may be buying something from an organization that doesn’t have a quality and safety regulatory plan within the organization, and then you, your brand and your client could be at risk,’” Emoff says. “Some don’t care, and those clients go away.” Rob Marshall, owner of Universal Marketing (asi/349570), says he’ll sometimes sacrifice margins in order to win a sale – but thanks to the personal service his company provides, it doesn’t usually come to that. “Most of our customers believe in long-term, face-to-face relationships, so over time they end up not beating us up on every order but trusting us to make sure we get the job done on time to meet their in-hands date at a reasonable price,” he says. “Our relationship ends up being the winner over just the cheapest price in town.” Emoff isn’t fond of sacrificing margins to compete with the online guys, but there are times in which he says it could make sense to do so – specifically, when trying to win a large order with a first-time client. “If there’s a big opportunity and it’s about price, then we can give a little bit,” he says. “To lose a couple points of margin on a million-dollar order isn’t as bad as losing 20 points on a smaller order where you work your tail off and get nothing for it.” But ultimately, maintaining a strong profit margin will likely mean losing to the e-commerce competitors from time to time. Emoff doesn’t think that’s a bad thing. “We don’t win them all,” he says. “We have people call in who know us from finding us online or through our reputation, and they don’t see the value proposition, so they go someplace else. But that’s not the kind of business we want.”
5
Check your software. “We routinely evaluate our software package to see if it’s functioning in an optimal way, if it still complements our business model or should be eliminated, if all users are in need of licenses, or if we can reduce,” Webb says.
6
Offer in-house decoration. “We have in-house embroidery and heat-transfer services for smaller orders. Orders up to 72 pieces can get expensive when using an outsourced decorator. We save costs by doing these inhouse,” Ibsen says.
2015
2016
2017
% of distributors reporting profit changes vs. prior year
Aimee Zeidman, owner of Unforgettable Goods, LLC (asi/348200), thinks margins will improve as clients are eager to spend. “There’s a lot going on in the world of tech, and many smaller startup companies – apps, software, etc. – are excited to get their names out there,” she says. “There are all sorts of fun gadgets available right now.”
More distributors increased their overall profits in 2017, reversing a recent trend.
2014
52%
40%
8%
2015
48%
40%
12%
2016
45%
41%
Will profit margins go up or down in 2019? Several distributors weigh in.
Sara Webb, owner of InTandem Promotions (asi/231285), believes the future of profit margins depends on distributors’ willingness to add value. “Being brand-focused, we see that our profit margins will remain strong through this year and into next, while looking to decrease internal costs and overhead on our side,” she says.
14%
Mike Emoff, CVO at Shumsky (asi/325300), predicts organizations doing over $5 million per year will be fine, but he’s pessimistic about smaller distributors. “If they don’t have a value-added proposition strategy, I don’t see them staying at the mar-
2017
7
Invest in e-stores. “For our larger clients who reorder the same items repeatedly or have a program established, we do a customer e-store. This includes features such as automated order entry and payment processing, which eliminates the overhead of manual data entry,” Ibsen says.
2014
WHAT THE FUTURE WILL BRING
4
Trim art costs. “We save on art costs when our clients don’t send us the best art by having staff trained in graphic design. They can resize and format logos for imprint areas as well as create virtuals and custom logos,” Ibsen says. “This is a charge we can give the customer without a large cost that many people incur by sending art out to be done.”
2013
PROFIT PENDULUM
3
Reduce catalog costs. “The days of boxes of paper catalogs are long gone,” Ibsen says. “I remember shipping annual catalogs to customers that weren’t local, but now we simply email them a digital copy or create a custom presentation of products we recommend.”
2012
55%
33%
12%
gins they’re at,” he says.
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
35
STATE OF THE
INDUSTRY
DISTRIBUTOR & SUPPLIER RELATIONSHIPS A statistical look at a key part of the industry supply chain.
93% of supplier orders arrived on time in 2017, according to distributors. This figure hasn’t been lower than 91% in any of the last 10 years. How Distributors Place Orders With Suppliers
THROUGH EMAIL
USING SOFTWARE/ WEBSITE
47%
37%
BY CALLING
11%
OTHER
5%
36 | COUNSELOR | STATE OF THE INDUSTRY 2018
Orders Requiring Turnaround in Five Days or Less 2014 36% 2015 38% 2016 35% 2017
35%
Number of Suppliers That Distributors Ordered From vs. Prior Year
46%
used more
45%
used the same
9%
used fewer
Distributors who have sales of $5 million or more place 34% of their orders by emailing a supplier. 53% of the orders from this top revenue group are placed through a website or software program.
STATE OF THE
INDUSTRY
SOURCES OF NEW BUSINESS
Modern strategies are helping distributors make gains, but there’s still work to do. BY SHANE DALE
REFERRALS REMAIN THE TOP WAY distributors are get-
“THE GOAL OF ANY WEBSITE SHOULD BE TO GENERATE A PHONE CALL.” GREGG EMMER, KAESER & BLAIR
ting new business, as 82% of respondents used them in 2017 to earn deals. Distributors with sales between $1 million and $5 million leverage this strategy the most: 91% of firms in this group said referrals helped them score new clients. While referrals continue their reign, other approaches to winning over prospects are increasingly popular, data shows. In 2014, just 19% of distributors said social media networking was part of their new business strategy. In 2017, that number jumped to 33%. Another riser in recent years: websites, which 29% of distributors said aided them in acquiring customers in 2017. Successfully using these more modern strategies, though, requires both a plan and the resources to execute it. In particular, making websites a lead and deal generator takes investment, including spending some money in online advertising, according to distributors. “Invest in sponsored advertisements and boosted posts,” says Kayla Wright, marketing director of Pro Design Graphics Co. (asi/590153). “You can easily track data through your social pages and websites to see raw data. This data will answer your questions in regard to who’s viewing, when, and for how long they’re engaged.” Once they land on your page, Gregg Emmer, chief marketing officer for Top 40 distributor Kaeser & Blair (asi/238600), says customers are more likely to place an online order if: a website quickly and succinctly explains what’s in it for them; they’re offered a free gift with the initial order; and it only takes a
38 | COUNSELOR | STATE OF THE INDUSTRY 2018
couple clicks to make that order. “If you get someone to your website, tell them why it matters that they deal with you,” Emmer says. “They can increase store traffic, build customer loyalty, improve employee performance, lower insurance rates and introduce new services. The goal of any website should be to generate a phone call.” Emmer suggests using a line on a landing page like: ‘Get our quote and a free gift.’ This “will secure better results from any website, and a good site will allow a customer to place a reorder” quickly and easily, he says. Wright believes the odds of earning an online order come down to one word: usability. “It’s the ease at which users can navigate through your website and find what they need to quickly and efficiently,” she says. “Usability is crucial on desktop and mobile.” In a recent look at her company’s analytics, Wright noticed users were leaving her firm’s website within 30 seconds of visiting. “This was an insight that helped us learn we needed to create the most user-friendly website we could,” she says. “Our hope is to increase the amount of time spent on our page and increase engagement.” Wright has used expert help in order to achieve this goal and suggests small and mid-sized distributors do the same, as the opportunity for web-generated business is there. “I recommend investing in a creative agency or creative person to build the website and social landing pages to your expectations,” she says.
INCREASE YOUR EMAIL CONVERSIONS
SOCIAL SHORTCOMINGS
How do distributors describe their social media strategies? For many, they’re a work in progress. $100k in sales and under
Small distributors are generating less business through email campaigns. Learn why, along with what you can do to yield better results. ARE YOU TIRED of seeing your email account littered with non-personalized messages from random companies? Your prospective clients probably are too, and that’s why email blast campaigns just aren’t as fruitful as they used to be. In fact, just 14% of distributors say email campaigns generated new business for them in 2017 – down from 19% only three years ago. “We’re currently living in a transitional generation where most people use email like billboards on the highway: You toss up a ton of the same images, put some bold graphics on there and send a mass email to a list of hundreds or thousands of folks. Anyone with any available creative or valuable content is lost in the shuffle,” says Jacque Lee, CEO of Silva Screenprinting (asi/326062). Lee says many of these emails don’t even make it to the intended client – they’re caught by spam blockers that automatically send them to the junk folder. “The new generations of decision-makers don’t want mass anything,” she says. “They want customized emails, messages and products.” But not all hope is lost. Kayla Wright, marketing director of Pro Design Graphics Co. (asi/590153), says the first step in getting more out of these campaigns “is to use software that lets you see who’s opening your emails and who isn’t,” she says. For those who aren’t reading, Wright recommends a trial-and-error approach. “What gets them to click? Is it a 50%-off deal? Is it free shipping? Play around a bit to find out this information,” she says. Wright’s company has experienced success by adding a personalized touch to emails – specifically, learning about upcoming events relevant to each client and connecting those events to a promotion. “One of our latest campaigns was to create a graphic where the user could click through to order a personalized graduation banner for their student’s celebration,” Wright says. A good rule of thumb: simply blasting generic info is a good way to get your email deleted. “What hasn’t worked for us has been random sales or promotions that aren’t tied to a deadline – for example, ‘Get 10% off your order with a promo code.’ There’s no sense of urgency or purpose there,” Wright says. “You want to put ideas in their head for upcoming needs and not bombard them with spam mail.”
