The year is winding down, and it would be an understatement to say it’s been quite a busy 2015 in the promotional products industry. Then again, we love busy years, because that means we can continue to have more busy years in the future. Companies dealt with issues such as the West Coast dock strike, safety and compliance, and continued consolidation. Sales were up, though not as much as in the past few years, and yet there is still a lot of optimism about the future.
Ready or not, here comes 2016, and now is a great time to sit down and reflect on the past year. That’s right, it’s our annual look at the promotional products industry: what worked, what didn’t, and what we can expect over the next year.
Just like last year, industry experts offered their take on how 2015 went and what they’d like to see happen in 2016. But just to provide a quick refresher, we put together this snapshot calendar looking at all the major events that have happened this year. Take a look, and then keep reading for a more in-depth analysis and for what is in store for 2016 and beyond!
If you like this timeline, feel free to copy/past the embed code below and share it on your blog or website!
State of the Promo Product Industry
Sales Continue to Rise
Promo items sales once again topped $20 billion in 2014, and it was the fifth straight year of positive growth, according to Promotional Products Association International (PPAI). However, the 1.09 percent annual growth was the smallest increase the industry has seen since 2010, when sales were finally starting to come back after the recession.
“This was somewhat of a relatively flat year, unless you added a major new product category or made an acquisition,” said Kippie Helzel, Vice President of Sales at supplier Keystone Line.
PPAI also reported that larger distributors fared better than smaller ones. Distributors with more than $2.5 million in sales saw, on average, a 4 percent increase in 2014. Those with less than $2.5 million only saw about a 1.72 percent increase.
The upward trend seen in 2014 continued into the first quarter of 2015. Distributors saw a 3.5 percent rise in sales over the first three months of the year. It was the 21st straight quarterly rise for distributors; however the increase was the smallest quarterly rise in the last five years. Second quarter sales rose 3.1 percent for distributors, and in Q3 distributors reported a 3.4 percent increase in sales.
C.J. Mittica, Executive Editor for Counselor Magazine, which is published by the Advertising Specialty Institute, said distributors remained optimistic throughout the year that sales would continue to increase despite the slower growth. He added, “One could argue the industry is at the tail end of its recovery from the recession, and that its continued growth and optimism from distributors reflect a generally positive outlook about the industry.”
Quality Logo Products® had a pretty good 2015 as well. We made Counselor Magazine’s Best Places to Work for the fourth straight year, and for the fifth time we made Inc. Magazine’s 5,000 fastest growing private companies.
We’re not stopping there, either. We’re hard at work creating a new website that will not only enhance our customers’ experience but will be mobile-friendly, too.
Bret Bonnet, co-owner of Quality Logo Products®, said, “Our worker elves have been working behind the scenes this past year to make ordering promotional products easier, faster, and more affordable than ever and I can’t wait to share their hard work with the world!”
We’re also giving our article library a much needed makeover. It’ll be a place to get more technical answers about the promotional product industry. So be sure to keep an eye out on our website for some really awesome content coming down the pipeline.
Influence of the Presidential Election
Even though the 2016 presidential election isn’t until…2016, the campaign season is in full swing. While presidential election cycles aren’t enough to make a huge increase in promo product sales, some experts noticed an uptick this year in particular.
Mittica said that while candidates always spend a lot of money on branded items, this year in particular has gone to another level, partly because of a certain Republican candidate…no, not Jeb Bush. Donald Trump’s campaign spent $825,000 on promotional items in the third quarter this year.
“Not a lot of political candidates are noted for their business savvy, so it’s interesting that when someone like Trump enters the race, promotional products become a major tool of his campaign,” Mittica said.
Margit Fawbush, Communications Manager for BIC Graphic, said candidates seem to be buying more promotional products this year compared to past election cycles, and the extended campaign season makes it easier for candidates to get their message out.
“We have an extremely long campaigning period in the US – far longer than other countries,” Fawbush said. “This offers more opportunities for candidates to conduct long-term outreach campaigns to drive awareness of their platforms. They are their own brands these days.”
Mergers, Acquisitions, and Consolidation
Consolidation was, again, a major storyline this year, with suppliers merging or teaming up with other suppliers to offer more services to distributors. For example, after Hit Promotional Products acquired Admints & Zagabor in July, C.J. Schmidt, president of Hit, told ASI that Admints will allow Hit to offer more products for the holiday season.
Perhaps the most newsworthy acquisition of the year came in February, however, when Staples announced it was buying Office Depot for $6.3 billion. In 2013, Office Depot bought out Office Max. If the deal with Staples is approved, it would mean the U.S. would go from three major office supply stores to one in about three years.
Other notable acquisitions include: Full Line acquiring R&R Promo, Gemini and Anchor Line, Royal Industries and Waldor Products, HALO and Newton acquisition, Wilson Sporting Goods buying Louisville Slugger, and Fields Manufacturing acquired American Greenwood.
Margit Fawbush said this year was the year of acquisitions. “So many distributors combined their businesses to increase buying strength,” Fawbush said. “Many smaller suppliers also merged to expand their offerings.”
Matt Rosenbaum, Field Sales Manager for Polyconcept North America, said a lot of the consolidation happened with suppliers buying out other suppliers or teaming up with other companies to offer more options for customers. “It just gives you more advantages,” Rosenbaum said. “If you’re consolidating with a supplier that has a strength in ‘X,’ you’ve just overall become more powerful.”
C.J. Mittica echoed Rosenbaum, saying that streamlining the supply chain was a major theme emerging in the industry this year. “Major hard good suppliers are branching into apparel, and apparel suppliers are adding decoration services instead of just selling blanks,” Mittica said. “Their goal is to a provide a one-stop solution, where a distributor can buy decorated hard and soft goods from a single company to save time and promote efficiency.”
