Tom Economou of Bellevue, Washington-based distributor Sunrise Identity (UPIC: Sunri635) had a pretty straight-forward strategy to growing sales in 2012. “We focused on our best clients and we had a great year,” he says. Not only did that strategy work for Sunrise, but promotional products distributors as a whole were slightly ahead of the U.S. economy in posting a 4.4 percent increase for the year, raising industry sales to $18,497,646,229. Modest as the increase was, it brought the industry to its third-best year ever.
Even distributors that didn’t post sales gains say they realized more income last year. Sales were down a little, but profits were higher, “so we were pleased,” says Conrad Franey of St. Louis, Missouri-based distributor Gateway CDI (UPIC: GATE0002).
In terms of market share, the 882 respondent firms in the large-size company database captured $9,318,526,638 of the business—a 50.4 percent share. Companies in this category reported sales of $2.5 million or more including franchisors such as AIA Corporation, Proforma and iPromoteU that report for their franchisees.
Total sales for the more numerous smaller distributors (companies reporting less than $4.5 million annually) as a group amounted to $9,179,119,591. The sales mean for the small-distributor group was $415,251—down a bit from the $422,505 a year earlier.
Five-Year Industry Performance
2008
$18,101,298,808
2009
$15,638,571,468
2010
$16,560,162,075
2011
$17,721,945,690
2012
$18,497,646,229
For many of the industry’s 22,105 small distributors, promotional products are a second revenue stream. In 2012, 46.1 percent of the survey respondents were doing four-fifths of their business in some other field. The portion of firms whose core business was elsewhere registered at 38.8 percent in 2011.
Percentage of Small Distributors Selling “Mostly Other Things”
2009
2010
2011
2012
Firms with less than 80 percent of sales in promotional products
24.1%
33.7%
38.8%
46.1%
Percentage of promotional products sales by “mostly other things” firms
38.0%
33.2%
32.5%
37.4%
As distributors’ total sales increase, so does the portion of business done with non-industry suppliers (i.e., those not identified with PPAI, ASI or SAGE). In 2012, that segment accounted for $3,459,059,845—or 18.7 percent—of total dollar volume.
Both small and large distributors report a larger total percentage of sales being made over the internet. These web sales (not to be confused with salespeople transmitting orders online) rose 8.3 percent to $3,743,013,925. As more and more promotional product distributors are filling orders from online customers, we believe this trend upward will continue based on the ability of more customers to access company’s web stores.
Internet Contribution To Distributor Business
2010
2011
2012
Online sales
$2,716,893,781
$3,099,370,950
$3,743,013,925
Average online contribution to small-distributor sales
16.1%
14.0%
16.9%
Average online contribution to large-distributor sales
16.7%
21.1%
23.5%
Jeff Grippando, vice president and general manager, Branded Merchandise Division at Dayton, Ohio-based distributor WorkflowOne (UPIC: SF00001) explains the online buying experience for his customers. “Clients are driving their organizational buying communities into online purchases that they can control through designated catalogs, consistent pricing and punch out applications into their procurement platforms such as Oracle, Ariba, SAP, etc.”
The website at Atlanta, Georgia-based distributor Booker Promotions (UPIC: BOOK0001) hasn’t drawn significant new, unsolicited business but it’s helping to engage clients says co-owner John Hiles Jr. He reports the company’s interaction and marketing efforts with existing clients and targeted prospects has greatly increased through the web presence.
At Memphis, Tennessee-based distributor Signet Inc. (UPIC: SIGNET), Chairman and CEO Elizabeth Tate sees more business being transacted over the internet and says her firm maintains a Facebook presence that “further showcases the people and causes important to Signet.”
In 2012, marketers spent 10.4 percent of their overall revenue on marketing activities, including advertising, research, software and salaries, reveals a study released by Gartner Inc., a Stamford, Connecticut, research firm. How much of that 10.4 percent went to media? For traditional media—not so much. As the chart below shows, the only non-digital big gainers were broadcast TV (apparently not the dead-as-a-dodo medium that some make it out to be), point-of-purchase advertising and product placement.
Print media in particular have been having a hard time in recent years. Interestingly, promotional products, among the oldest of the old media, is largely print (but also comes in forms that appeal to all those human senses) and is more than holding its own. Reasons why are familiar to everyone in the industry, but that is another story.