8%
22%
41%
29%
$100,001$250k
2% 17%
48%
33%
$250,001$1m
6% 18%
42%
34%
$1,000,001$5m
38%
22%
10% Well-defined
WHAT TRENDLINES SHOW
22%
28%
35%
$5m+
All distributors
32%
8%
26%
40% Somewhat well-defined
Referrals
2015 2016 2017 84% 82% 82%
Social networking
27% 28% 33%
Gauging the top 10 ways distributors are winning new business highlights what strategies are successful and what aren’t.
Websites
21% 27%
Cold calls
32% 27% 25%
% of distributors using strategy
Organizational networks
30% 29% 24%
29%
11%
28%
Just starting to develop
No strategy
2015 2016 2017 17% 15% 14%
Email campaigns Trade shows
Direct mail
11%
8%
11%
9%
6%
6%
6%
5%
4%
4%
3%
3%
Print advertising
Public speaking
6 TIPS FOR BEING MORE VISIBLE ON SOCIAL SITES
Few distributors have well-defined social media strategies, according to our SOI survey. Here, active social media user Natasha Rawls, an account executive for Sourcepoint powered by Proforma (asi/300094), shares tips for bolstering your presence on popular platforms.
1
3
5
2
4
6
Prioritize LinkedIn postings. “LinkedIn can take a post from having 100 views to having close to 100,000 views in a relatively short time,” Rawls says. Like, comment and share others’ posts. “If my competitors share something, I totally comment on it. I know it helps when I like and comment on other people’s posts – and when they do it back, it helps me, too.”
Pitch less. “It’s not always about selling on social media; it’s about sharing and engaging. When I see unique case histories, whether I did it or not, I’ll say, ‘Hey, look at how cool this is.’” Run contests. Rawls loves running giveaways on LinkedIn. Case in point: a recent backpack design contest she ran yielded dozens of entrants, comments and new leads. “Contests do work,” she says. “Sometimes I’ll spend my spec sample budget in social media efforts.”
Commit to consistency. “Every day, it’s great if you can give 10-15 minutes and post one or two things. You’ve got to stay consistent. The more you put in, the better the reward will be.” Make it easy to connect. “I always share my email address to make it easy for people to get a hold of me if they see something they like. That incoming lead is what we want.”
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
39
STATE OF THE
INDUSTRY
AMAZON: ANXIETY & OPPORTUNITY
The ultimate market disrupter is making a play in promo, giving some distributors pause and others prospective business. BY CHRISTOPHER RUVO
PROMOTIONAL PRODUCTS COMPANIES have a host of
Go to page 78 to read a profile on the Distributor Entrepreneur of the Year, Mitch Mounger, whose Top 40 company, Sunrise Identity, sells promo items through Amazon.
concerns about Amazon – a point underscored by the fact that nearly half of distributors believe the e-commerce power poses a threat to their business. The fears are rooted in Amazon’s demonstrated ability to dominate markets in which it competes heavily. Some industry firms worry Amazon could eventually commandeer the promo space, cutting out suppliers and distributors to gobble up market share. “By leveraging its global platform, Amazon is able to position itself as the lowest cost provider from a product and freight perspective,” says Pat Barry, EVP of sales at Top 40 distributor Boundless (asi/143717). While Barry doesn’t see Amazon bringing its full might to bear in promo just yet, he says it’s a threat Boundless is preparing for by combining personalized service and creativity with custom online branded merchandise solutions. Other industry pros think Amazon could one day opt to partner with only select suppliers and distributors. Under this scenario, partner firms could see sizeable sales gains due to Amazon’s reach, while competitors would lose ground. Meanwhile, some promo execs fear Amazon will increasingly bypass distributors altogether, linking up with suppliers who would sell direct through its platform. In yet another view, others think Amazon’s disruption will center not on upending the current promo model, but on its expanding search presence. If Amazon becomes a Google of sorts, where product search rankings crown winners
40 | COUNSELOR | STATE OF THE INDUSTRY 2018
and relegate losers, advertising expenses would likely rise, among other issues. Suddenly, winning attention in a crowded Amazon marketplace would take on make-or-break significance. Another topic worth watching: As Amazon’s influence grows, what promo companies could be affected most directly? In the short-term, sales at webbased distributors and at firms that specialize in program business through large online stores appear most at risk. After all, they’re playing on Amazon’s home turf. “Amazon has proven in other markets that they do e-commerce better than anyone, and I’d have a hard time betting against them,” says Harry Ein, owner of Perfection Promo, an affiliate of Top 40 distributor iPROMOTEu (asi/232119). Elsewhere, distributors worry about the influence Amazon has on buyer expectations. As more brandable products populate the site, consumers are – and will continue to – use Amazon as a price anchor, checking the cost of an item there and comparing it to the price quoted by a distributor. But that’s not all. “When we used to speak of the Amazon mentality, it was about immediate delivery. Now it’s immediate returns. That’s a game changer,” says Jo-an Lantz, COO/EVP at Top 40 distributor Geiger (asi/202900). “Customers now expect this service. The rate of returns for distributors will increase because of the Amazon mentality.”
A BRIDGE TO MORE BUSINESS
Of the possibilities Amazon presents to promo, some could be quite beneficial. WHILE SOME ARE WORRIED about Amazon, other promo products companies are already leveraging the platform to their advantage. These firms are selling through Amazon Business – the megasite’s B2B platform – and Amazon Custom, home to an array of products anyone can customize online and purchase. Through Custom, for instance, companies sell brandable merch, providing fulfillment and sharing a portion of the sale with Amazon. Distributor iPromo (asi/229471) is one of the firms on Amazon Business and Custom. The company also has a presence on the main Amazon site. iPromo CEO/Founder Leo Friedman says that the Chicago-based distributorship began conducting sales through Amazon a little over a year ago. “The same people who buy consumer goods on Amazon are also making B2B purchasing decisions,” says Friedman. “We want customers to find us easily anywhere they are online.” Currently, the percentage of total sales iPromo generates through Amazon is a small portion of its annual eight figures in revenue. Still, sales are consistently increasing monthover-month. “We’ve seen a marked uptick, and I expect that to continue,” Friedman says. According to the CEO, the average order size is below what iPromo usually does, but the sales are welcomed, of course. “We’ve gained incremental clients that wouldn’t have found us otherwise,” says Friedman, noting customers are generally small businesses, with the occasional medium-sized business. Typically, Friedman says, clients on Amazon have been purchasing hard goods, so for iPromo, imprinting is simple and straightforward. Popular items are USBs, pens, power banks, sunglasses and more. “Apparel is a more complicated sale. We haven’t seen anybody doing well with custom apparel on Amazon yet,” Friedman says. The transaction structure is set up to run like this: A buyer finds a product on Amazon, uses a customization tool on the site to virtually brand it with text and artwork, and then submits an order. iPromo gets the information and does the fulfillment. Friedman says Amazon takes 15% – a charge that gets sellers’ benefits that include Amazon-backed fraud protection and coverage of credit card fees. “That makes (Amazon’s percentage) palatable,” says Friedman, noting that Amazon assiduously monitors sellers’ performances using a spectrum of analysis points, like order defect rate and late shipment rate. Those who fail to make the grade are suspended. “They’re strict on making sure you provide the best service,” says Friedman. “They don’t want to degrade customer trust.” While Friedman believes iPromo’s Amazon sales will continue to rise, he doesn’t believe they’ll overwhelm other more traditional revenue channels – at his firm, or others. “Given the complex nature of many custom orders, I don’t think it’ll be the preferred venue for B2B buyers in the promo products space,” he says.
TOP COMPETITOR THREATS
E-commerce firms, now including Amazon, remain a leading concern for all distributors, but secondary threats vary by distributor size. 10% 11%
4%
6%
10%
9%
10%
8%
5%
5%
15%
Large distributors nearby
8%
33%
9%
11%
Suppliers selling direct
9%
6%
Other local distributors
6% 55%
50%
41%
44%
$100k in sales and under
$100,001$250k
44%
Websites selling promotional products
33%
SITE FRIGHT
A considerable number of distributors, especially larger firms, are nervous about Amazon’s place in promo.
$250,001$1m
$1,000,001$5m
$5m+
All distributors
% of distributors who consider Amazon a serious threat
Strongly agree
Somewhat agree
$100k in sales and under
14%
32%
$100,001-$250k
20%
28%
$250,001-$1m
11%
29%
$1,000,001-$5m
20%
38%
33%
24%
$5m+
All distributors
17%
30%
DISTRIBUTORS WORRY LESS ABOUT WALMART THE LAUNCH OF Walmart Promo Shop was one of the most talked about events in the promo industry in 2017. Still, the chatter about Walmart hasn’t translated into the same anxiety that many feel about Amazon. While 47% of distributors agree that Amazon poses a significant threat to their businesses, only 27% say the same about Walmart Promo Shop, SOI data shows. A key reason for the difference is a pervasive perception that, while Amazon has the e-commerce power to potentially compel a paradigm shift in how promo products are sold and purchased, Walmart Promo Shop is another competitor playing within the current framework. An e-commerce destination selling brandable merchandise directly, Walmart Promo Shop is effectively run by Texas-based distributor Harland Clarke (asi/219943) in partnership with the global retailer. It’s not, as some fear Amazon could be, an all-new marketplace with the capability of swallowing huge quantities of promo spend – at least not yet. “Walmart has relatively inexpensive access to a large customer base, but it
hasn’t created a better mousetrap,” says Steve Paradiso, president of Top 40 distributor ePromos Promotional Products (asi/188515). Nonetheless, there are distributors who admit they’re leery, including Dan Crandall, the owner of Meadville, PA-based Fine Print Commercial Printers (asi/194109). “If Walmart were to start selling promotional products from their stores, that has the potential to have a real impact in small towns like mine,” he says. % of distributors who feel Walmart is a significant threat
Strongly agree
18% 6%
19% 8%
$100k in $100,001sales and under $250k
41%
Somewhat agree
16% 7% $250,001$1m
21%
18% 10% $1,000,001$5m
6%
6%
$5m+
All distributors
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
41
STATE OF THE
INDUSTRY
STORIES OF THE YEAR
These were the promo industry’s 17 biggest headlines and happenings of 2017.
12
JANUARY
S’well Sues ETS Express Drinkware maker S’well accused ETS (asi/51197) of trademark infringement over its stainless-steel water bottle, the popular h2go Force. In 2018, a jury ruled in favor of ETS, quashing S’well’s claims.
1
Gildan Buys American Apparel In early 2017, Canada-based Gildan (asi/56842) won a bankruptcy auction and acquired American Apparel after raising its bid to $88 million. The deal helped make Gildan a Top 40 supplier for the first time last year.
NOVEMBER
13
2
Hagan Returns to Sweda After 18 months away, Jim Hagan was again named president and CEO of Top 40 supplier Sweda (asi/90305). Hagan took over for KB Marshall.
FEBRUARY
3
Roy Exits A Brand Company Top 40 distributor A Brand Company announced that executive chairman Marc Roy was moving on to pursue other interests. By October, Roy had a new industry job as a VP at BDA (asi/137616).
JUNE
4
YETI Alleges Suppliers Violated Intellectual Property Rights YETI notified ASI, Sage and DistributorCentral by letter about its complaints that promo companies were knocking off its drinkware and wrongfully marketing its designs. YETI asked that the alleged infringing products be removed from search databases.
5
ePromos Buys Motivators Top 40 distributor ePromos (asi/188515) acquired certain assets of Motivators, including Motivators.com and its customer base, strengthening its online presence.
8
Walmart Enters Promo Market The world’s largest retailer launched Walmart Promo Shop, a website that sells promo items. The site is backed by distributor Harland Clarke (asi/219943).
9
Promo Firm Guilty of Price Fixing Zaappaaz Inc., which operates as both a supplier and distributor under names including WB Promotions Inc. (asi/98409/353290), along with its president Azim Makanojiya, pleaded guilty to conspiring to fix prices for customized promo products sold online.
OCTOBER
10
Wildfires Take Toll on CA Companies A series of devastating wildfires, first in October and later in December, spread throughout California, forcing temporary closures and rattling promo businesses.
11
BDA Acquires UK Sports Agency Top 40 firm BDA continued its overseas expansion by buying Sports Merchandise Global. The deal gave BDA potential business opportunities with teams in the Premier League and La Liga.
NC Chocolate Manufacturing Acquires Lanco The parent company of supplier Chocolate Inn/Taylor & Grant (asi/44900) bought Lanco, a Top 40 company that was on the verge of closing. As a result, Chocolate Inn joined the 2018 Top 40.
14
Gilley Replaces Sanderson at Overture Promotions Heather Sanderson, a member of Counselor’s Power 50, left Overture (asi/288473) and was succeeded by Jo Gilley. Among her previous roles, Gilley was the VP of marketing for Chicago’s WNBA team, the Sky.
15
BAMKO Purchases Tangerine Promotions Florida-based Superior Uniform Group announced that its division, BAMKO (asi/131431), acquired distributor Tangerine Promotions, lifting BAMKO into this year’s Top 40.
DECEMBER
16
alphabroder Acquires Prime Line Entering the hard goods segment, Philadelphia-based alphabroder (asi/34063) bought Prime in the most significant industry acquisition in several years.
6
BIC Graphic Sold to PE Firm H.I.G. Capital bought BIC Graphic (asi/40480), breaking the supplier off from its France-based parent company BIC Group.
AUGUST
7
Hurricanes Disrupt Industry Firms Harvey, Irma and Maria devastated regions from the Caribbean to the Texas coast, displacing promo companies and leaving economic chaos in their wake.
42 | COUNSELOR | STATE OF THE INDUSTRY 2018
17
Distributor Sales Hit Record Promo distributors reported total 2017 sales of $23.6 billion, a year-overyear increase of 3.2%, and an all-time high revenue mark.
STATE OF THE
INDUSTRY
2017
44 | COUNSELOR | STATE OF THE INDUSTRY 2018
2008
2.0%
2009
6.2%
2015
2016
2017
2011
2012
2013
2014
2015
2016
2017
PRODUCT PLACEMENT
These are the most popular promo items, shown here as the percentage of distributor sales that they represented in 2017. 15.0%
T-SHIRTS POLOS/SPORT SHIRTS SHIRTS – OTHER THAN T-SHIRTS OR POLOS CAPS/HEADWEAR OTHER APPAREL OTHER PRODUCTS TEXTILES HOUSEWARES/TOOLS GAMES/TOYS/PLAYING CARDS DESK/OFFICE/BUSINESS ACCESSORIES BOOKS/CARDS/POSTCARDS/STATIONERY/GIFTWRAP WRITING INSTRUMENTS RECOGNITION AWARDS/TROPHIES/JEWELRY HEALTH AND SAFETY PRODUCTS FOOD GIFTS CALENDARS MAGNETS CLOCKS/WATCHES USB DRIVES ELECTRONICS MOBILE TECH ACCESSORIES
6.2%
2010
% 2.9 9% 0.