Annual Expenditures For Selected Media and Methods
Media/Method
2011
2012
% Changed
Direct Mail
$50,000,000
$51,100,000
2.2 %
Broadcast Television
$45,156,841
$49,657,968
10.0%
Newspaper (print only)
$20,692,000
$18,931,000
-8.5%
Internet Advertising
$31,740,000
$36,570,000
15.0%
Point-of-Purchase Advertising
$28,500,000*
$30,500,000*
7.0%
Cable Television
$23,543,165
$24,372,841
3.4%
Consumer Magazines
$21,714,467
$21,074,090
-2.9%
Promotional Products
$17,721,945
$18,497,646
4.4%
Radio Advertising (on-air only)
$14,085,500
14,300,000
1.5%
Sports Marketing (sponsorships)
$12,184,844
$12,962,600
6.0%
Business Magazines
$7,878,000
$7,562,000
-4.8%
Out-of-Home (billboards)
$6,400,000
$6,700,000
4.6%
Product Placement (Film, TV)
$4,333,334
$4,750,000
11.4%
Mobile (phone) Advertising
$1,596,000
$3,400,000
111.0%
Figures shown in billions of dollars
*Estimated
**Media sales volume figures are subject to revision throughout the year as reporting organizations update their data.
Expenditures for selected advertising media and promotional methods were compiled for Promotional Products Association International by Richard Alan Nelson, PhD, University of Nevada-Las Vegas and Rick Ebel, Glenrich Business Studies. Sources include American Business Media/Business Information Network, Cable TV Advertising Bureau, Direct Marketing Association, IEG, Interactive Advertising Association, Newspaper Association of America, Outdoor Advertising Association of America, Point-of-Purchase Advertising Institute, PQ Media, Publishers Information Bureau, Radio Advertising Bureau and Television Advertising Bureau.
As media buyers move from bricks to clicks, internet advertising and its subset, mobile phone advertising, grew more than other media in 2012 and growth is expected to continue. Like promotional products, mobile phone advertising is ubiquitous, and as a Marketing Daily story headline put it, “Yes, Even Grocery Shoppers Say They Want Mobile Services … And the Power to Tell Off the Store.”
In terms of who is buying promotional products, ad-spend leaders in the healthcare and durable goods industries globally suffered the biggest dips in 2012, and fast-moving consumer goods, the food category, for example, increased its dominance.
So, what’s in store for 2013 overall? Seven out of 10 survey respondents told Relevant Insights they’re expecting a better year than last. Almost a quarter (21.4 percent) of survey respondents predict their business revenue will remain unchanged, and only 7.6 percent believe they—and possibly the industry as a whole—will do worse.
Looking for an optimist? Ask Forrest Fairley, director of product support, promotional products, for distributor Safeguard Business Systems/Deluxe Corporation (UPIC: SAFE0003) in Dallas, Texas. He says his company’s first quarter was up 14 percent, and the expectation is that the company will maintain the high-level pace for the remainder of the year.
>>Methodology
The 2012 Estimate of U.S. Distributors’ Promotional Products Sales was executed by Relevant Insights LLC, a Euless, Texas, research company. Additional contributions were made by the authors of this article.
As in the past, the industry’s distributor population—PPAI members and nonmembers—was culled from five separate databases, including PPAI and UPIC lists. More than 22,000 smaller distributors (under $2.5 million in sales) were emailed a questionnaire which this year combined distributors’ sales by programs and products. In some cases, as a follow-up, a duplicate survey was circulated by mail to those not reporting back earlier. Response totals were added to those obtained from a census of the 991 large ($2.5 million and up) distributors. The census was augmented by phone solicitations to account for the top-50 leading distributors.
The combined sample and census produced 794 usable responses, which qualified those distributors for a prize drawing. The survey margin of error was +/- 2.3 percent at the 95 percent confidence interval.
>>Highest Sales To Date:
$19,440,837,547 in 2007
Biggest Percentage Increase: 25.1 Percent in 1997 when sales rose from $9.4 billion to $11.8 billion.
Biggest Percentage Decrease: 13.6 percent in 2009 when sales tumbled from $18.1 billion to $15.6 billion.
>>Distributor Snapshots: A 2013 Forecast Distributors weigh in with their economic outlook for 2013.