8.7% SHIRTS: 2
6.6%
2.9%
Apparel 36.8%
4.0% S: 10.2%
2016
3.9%
LE % 6.2 EARAB RW
2015
4.0%
3%
HE
12.5%
7.6%
6.1%
5.1%
OT
14.3%
CAPS/HEADWEAR
5.7%
Non-apparel 63.2% HO 2.3 ME & % O 2.0% FFICE: 28.2% 2.9% 6.1% 3.9%
% 3.0
15.0%
MARKET SHARE TREND
6%
7.6% 7.5%
2.2%
T-SHIRTS
When it comes to wrapping up a promo sale, the box can be as significant as the gift inside. Distributors believe last year’s jump in sales in the books/stationery/giftwrap category – which grew to account for 3.9% of distributor revenues – was powered by an increased emphasis on creative packaging. “It makes a ton of sense that packaging is taking more market share. This has been a huge growth area for our team over the past three or so years,” says Kevin Mullaney, VP of Brandito (asi/325944). “We started doing ‘New Hire Kits’ for our clients, and now suppliers want to provide the products inside and the packaging as well.” Brandito isn’t the only distributor leveraging improved packaging for sales. Execs at Los Angeles-based Brandinc (asi/145212) say their firm has “tripled their gift wrapping and custom packaging sales in the last two years.” Meanwhile, at nearby Jack Nadel International (JNI, MARKET SHARE TREND asi/279600), reps admit some orders come in BOOKS/STATIONERY/ based entirely on the company’s reputation for 3.9% GIFTWRAP stylish design. “I’ve had clients come to me just for the box, and I tell them ‘hey, we also offer 2.6% stuff to put in the box,’” says Mallory Ebrahemi, a creative branding specialist at JNI. What kind of packaging do clients want? Bob 1.4% Chester, senior sales consultant at American 2015 2016 2017 Solutions for Business (asi/120075), says fourcolor process printing, spot varnish pictures and Velcro closures are some of the features his clients favor. “I get referrals when people see my boxes,” he adds. And clearly, boxes can be big business. In 2017, the City Paper Co. (asi/162267) design team created a Bud Light box that was sent to various media influencers in town for the Super Bowl in Houston. When the box was opened, speakers inside produced the sound of a roaring crowd and an official calling a touchdown. “Print and packaging, together with promotional products, are so much more powerful in combination,” says Stephanie Friedman, City Paper’s VP of sales and marketing.
8.4%
9%
0.7%
JOANNE WORRALL, JPR CONSULTING
MARKET SHARE TREND
LARGEST RISER: BOOKS/STATIONERY/GIFTWRAP
12.4%
12%
TECH: 7.5% 3.5% 2.2% 1.8%
“WE’RE SEEING AN UPTICK IN COLORS LIKE FROST AND HEATHER LOOKS.”
Tees are still tops when it comes to flexing a brand’s marketing muscle – in 2017 they accounted for 15% of distributor sales. That figure also represents the largest market share for any promotional product over the past decade. “T-shirts are easy to sell because they have a reasonable price point and a myriad of decoration options, plus they work for adults and kids,” says Joanne Worrall, president of JPR Consulting (asi/232678). “We sell them for corporate events like picnics, product and program launches, special in-house events as well as race and walk sponsorships.” What styles are popular among buyers? “Our customers prefer lighter-weight fabrics with a fashion-forward styling,” says Worrall. “For ladies that means a scoop-neck and V-neck with a contour cut. The weathered slub is a big hit in high schools and college campuses and we’re seeing an uptick in requests for tri-blend.” Meanwhile, for general giveaway items, “the standard 100% cotton crew neck is still king, but even then, our customers prefer colors, rather than white,” Worrall says. “We’re seeing an uptick in colors like frost and heather looks.” At Shirtwerx LLC (asi/567544),
the company’s top buyers also include education markets clients, but with a different twist, according to owner Danny Lakey. Shirtwerx does orders for lots of church groups who use tees at nearly every event they organize, like youth camps, vacation Bible schools and retreats. High schoolers and college students, particularly members of fraternities and sororities, love Comfort Colors tees, Lakey has noticed. “They’ll pay extra for them. The ringspun fabric gives a soft feel, plus there are lots of color choices, including a pigment dye that looks faded and worn, which the kids like,” he says. Demand for ringspun cotton tees has also been on the rise, according to Lakey. “My SanMar (asi/84863) rep told me I bought almost as many ringspun shirts as I did pure cotton last year,” he says. Part of it is cost: The price differential between the two used to be significant, but as the cost of cotton shirts has risen and ringspun has come down, the gap has narrowed and the difference is negligible, Lakey explains.
Bags Writing instruments Drinkware Health/Safety Tech
15%
1.1%
LARGEST OVERALL: T-SHIRTS
In terms of market share, sales of promotional hats dropped the most in 2017, declining from 7.6% of distributor revenues in 2016 to 6.2% last year. “I used to do more business selling hats for giveaways – I don’t see that anymore,” says Lakey. “It could be partly because embroidered hats cost more than a shirt. Also, not everyone wears a hat, but everyone wears a shirt.” At California-based JPR Consulting, “we sell a good number of caps to our customers who work outdoors,” says Worrall, “but I don’t sell as many to our corporate accounts. Part of the reason is people have a tendency to have a few ‘favorite’ caps for their personal use and aren’t interested in getting additional caps. They’re not as versatile as T-shirts for promotional purposes, and they’re also more expensive. Not everyone likes caps.” While the caps category overall dipped in 2017, there are styles that remain popular, according to distributors. The Richardson 112 trucker hat remains hot, while “dad caps” also have their place. For example, JNI’s Ebrahemi says “dad caps” are on trend for younger people, including her entertainment clients. Yet, Shelly Aberson, president of Aberson, Narotzky & White (asi/102667), adds “Dad is popular, although not in the quantities we used to see.”
A look at the market share of five product categories over the last decade.
OT HE 3.0% R: 4.1%
BY JEAN ERICKSON
RISE AND FALL
.5 : 2 .8% 1 %
A breakdown of the best-selling promo items features a dominant leader and a rising category to watch.
LARGEST DECLINER: CAPS/ HEADWEAR
8.4% ON 7.6% TH E G 2.0% O: 2
TOP PRODUCTS
H
E OM
0.7%
5.1%
BAGS DRINKWARE PERSONAL/POCKET-PURSE PRODUCTS BUTTONS/BADGES/RIBBONS/STICKERS/DECALS/EMBLEMS/TRANSFERS/LANYARDS
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
45
STATE OF THE
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ERA OF DIVERSIFICATION
More distributors are benefitting from thinking beyond promo products. BY JEAN ERICKSON
DATA SHOWS THAT an
increasing number of distributors are expanding their sales focus beyond traditional logoed items, and their efforts are paying off. Last year, distributors generated an average of 64% of sales from logoed items, but also supplemented their income by providing graphic design services, company stores and warehousing and fulfillment, among other offerings.
TYPES OF REVENUE STREAMS
important to provide a one-stop solution,” he says. “We’ve added staff to our design team to develop art for clients, to create custom proposals and respond to RFPs. These assets are really important to our business.” The company’s online stores and fulfillment services are “continually growing,” and Brandinc can now offer on-demand print production, deliverable within three to five days, eliminating the need for inventory, says Webster. Retail packaging is City Paper Co.’s (asi/162267) core business, representing 60% of sales. However, in the last five years the company has put a heavy emphasis on areas like promotional products, e-commerce and printing – all expanding segments. “When we looked at our existing packaging client base, we saw an opportunity for cross-selling,” says Stephanie Friedman, the firm’s vice president of sales and
In 2017, distributors generated an average of 36% of their sales from categories that don’t include
$100k sales and under
$100,001 - $250k
When Crackerjack Shack expanded into company stores, “it totally changed the direction of our business and created a stream of income we thought we had lost to big companies like Amazon and Custom Ink,” says CEO Sandy Higgins. After investing some time in research and planning, it launched Spirit Stores two years ago. “The first year we booked $150,000 in online sales, and knew we were onto something,” Higgins says. In addition, Crackerjack Shack added a fundraising element to its Spirit Stores, “so the customer gets a ‘kickback’ check and the sponsors/coaches don’t
PRINTING MONEY
Of all the added services distributors are offering, one in particular is providing a breakthrough with sales. PRINT IS NOT DEAD – in fact, it’s giving additional life to promo industry sales. Distributors who offer printing services to their clients are much more likely to post annual revenues of over $1 million, according to SOI data. Also of note, distributors offering printing services are getting nearly 30% of their overall company revenues from that segment. “Print is a great solution to add to your sales process,” says Mark McCormack, owner of Identity Marketing Group (asi/229993). “If you can automate the print process you can win – and make some good money. Just don’t put an antiquated process in place to handle it.” He recommends using online ordering and solutions that make it easy to implement for both the distributor and the customer. “Your customer will appreciate it and think of you as a solution provider.” At California-based Brandinc (asi/145212),
promotional products. $1,000,001 - $5m
$250,001 - $1m
42%
42%
40%
34%
28%
33%
32%
31%
29%
22%
13%
14%
17%
17%
14%
8%
6%
4%
10%
4%
4%
3%
3%
2%
1%
4%
2%
All distributors
$5m+
25%
9%
“print is a growing part of our business, and continues to increase as a percentage of our total annual sales volume,” says president and COO Tad Webster. “Print is an important component of custom packaging and gift wrapping, and we offer full-service packaging solutions.” Bob Chester, senior sales consultant at American Solutions for Business (asi/120075), attributes some of the rising interest in printing to the emergence of digital offerings. “A lot of traditional print shops are going digital to offer post cards, brochures and flyers that can be done quickly and in small lots,” he says. They’re also adding largeformat printers for banners and posters, which are used for signage, trade shows and canopies, Chester adds. Demand for labels is on the rise as well, with government regulations requiring more warning and UPIC labeling, says Chester.
34% 30%
18% 10% 6%
2%
7
%
Hard goods
“MIXED MEDIA IS A GREAT ASSET THAT HELPS US WIN BUSINESS.” STEPHANIE FRIEDMAN, CITY PAPER CO.
Promotional apparel
Printing services
“Customers want to work with one shop to handle their marketing and branding efforts,” says Identity Marketing Group (asi/229993) coowner Mark McCormack. “Having the biggest set of tools to go to market with is a great advantage to our business.” Brandinc’s (asi/145212) business has expanded and evolved because clients demanded it, according to the firm’s president and COO Tad Webster. “It’s become increasingly
46 | COUNSELOR | STATE OF THE INDUSTRY 2018
Other, including marketing services
Graphic design
% of distributor sales by category & company size
Incentive programs
marketing. “We leveraged our opportunities and now we work with clients on both packaging and promo, which has changed the persona of the company.” City Paper now features what it calls its “secret weapon” – an in-house art department called City Paper Studios. “We offer and incorporate mixed media into our packaging, and provide copywriting and digital graphic design, among a host of other creative design services,” Friedman says. “It’s a great asset that helps us win business.” At Identity Marketing, “from early on, we took the model that the best creative and best overall service provider will usually win the business,” says McCormack. The Omaha-based distributor has added a number of services over the years, and “has a lot of innovations coming in the technology and web services side of the business,” McCormack says. “So far, they’ve been well received and are generating a significant source of income.”
have to do anything.” While most of Image Source’s (asi/230121) business still comes from promo, the company is tapping into a growing segment – experiential events – to drive opportunity, says president Tom Goos. “We’re doing more custom packaging and kitting, centered on ‘purpose’ clients who want more than a product. They want to add value to a campaign and create a story around it,” he says.
BETTER RETURNS
Distributors that offer printing services tend to generate more overall sales. In fact, nearly one-third of distributors that offer print produce annual revenues of at least $1 million.
31% 9% 15%
Companies that offer printing services derive 29% of their sales from that segment.
20% 8% 14%
Only 52% of distributor companies that generate between $100,001 and $250k in sales offer printing, the lowest of any revenue class.
21%
17% 28% Offer Printing $100k and under $500,001 - $1m
37% Do NOT Offer Printing $100,001 - $250k $1m+
$250,001 - $500k
By contrast, 78% of distributor firms that achieve more than $5 million in annual sales offer printing services, the highest of any revenue group.
STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
47
STATE OF THE
INDUSTRY
PRODUCT OF THE YEAR FIDGET SPINNER
No matter how you spin it, this was the item that had everyone talking and buying in 2017. BY JOHN CORRIGAN
LAST YEAR, REINVENTING the wheel led to the fidget spin-
ner becoming a highly profitable viral sensation. First it was a hit on YouTube, where kids filmed themselves doing tricks with this new toy. The videos were shared on social media, and then fidget spinners quickly entered the classroom. Marketed as a comforting aide for those with ADHD and anxiety, the mesmerizing spinning widget, made in a variety of shapes and designs, captured the imagination of children and the wallets of their parents. “I know my kids wanted one or multiple ones because everyone else had them,” says Jennifer Jacobson, creative services manager at Top 40 supplier Evans Manufacturing (asi/52840). “They were the ‘it’ thing and nobody could keep them in stock.” During the spring and summer of 2017, 18 of the top 20 bestselling toys and games on Amazon were fidget spinners. Accord-
ONE WILD RIDE
The fidget spinner’s rise in popularity started early in 2017 when online retail searches for the product quadrupled. In the promo space, the item took off in April, when it broke into the top 10 most-searched terms on ESP. By May, it topped the ESP search chart before dropping off in the fall – although not as quickly as it did at retail.
ESP SEARCH RANKINGS OF “FIDGET SPINNER” (in 2017)
JANUARY
FEBRUARY
NR
# 125
#4
MAY
JUNE
JULY
AUGUST
NOVEMBER
DECEMBER
NR #1
SEPTEMBER
#7
#1
OCTOBER
# 16
MARCH
#2 # 38
(NR = not ranked)
APRIL
#4
# 35
“NOBODY COULD KEEP THEM IN STOCK.”
JENNIFER JACOBSON, EVANS MANUFACTURING ing to data management and analysis firm 1010data, the amount of online sales generated by fidget spinners in April 2017 was 55 times greater than the product’s total sales at the beginning of the year. Between January and February, the search volume for “fidget spinner” across major retailers like Amazon and Walmart quadrupled. By the end of April, “fidget spinner” had more than 25 million searches. In the promo products industry, suppliers and distributors hustled to meet the enormous demand. “Professional sports teams and their sponsors used spinners both as a giveaway to boost attendance and as a retail item for their gift shops,” says David Fiderer, senior director of marketing at supplier Prime Line (asi/79530). “Summer camps gave them away at reunions and fairs, and event planners included spinners in swag bags.” From February to May, there was exponential growth (4,064%) in ESP keyword searches for the words “fidget” or “spinner.” There were 226 searches in February for “fidget cube,” a desk toy consisting of buttons, dials and switches, which was the result of a hugely successful Kickstarter campaign that raised $6.4 million. Searches increased 762% to 2,153 in March, and jumped up 337% to 9,411 in April. “We were air-shipping hundreds of thousands of them on a weekly basis, especially for retail clients,” says Chris Faris, president and CEO of Boost Promotions (asi/142942). “It was a very good six months for us with the fidget spinners.” With the incredible demand and the sheer number of spinners flooding the marketplace, there were bound to be a few safety issues. At retail, there were reports of kids swallowing parts and ball bearings breaking, prompting promo suppliers to make some tweaks. “We created a more safety-oriented version with the bearings molded into the product so they wouldn’t come out,” Jacobson says. “This product has been a good seller for us, and we continue to get sales from it.”
STATE OF STATE THE INDUSTRY OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 2018 | ASICENTRAL.COM || 49
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THE CYBERSECURITY CHALLENGE As malware attacks become more prevalent and costly, promotional firms face a critical moment. BY CHRISTOPHER RUVO
“EVERYONE IN THE INDUSTRY NEEDS TO BE AWARE THAT THIS IS OUT THERE.” LES DORFMAN, HIGH CALIBER LINE
50 | COUNSELOR | STATE OF THE INDUSTRY 2018
Carnage is only a mouse-click away. That’s the inescapable reality in the age of internet-connected digital business. Hackers are continually creating viruses that can do everything from take over computer systems to steal sensitive data like credit card numbers. Here are steps IT execs in the promo market suggest industry firms take to secure their digital info.
1
LES DORFMAN CALLS IT
“probably the worst virus” he’s ever seen in his 35 years in the industry. In April, Dorfman’s company, California-based High Caliber Line (asi/43442), faced a malware attack that repeatedly disrupted the supplier’s systems over several days. The virus arrived in emails that appeared to be from customers, asking recipients to click on a link to complete a shipping form. Simply clicking the link launched the virus. “It spreads very rapidly throughout your computers and servers,” says Dorfman, High Caliber’s EVP. “No one should click that link.” Working around the clock, the IT team at High Caliber removed the malware – a “Trickbot” that can generate and rapidly download other viruses leading to dreaded blue screens. This particular virus was complex: it was able to hide in several places, including the “C Windows” directory and “net defender” folders. After the virus was accidently triggered again, High Caliber staffers were forced at times to manually fulfill orders. “Everyone in the industry needs to be aware that this is out there,” says Dorfman. High Caliber, which ultimately defeated the virus, wasn’t the only firm that was recently targeted by malware. Counselor has confirmed both suppliers and distributors fell prey to the recent virus, although only a handful publicly acknowledged the attacks. Among those companies that reported recent episodes are Hub Promotional Group (asi/61966) – which was able to fend off the virus before it took out its systems – and Hit Promotional Products (asi/61125), which
9 TIPS FOR KEEPING DATA SAFE
Use an Email Gateway Like Mimecast. “Email is often the Trojan Horse of malware getting into your network,” says Marc Sule, CIO at Top 40 supplier alphabroder (as/34063). “A secure gateway can lower your risk by monitoring and blocking users from opening malware attachments or clicking bad URLs.”