Molly Beavers, Senior Manager of Marketing, Newton Manufacturing Co. (UPIC: NEWTON), Newton, Iowa, PPAI Member Since: 1909
Company: An industry old-timer, Newton Manufacturing was founded in 1909 by George Newton and began manufacturing its own line of promotional products. After a fire in 1943, the company shifted its focus to distribution but kept “manufacturing” in the name for brand recognition. Today, the distributor’s 100 employee-owners provide support for more than 500 independent contractors across the country.
Operation: One of the largest employee-owned distributors in the country, Newton, coincidentally, is located in Newton, Iowa. Clients range from small-business owners to Fortune 500 companies. The firm offers award-winning creative services, e-commerce and fulfillment programs, recognition programs and event marketing.
Outlook: As the economy continues to improve, Beavers is confident “that the value Newton has to offer our customers and the enhancements we are making in our technology will result in modest sales increases.”
John Hiles, Jr., Co-owner/Partner, Booker Promotions, Inc. (UPIC: BOOK0001), Atlanta, Georgia, PPAI Member Since: 1954
Company: In 1920 Roy G. Booker founded the company, which operated under his name until 1989 when it merged with Promotion Products of Atlanta. Ten years later Booker Promotions merged with Ad Works Promotions, and now the firm has three equal owner/partners: John Hiles, Jr., Neil Kalnitz and Scott Moscow. Previous owners and CEOs include PPAI Hall of Famers Almand “Bo” Carroll and John Hiles, Sr. A sales force of seven includes the owners.
Operation: Although Booker’s area of operation is concentrated in Atlanta and surrounding areas, the firm has a nationwide account list. As a full-service distributor, the firm offers promotional products’ consulting, art creation, fulfillment and other marketing services. Clients include colleges and universities, private schools, technology companies, industrial packaging firms, hospitals and home healthcare organizations and service-related entities.
Outlook: Hiles sees the future optimistically. With sales thus far this year up 18 percent over 2012, he can probably afford to. “We recently hired younger salespeople that are showing great potential and are helping us market to the new generation of buyers,” he declares. “We also have hired a person to help us with our social media, marketing and sales efforts.”
Elliott Zirlin, Chairman, Blue Sky Marketing Group Ltd. (UPIC: BLUE0009), Northbrook, Illinois, PPAI Member Since: 1997
Company: A full-service marketing agency, Blue Sky specializes in premiums and promotional products. Launched in 1997, the company is a privately-held family business comprised of 20 salespeople.
Operation: Blue Sky’s operations and fulfillment services are directed from the company’s suburban headquarters, which is 25 miles north of Chicago. Since 2000, the distributor has added more than 10 offices throughout the U.S. to service its client base. Blue Sky offers free 24-hour rush programs, graphic design, creative ideas, warehousing, fulfillment and drop shipping, product decoration and web store/virtual catalog development.
Outlook: Zirlin says he’s “extremely optimistic” about the U.S. business climate going forward. “With our preferred suppliers manufacturing new and exciting products, as well as our strategy to maintain and grow a diversified client base, we are confident (about) the future…,” he states.
Jeff Grippando, Vice President and General Manager, Branded Merchandise Division, WorkflowOne (UPIC: SF00001), Dayton, Ohio, PPAI Member Since: 1993
Company: WorkflowOne’s roots date back to 1898. Growth since then has been achieved with the help of various acquisitions in many different markets and product segments. The current number of salespeople is 230.
Operation: During its 100-plus years, WorkflowOne has become one of the largest providers of marketing and distribution services and document management in North America. Products and services range from business documents, electronic print and mail, branded merchandise, labeling, sales and marketing collateral and distribution. It has 12 production facilities and 14 business service centers nationwide with 1.5 million feet of warehouse space. The Dayton, Ohio, firm is staffed by 2,000 employees throughout the U.S., and its 12,000-client base includes leaders in financial services, healthcare, manufacturing, retail and service sectors.
Outlook: Grippando credits market change for his optimism about near and long-term prospects. “The buying conditions,” he says, “have changed, and our product offering is meeting that requirement.” He says WorkflowOne is now “focused on a brand spend solution strategy” that ties together commercial print, point-of-purchase, direct mail and promotional marketing with a fulfillment and kitting operation supported by technology. So far this year, he says: “We are seeing early success based on early client wins, both in our cross-selling efforts as well as new-customer development.”
James L. Southwick, President/CEO, Southwick Specialty Advertising, Inc. (UPIC: UPIC: 8383), Portland, Oregon, PPAI Member Since: 1996
Company: Formed in 1983, over the next 30 years Southwick merged with The Merle Co., Network Products and Garrett Marketing. Today, there are 10 salespeople.