2
Utilize Malware-Scanning Software that routinely scans corporate systems and personal computers, and alerts your IT team when malware is detected. Microsoft’s SCCM Endpoint Protection is a popular choice. “Endpoint protection helps prevent targeted attacks,” says Greg Muzzillo, founder of Top 40 distributor Proforma (asi/300094).
3
Build Sturdy Walls. All networks should have firewalls that are configured correctly, continually patched and constantly monitored. “It’s critical to have a properly configured nextgeneration firewall with unified threat management,” says Muzzillo.
4 announced the attack in late April. “Since the initial infection, we immediately engaged an outside security firm to actively monitor the virus, and we’ve taken many additional security measures to harden our network to contain and eliminate the virus,” says Krista Ward, Hit’s director of marketing. As these attacks clearly show, the promo products industry isn’t immune to what’s become a very real and crippling threat to companies across the U.S. At particular risk are small businesses, which make up the vast majority of the promo products market. In fact, recent reports, including one released last September by the Ponemon Institute, show more than 60% of U.S. small businesses have been hit by cyber attacks over the past year. “The most prevalent attacks against smaller businesses are phishing/social engineering and web-based,” the report’s authors wrote. “Respondents say cyber attacks are more targeted, severe and sophisticated.” According to UPS Capital, these cyber attacks typically cost small businesses between $84,000 and $148,000 each, and about 60% of small businesses go out of business within six months of an attack. Although it’s rarely mentioned among the top challenges promo firms are dealing with, the evidence is mounting that cyber security is a considerable topic that must be addressed. “These data scams are very convincing and can have extremely serious repercussions,” Dorfman says. “Major preventive measures have to be taken.”
All Computers Should Have AntiVirus Protection that’s updated in real time and makes use of heuristics and behavior analysis. Armughan Rafat, CTO for ASI, notes that all systems, including third party software, must be up to date on patches and feature strong spam filters.
5
Have Good Backups in Place. “Always back up your critical systems on a separate VLAN away from the production system,” says Sule. “If your production systems and logical back-
ups (or even DR environment) all exist on the same VLAN, ransomware may be able to spread and encrypt them all, leaving little option for recovery.”
6
Be Link & Attachment Savvy. “Never open an attachment or link from someone you don’t know,” says Muzzillo. Be sure to check links before clicking on them. By hovering over a link, you can see the actual web address you’re being directed to. Make sure the link is taking you to the website you expected. “Links in scam emails may direct you to web addresses that are long, unfamiliar and use random characters,” Muzzillo adds.
7
Be Smart With Passwords. Your company should have safe password practices like two-factor authentication. Never use the same password for critical systems like email and logins.
FEW SMALL DISTRIBUTORS HAVE DATA SECURITY POLICES For the first time ever, Counselor’s 2018 SOI survey asked distributors about cybersecurity. The results show the clear majority of smaller promo firms need to develop stronger controls for data protection. In total, only 39% of distributors say they have a formal data security policy in place. That figure lags behind the 50% average of all U.S. businesses, a stat released in a recent report from Nationwide Insurance. What’s a formal policy? It could include password management, oversight of software licenses and email usage rules. As the chart shows, the larger the distributorship, the more likely it is the firm has data security measures.
74%
% with data security policy
41% 36%
33%
33%
$100,001$250k
$250,001$1m
8
Encourage Communication. “Make sure employees know to report any suspicious emails to a supervisor in charge and the IT department,” says Les Dorfman, EVP of High Caliber Line (asi/43442).
9
Remind & Consider Training. Send periodic reminders to staff about cyber security best practices they should be following. Also, consider providing employees with cyber safety training. Alphabroder, for example, recently contracted a company that provides anti-phishing training and mock phishing campaigns to monitor, score and identify additional training needs within its corporate user base.
$100k and under
$1,000,001$5m
$5m+
A TIMELINE: NOTABLE CYBER ATTACKS IN PROMO INDUSTRY
While breaches have been increasingly reported in the U.S. in recent years, the promo market faced significant attacks as far back as a decade ago. SEPTEMBER 2008 Hackers raided Newton Manufacturing ’s systems several times, obtaining the social security numbers of certain clients. The attacks were found during an audit at Newton.
AUGUST 2009 Gateway CDI suffered a significant summertime breach, leading its client Mozilla Firefox to temporarily shut down its online store which sold promotional items like T-shirts, mugs and mousepads.
NOVEMBER 2009 A late-year attack overloaded servers at supplier Leed’s (asi/66887), disabling the company’s main website for several days and disrupting the firm’s overall business.
JUNE 2015 Casad Company (asi/168375), which runs the site totallypromotional.com, reported hackers accessed the credit/debit card info of some customers. Casad learned of the breach after customers saw unauthorized charges on their cards.
FEBRUARY 2018 A ransomware attack took HALO Branded Solutions’ (asi/356000) ERP system offline for two weeks. Company reps had to communicate with clients by using their personal email addresses.
APRIL 2018 The same malware attacked systems at supplier High Caliber Line (asi/43442) multiple times over four days, forcing the company to keep up with orders manually.
APRIL 2018 A virus disrupted the computer systems at Hit Promotional Products (asi/61125), targeting a protocol on one of the supplier’s file servers that processes artwork.
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SIZE MATTERS
DATA COLLECTION DIVIDE
The differences between large distributors and their smaller competitors are as striking as ever before. BY KYLE RICHARDSON
IN THE PROMOTIONAL PRODUCTS MARKET, it’s clear
“IT CAN END UP BEING A REAL DOG FIGHT TO WIN THE BUSINESS.” BOB HERZOG, CORPORATE IMAGING CONCEPTS
that size tells a story. This year’s SOI takes into account five revenue classes: distributors with annual sales of $100,000 and under; sales of $100,001-$250,000; $250,001 to $1 million; $1,000,001 to $5 million; and greater than $5 million. What we found were some interesting contrasts – especially between the largest class and the other groups. For example, distributors of all sizes continue to cite e-commerce as the largest threat to their business. But while 55% of distributors in the $1,000,001 to $5 million range view web-based businesses as the top threat, that number drops to just 33% for distributors with more than $5 million in annual sales. Notably, these largest firms are equally concerned with another type of threat: each other. One-third of respondents in this high-revenue ($5m +) class report that other large distributors in their territory are their biggest concern – a fear shared by only 8% of the industry as a whole. “We’re an $85 million company, and we can provide all the major services. I know the other big companies I compete with can pretty much do everything we can do,” says Bob Herzog, CEO of Corporate Imaging Concepts (asi/168962). “It can end up being a real dog fight to win the business.” There are many other ways that multimillion-dollar distributors differ from the rest of the industry. Big distributors tend to have various attitudes toward internal policies, offering attractive workplace benefits to employees at higher-thanaverage rates. Associates at larger
52 | COUNSELOR | STATE OF THE INDUSTRY 2018
29%
$100k in sales and under
WHILE CUSTOMER SURVEYING isn’t a new idea, it hasn’t caught on among distributors, as less than one-third sent questionnaires to customers in 2017. But when it comes to distributors with annual sales greater than $5 million, about 60% – more than double the average – poll clients about their satisfaction. According to Jo-an Lantz, COO and EVP of Top 40 firm Geiger (asi/202900), surveys are instrumental in driving business decisions for the Lewiston, ME-based company. “We use a one-to-five survey, and any answer three or lower triggers an immediate email chain to the salesperson, his or her manager, our manager of supply chain, our customer service vice president and me,” Lantz says. “It helps us take
25%
$100,001-$250k
% of distributors that survey customers
17%
$250,001-$1m $1,000,001-$5m
23% 59%
$5m+
28%
All distributors
care of the issue immediately.” Surveys like this allow Geiger to respond to problems in real time. When an unsatisfactory survey result comes in, it provides a wealth of
information: what the product was, what the issue was, who manufactured the product and so on. When an issue is easily fixable – if an item is the wrong size or there was an issue with the delivery – Geiger can send out replacements to keep the customer happy. Even when an issue isn’t so easily solvable, the data generated can result in action. “We consolidated that information to look at supplier trends,” Lantz says. “There’s a link between certain suppliers with high marks, and other suppliers with low marks.” When a specific item continually leads to poor survey responses, the company will see that, and can decide whether it’s worth it to continue working with that item – or that supplier. “Quick response to survey information has changed our business tremendously,” Lantz says.
PERKS & POLICIES
Smaller distributors offer fewer benefits than their larger counterparts. 44% 83%
57%
51%
58%
31% 40%
48%
40%
55%
$100k in sales and under
68% 37%
59%
29%
23%
% that offer full-time employees health insurance
% that support telecommuting
% with formal conduct policy
firms are more likely to enjoy health insurance options and telecommuting opportunities than their peers at smaller distributors. Top-revenue distributors are also twice as likely to implement formal personal conduct policies to protect the rights of their workers. “We do many of these things, and a good deal more, simply because they’re the right things to do in order to draw and retain the best possible talent to serve our customers,” says Marc Simon, CEO of Top 40 distributor HALO Branded Solutions (asi/356000). “If you want to provide the best customer experience, you need the best people to achieve it.” One area where the largest revenue distributors aren’t the biggest outlier is in their number of annual customers. While the largest companies serve more than twice the median number of clients – 125 vs. 55 – it’s distributors in the $1,000,001 to $5 million bracket who serve the most clients, with an annual median of 200. According to Herzog, the industry’s largest distributors are focusing on fewer – and bigger – fish. “The price of admission with these high-profile customers is high: They’re going to ask what your sales were last year, how many employees you have, how many locations, and you’ve got to be able to answer that successfully to even talk to them,” he says. “Once you can clear those hurdles, the chance of landing a sixor seven-figure deal jumps tremendously.” When larger distributors start winning some big customer orders, they realize that’s the type of business they want. “You don’t spend much more time doing that if you were going after someone smaller,” Herzog says.
35% 65%
71%
$100,001 - $250k
TIME IS MONEY DISTRIBUTORS THAT EARN between $1,000,001 and $5 million annually report clients took nearly 50% longer to pay them back in 2017 compared to other distributors. Outstanding payments were paid on average in 43 days for this group, as opposed to 32 days for the entire industry. Why is that? For some distributors, offering longer net terms is a competitive advantage. Where the largest revenue distributors can offer the strongest buying power, companies in the $1 million range can provide clients something possibly even more valuable: time. For small and midsized customers, an extra 15 to 30 days to make final payment can be the difference between funding a full-fledged marketing campaign and deciding just to send a tweet.
$250,001 - $1m
$100k in sales and under
$1,000,001 - $5m
32 34
$100,001-$250k $250,001-$1m
Average days sales outstanding
29 43
$1,000,001-$5m $5m+
32
All distributors
32
Distributors with sales in the low millions are also at a turning point in their business where they may be transitioning to larger national customers and government organizations – and if you’ve ever had to deal with the government, you know “fast” isn’t in its vocabulary.
$5m+
All distributors
According to Jessica Johnson, co-owner of Production Creek (asi/299743) in Lincoln, NE, her company has gained several high-profile customers as it’s grown and has “accommodated to ensure their business.” That means contracts with more lenient payment terms to account for slow-moving organizations. “I think the larger accounts and government clients have more hoops to go through in order to get an invoice paid,” she says. According to distributors, another benefit of clients slower to make a payment is that they’re also typically slow to change vendors. The internal red tape surrounding contracts makes these organizations more likely to stick with what works than to jockey between distributors trying to eke out a couple more cents in savings. For distributors, that means waiting a few more days for payment could add more years to your relationship.
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DISTRIBUTOR ORDERS
Promo firms of nearly all sizes won more deals and made higher value sales in 2017.
270
Median Number of Orders
Median Value of Orders
All Distributors
All Distributors
270
300
280
260
300
$560
$600
$250k in sales and under
118
120
120
120
500
500
125
150
$500
$500
$500
1,800
480
2,070
$550
$575
$500
$500
$500
$750
$875
$1,000
$1,125
$250,0001 - $1m
470
515
$750
$820
$750
$1m+
2,000
$600
$250k in sales and under
$250,0001 - $1m
450
$550
$800
$1m+
2,000
1,900
2012
2,000
2013
2014
$750 2015
$1,000 2016
$980
$950
2017
$1,585
The average value of orders in 2017 among distributors with at least $1 million in annual sales.
Average Value of Orders Among All Distributors
$1,061
$1,056
$1,060
$1,064
$1,043
$1,010
2012
2013
54 | COUNSELOR | STATE OF THE INDUSTRY 2018
2014
2015
2016
2017
STATE OF THE
INDUSTRY
COMPENSATION & JOB SATISFACTION Is there a gender wage gap in the promo products market? It depends if you’re a rep or an owner. BY JEAN ERICKSON
PAY PARITY IN the corporate
“THOSE WHO SELL WELL EARN MORE MONEY THAN THOSE WHO DON’T, REGARDLESS OF GENDER.”
DAVID BLAISE, BLAISE DRAKE & COMPANY
world has been an ongoing debate, beginning well before the #MeToo and Time’s Up movements came to prominence. Recent individual reports by the U.S. Census Bureau and Pew Research Center show women earned between 80%-82% of what men did in 2016 and 2017. However, the promotional products industry appears to be a much more level playing field when it comes to women’s pay. In fact, the earnings gap is only about 4% between male and female salespeople in promo (men earn more), showing there’s opportunity for most anyone if they’re willing to work to get ahead. “At Jack Nadel (asi/279600) as a whole, we have lots of badass females making a ton of money,” says Mallory Ebrahemi, a creative branding specialist at the Californiabased firm. A big reason for the equity is the popularity of the commission pay model. About 42% of distributor sales reps work strictly on commission, and another 7% earn a combination of commission, plus a salary or a bonus. “Since much of the compensation for professionals in our industry is commission-based, it makes perfect sense that there wouldn’t be much of a pay gap. Commission sales is the great equalizer,” says David Blaise, head of industry consultancy Blaise Drake & Company. “Those who sell well earn more money than those who don’t, regardless of gender.” Sandy Higgins, CEO of Crackerjack Shack, became a familiar voice on the topic of gender in business after being featured in a 2016 Forbes “Story Exchange.” At the time, she
58 | COUNSELOR | STATE OF THE INDUSTRY 2018
was applauded for being one of only 2% of women-owned businesses that earned over $1 million in revenues, according to Forbes. “I’ve been asked this question many times. I don’t feel disadvantaged by being female,” says Higgins. Nina Shatz, brand development director at Top 40 firm HALO Branded Solutions (asi/356000), agrees with Higgins to a point, but adds “I do think that as with any profession, it sometimes takes more effort for women. Women will always need to spend a bit more time to be taken seriously, no matter how sharp and savvy one may be. I think women within our industry would like to have more opportunities to formally discuss challenges that might arise, or brainstorm together in a non-competitive environment.” That said, Shatz feels the promo products industry is an “incredible” place for women. “I’m consistently impressed with both women vendors and distributors,” she says. At New York-based Axis Promotions (asi/128263), “almost all of our top salespeople are women, and they do incredibly well,” says CEO Larry Cohen. “We’re big believers in the topic of advancement of women.” In fact, women make up 80% of Axis’ 70-person workforce. While Cohen says he does get questions about pay parity, he gets asked more frequently about the subject of pay structures in general. “The old commission structure may not be as viable,” he says. “After living through unstable economic times, employees don’t necessarily want to be paid pure commission. They’d rather have more security, with perhaps a lower commission rate.” This is a conversation industry reps and business owners are having, says Cohen. “Our business world is changing, especially in the wake of Time’s Up and Me Too movements.” One step Axis is taking: “We’re trying to make a lot of bonus decisions less discretionary and more quantifiable, so employees know what their goals are and how to achieve them,” Cohen says.