Operation: Headquartered in Portland, the firm also maintains an office in Bend, Oregon. Southwick covers Washington State and Idaho as well as Oregon through its sales force. With customers nationwide, the firm’s principal clients include those in healthcare, financial, software companies, utilities, telecom and education. Typical clients are small to medium companies to which Southwick offers, among other things, art production, packaging and fulfillment.
Outlook: “Sales this year should be a little better than last year,” predicts Southwick, “and the outlook would be cautiously optimistic, barring government actions.” Receivables, he notes, “seem to be holding up, and we have not seen a trend downward yet. As you know, we [the industry] are the first to decline and the first to recover” when the economy sours. Southwick also predicts “more polarization and merging of distributorships in the next few years due to aging owners, the need for more services for clients and a capital base for ongoing technologies.”
Elizabeth B. Tate, Chairman/CEO, Signet, Inc. (UPIC: SIGNET), Memphis, Tennessee, PPAI Member Since: 1976
Company: Since its founding in 1976, Signet has grown from two people to 50 and from one salesperson to six. Signet’s facility has doubled in size to 50,000 square feet, and the firm is a WBE-certified woman-owned business and a member of the PeerNet Group.
Operation: With 125 corporate accounts, including international, Signet caters to Fortune 500 and other high-profile companies. Types of industries served include transportation, consumer service, food service and financial. Services include warehousing and fulfillment, collation and kitting, gift wrapping and event support.
Outlook: Tate says she views the remaining months of 2013 in a positive light. She also observes, “Companies seem to be buying less-expensive merchandise in an effort to make their advertising dollars go further.”
Rick Ebel, former marketing communications director of PPAI, is principal of Glenrich Business Studies, a business writing and research firm in Corvallis, Oregon. Email: rick3hebel@yahoo.com
Richard Alan Nelson, Ph.D., is Adjunct Professor of Integrated Marketing Communications at the Hank Greenspun School of Journalism and Media Studies, University of Nevada, Las Vegas. He is also the editor emeritus of Journal of Promotion Management. Email: RnelsonLV@gmail.com
>>The Big Four
2012’s Hottest-Selling Product Categories
By PPAI Staff
Each year PPAI conducts annual product and program category surveys that determine the product segments in the industry as well as identifies the various promotional programs in which they are used. Traditionally, the largest product category has been the wearables segment (t-shirts, jackets, caps, footwear, etc.) with 28.92 percent of the market in 2012 (down from 29.64 percent in 2011). The consistency of this leader should come as no surprise since many new promotional products distributors trying to break into the market usually get their foot in the door by selling wearables. With the recent demand for reusable bags and totes, the bags category grew from 7.17 percent in 2011 to 8.73 percent last year. Writing instruments came in at a close third at 8.63 percent (down from 8.99 percent in 2011).
Product Categories On The Rise
With an increasing consumer demand for reusable water bottles, drinkware is quickly rising to the top of the product categories. Last year’s drinkware sales grew to a 7.09-percent share of the promotional products market from 6.68 percent in 2011. Recognition awards and trophies also saw a significant increase in 2012—growing to a 4.12-percent share of the promotional products market from 3.21 percent in 2011. As mobile computing continues to grow, sales of computer products saw a slight increase to 3.87 percent from 3.76 percent the previous year.
Top Promotional Program Categories
PPAI Research also examined how promotional products are used in the marketplace. Results indicate that in 2012, buyers of promotional products spent the most on programs that fostered goodwill and retention with Business Gifts coming in at 10.80 percent. Next, buyers spent the most on Brand Awareness with this segment getting an 8.83-percent share of the pie. In a recovering economy, it comes to no surprise that businesses continue to focus their efforts on building business relationships and increasing brand awareness.
Behind The Numbers
This year the product and program surveys were included as questions in PPAI’s annual sales volume survey that was sent to both member and nonmember companies. A total of 647 companies (368 members and 279 nonmembers) provided information about their sales by product categories and 618 (358 members and 260 nonmembers) reported on the program categories. While more surveys were completed this year over last year, responses to questions about product and program categories continue to be a challenge as many distributors do not keep track of their sales by these categories. In order to continue building on the established research, PPAI urges new entrants to the industry and established distributors to keep track of their sales by PPAI’s product and program categories shown in this article.