A NOTABLE DIFFERENCE
% of distributor owners whose annual salaries are $100k+
Men who own distributorships earn more money than women, but execs think the disparity is simply rooted in style, not unfairness. While compensation between men and women sales reps in promo appears to be pretty equal, our data tells a different story when it comes to pay levels between company owners. On average, owners who are men pulled in $92,000 compared to $67,000 for women who owned promo businesses in 2017. One reason for the gap: men are more likely to own companies that have three or more reps, and of this group, the owner’s average pay is over $170,000 per year, data shows. Beyond that, operational styles could also play a role. “I think it’s more likely to be based on the size of your business and how you run it versus being a gender issue,” says Larry Cohen, CEO of Axis Promotions (asi/128263). “Women are on industry boards and committees and their voices are being heard. They’re definitely seated at the table.” Crackerjack Shack CEO Sandy Higgins owns a brick and mortar store, which creates greater expenses for her than other distributors might face. “I don’t know what my competitors make. I tend to over-service my customers, so I’m willing to spend where others might not be,” she says. “It’s hard to compare
26%
30% 23%
PERFECT PLAN What’s the ideal compensation structure for
reps and managers? There’s clear disagreement that runs along the lines of gender and age. 50
STRAIGHT COMMISSION
40
All owners
Men
Women
31% 30
apples to apples.” Meanwhile, Rachel Leone, owner of Leone Marketing Solutions (asi/251966), believes the 2017 data is simply a blip, arguing that “it all comes down to experience, work ethic, connections and bringing in business. I don’t think it matters if you’re male or female. There are 23,000 distributors and overall I know more successful women-owned companies.” Industry consultant David Blaise believes leadership approaches could be another factor in the owner pay gap. “Owner compensation is normally tied directly to profitability,” he says. “But if women in companies doing a sales volume similar to men are paying themselves less, then maybe they’re choosing to invest their profits in additional resources and personnel rather than owner compensation. Much of it depends upon the goal of the owner.”
20
20
Men
CONTENT AT WORK
Women
3%
40
40 and under
Men
Women
40 and under
56%
62%
56%
62%
0%
2%
0%
41-50
51-60
61+
33% 28%
27% 19%
16%
10
0
40
38%
61+
SALARY + COMMISSION
20
% of reps/managers very satisfied with their jobs
51-60
5% 1%
21%
Both industry sales reps and sales managers are generally very satisfied with their jobs, with the exception of one group.
41-50
STRAIGHT SALARY
10
0
20%
10%
10
0
17%
16%
30
54%
46%
Men
Women
40 and under
41-50
51-60
61+
SALARY + BONUS
30
20
15%
Men
Women
Age 40 and younger
Is there a mid-life career crisis in the promo industry? There could be a hint of one. Sales reps and managers age 41-50 are less satisfied in their jobs than other age groups, according to ASI data. Axis Promotions’ (asi/128263) CEO Larry Cohen has one theory. “I don’t see dissatisfaction in this age group specifically, but it could be that this demographic came up in the business when there wasn’t as much transparency,” says Cohen. “They may not be as used to millennial online buying patterns and types of selling.” The younger demographic holds fewer meetings, asks more questions, and prefers connecting via text and email. “People who
41-50
51-60
17%
17%
11%
13%
10
61+
grew up with a more traditional style of selling might find it frustrating. If you’re old-school, this might be hard,” Cohen says. Brandito (asi/325944) VP Kevin Mullaney wonders if this 41-50 age group “could just be experiencing some burnout. Some managers may have been extremely successful sales reps that earned their promotion for being a top performer. This is a common mistake in sales organizations. Not all great sales people become great, or even good, sales managers.” How can execs deal with this burnout? “I suggest leaders talk to their top performers and make sure they have a clear career path,” Mullaney says. “If reps just want to pump gas into your sales pipeline, don’t take offense.”
0
40
5%
Men
40 and under
41-50
51-60
61+
SALARY + COMMISSION + BONUS 36% 28%
30
20
Women
29%
19%
18% 14%
10
0
Men
Women
40 and under
41-50
51-60
61+
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STATE OF THE
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A LOOK AHEAD
Distributors are generally optimistic about the industry going forward in 2018 and see an opportunity to grow by banding together. Forecasted Industry Health
Sales Expectations for 2018 vs. 2017
3.97 3.92 3.89 3.84
Increase: 56%
3.78
Same: 32%
3.72 (1=ailing, 5=robust)
3.64
2012
2013
2014
2015
2016
2017
Decrease: 12%
2018
7% of distributors plan to join a buying group in 2018, adding to the 13% of firms that are currently part of one. Forecasted Industry Health by Region (1=ailing, 5=robust)
WEST 2018 - 3.95 2017 - 3.96 2016 - 3.71
MIDWEST 2018 - 3.91 2017 - 3.75 2016 - 3.93
SOUTHWEST 2018 - 3.79 2017 - 4.04 2016 - 4.01
60 | COUNSELOR | STATE OF THE INDUSTRY 2018
NORTHEAST 2018 - 3.86 2017 - 3.96 2016 - 3.99
SOUTHEAST 2018 - 4.01 2017 - 3.94 2016 - 4.02
STATE OF THE
INDUSTRY
TOP 40 DISTRIBUTORS BY THE NUMBERS
32
SURGING & SLIDING
BAMKO
89.8%
The largest risers and decliners by year-over-year sales change.
HALO Branded Solutions
47.5%
32.0%
IMS/Group II Communications
Summit Group
-5.7%
RECORD SETTING
The total sales of Top 40 distributors set a new high mark last year.
8% rise (in billions)
$4.10
2011
$4.22 $4.39
2012
2013
Artcraft Promotional Concepts
-7.5%
-8.6%
4
Sunrise Identity
$4.75
2014
72 | COUNSELOR | STATE OF THE INDUSTRY 2018
$5.11
2015
$5.61
2016
$6.05
2017
7
Top 40 distributors headquartered in Illinois, the most of any state.
The number of women who are chief executives of Top 40 distributors. HELLO THERE The number of new distributors BAMKO, Corporate Imaging Concepts and Quality Logo Products – on this year’s list. Meanwhile, Tic Toc, CSE and Tangerine Promotions are no longer on the list.
3
Top 40 distributors that increased their annual sales in 2017.
GROWING GAP
$565.4 million
The revenue spread in 2017 between the number one and number 40 companies on the list. The 2016 spread was $550.2 million.
ALMOST FAMOUS
41
3
The rank of Mercury Promotions, which just missed making this year’s list for the first time.
Top 40 distributors headquartered outside the U.S.
15
Top 40 distributors with a five-year average annual growth rate of more than 10%.
$98,662.75
CONSOLIDATION RATE
The percentage of total industry revenue the Top 40 makes up has steadily increased over time.
21.5%
22.1%
23.0%
25.6% 24.5%
The total amount of sales Top 40 distributors generate every hour. 2013
2014
2015
2016
2017
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STATE OF THE
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28
TOP 40 SUPPLIERS BY THE NUMBERS CROSSING OVER
In recent years, several suppliers have begun selling both apparel and hard goods, a trend that’s likely to continue.
Suppliers selling apparel
Suppliers selling both
14
3
Includes six of the 10 largest firms
Account for 31% of total Top 40 sales
Suppliers selling hard goods
23
Of this year’s six newcomers, five are in this group
TAKING OWNERSHIP
GOING UP
The total sales of Top 40 suppliers continue to shatter records.
8% increase
$7.65 $7.10
The majority of Top 40 suppliers are private companies, and many say they’re family-owned.
12.5%
Public companies
(in billions)
$4.50 $4.68
$5.02
$5.46
$5.87
87.5%
112
2012
2013
2014
| COUNSELOR | STATE OF THE INDUSTRY 2018
2015
6
WELCOME ABOARD The number of new suppliers – Next Level Apparel, Innovation Line, Chocolate Inn, SnugZ USA, Moderne Glass Company and Starline – on this year’s list. Ennis, River’s End Trading Company, Antigua and Noteworthy fell out of the rankings, while Prime Line is now part of alphabroder and Lanco is part of Chocolate Inn’s portfolio of brands.
$124,755.38 Private companies
2011
3
The number of women who are chief executives of Top 40 suppliers.
Top 40 suppliers that increased their annual sales in 2017.
2016
2017
The total amount of sales Top 40 suppliers generate every hour.
STAYING POWER
13
The number of Top 40 suppliers that have remained on the list every year since 2000.
THE SPACE BETWEEN
$1.37 billion
The revenue spread in 2017 between the number one and number 40 companies on the list. The 2016 spread was $1.08 billion.
8
Top 40 suppliers with a fiveyear average annual growth rate of more than 10%.
JUST MISSED
41
The rank of Ennis, which reported 2017 sales of $31.4 million.
8
Top 40 suppliers headquartered in California, the most of any state. STATE OF THE INDUSTRY 2018 | ASICENTRAL.COM/SOI2018 |
113