2015 Trends and News
Technology and Healthy Living
Tech products continued their dominance in the promo products industry. We saw this in the number of silicone cell phone wallets that made our annual Top 25 Most Popular Promo Items. This year, however, was focused on wearable technology. Wearables aren’t a new idea, but with the introduction of the Apple Watch this year, some industry experts noticed more inquiries for branded wearables. Some experts said tech items are growing so much that they fit into other categories like health and fitness.
Jeff Solomon, Master Advertising Specialist with Free Promo Tips, said there is a movement of companies offering employees more options to live healthier lives. Promotional products are a great way to fit that need on a wide scale. “I’d almost put it in two categories,” Solomon said. “The first one is the tech that is the [cell phone] chargers, flash drives, and those kinds of products. The other is wearable tech that I’d really call fitness tech. This is a hot category.”
Health and fitness is a strong marketing niche, echoed Kippie Helzel. These products will continue to be popular partly because they create a positive association between the company that gives the products out and the people that use them.
Margit Fawbush agreed, saying fitness trackers such as Fitbit and other health tracking bracelets will continue to grow in popularity in the future. She added, “The technology has gotten less expensive, and the opportunity to brand an item someone wears every day, or at least when they work out, is very attractive to marketers.”
With this kind of explosion in interest, it’s become a race to be the first to market with new technology products, Matt Rosenbaum noted, no matter how outlandish a product idea might seem. For instance, the Zoom Audio Flask is an 18-ounce water bottle that includes a removable Bluetooth speaker. Yup, you read that right.
“Again, it becomes a race to be the first to market,” Rosenbaum said. “There’s that constant need to stay relevant. I think [the Audio Flask] is going to do better than you think. Are you going to use a water bottle and Bluetooth speaker at a gym, no. But it’s a novelty item. It’s different.”
Environmentally Conscious Consumers
Climate change and developing cleaner energy options was (and continues to be) a major storyline this year. However, some experts said the trend for customers wanting eco-friendly products has softened over the last few years.
“It’s not new,” Rosenbaum said. “That was something that was a major focus a few years ago. I don’t think that is as exciting it is as it once was. So I would say overall that has kind of mellowed out, but there is definitely still a need out there.”
C.J. Mittica said consumers are still concerned about being environmentally friendly, but it has to be tied with a great product as well. He added, “They won’t just buy something for the sake of being green.”
Instead, major cities are still focused on reducing or eliminating the use of plastic bags, said Jenny Straub, Marketing and Product Development representative at Vitronic.
Bans on plastic bags have become more common over the years and continue to gain popularity. California’s state legislature was the first in the country to ban plastic bags statewide, and Chicago’s plastic bag ban took effect in August. As a result, Straub said she’s seen an uptick in orders for reusable tote bags.
“When a new habit is forced (like using reusable bags), it does not take long for us to adapt,” Straub said. “Reusable bags and cotton tote bag orders are increasing, which is a good indication of a big push for environmentally friendly products.”
Safety and Compliance
The trends in 2015 weren’t all product related. Safety and compliance was a major talking point throughout the industry this year and is likely to be next year. The Quality Certification Alliance now has a total of 34 active supplier members, said QCA Executive Director Jeff Jacobs. There are 14 active members of the QCA Distributor Advocacy Council, including Quality Logo Products®, who joined just this year.
Jacobs credited PPAI with raising suppliers’ awareness. He said the main steps taken in safety over the last few years are because the customers are demanding safe products.
“From our perspective, delivering safe and compliant product to end-users is an activity best done collaboratively between suppliers and distributors,” Jacobs said. “I think the ‘big steps’ from the industry have come because the end-users themselves are forcing them to happen.”
Matt Rosenbaum said more and more suppliers are taking product safety seriously and seeking out accreditation from QCA. “Especially with technology being the category that it is now, all of the safety components become more and more important,” Rosenbaum said. “It’s especially important for companies that don’t want to give something out that will end up having a negative impact on their brand.”
West Coast Port Dock Strike
The West Coast port dock strike was major news throughout the country at the beginning of this year. Many industries were affected by the strike, including the promotional product industry.
Rosenbaum said at a certain point PCNA couldn’t take orders for power banks because the inventory was too low. “It took us about a month to recover,” Rosenbaum said. “It was long enough to where it definitely had an impact.”
Trends to Watch for in 2016
Just about every expert I spoke with said technology will continue to be a major trend going forward beyond even 2016. The popularity of wearables will continue, but the tech still has some issues it has to work out, said C.J. Mittica. He called the wearable tech industry “fractured” and compared it to the “pre-iPhone era.”
“Fitbits and Apple Watches are popular, but each have their issues,” Mittica said. “Many people abandon their Fitbits after a few months. Plenty of people love their Apple Watches, but even they admit it’s an expensive accessory of their iPhones.”
He added that businesses are looking for solutions to wearable technology issues. But once those issues are worked out, we can expect an even bigger demand for wearable tech than there is now.
Online and Mobile Access
Mittica said that apart from the tech products companies are offering, technology will play a role in the industry as a whole as more customers do business online (specifically on their phones and tablets). Google announced in February that it was going to start penalizing websites for not being mobile friendly. So having a mobile-friendly website will be even more important next year.
“Just look at the behaviors of consumers today – they shop from their phones, they price compare while they’re in a store, and they look up something on their phones before even bothering to sit down in front of a computer,” Mittica said. “Companies that want to succeed in this industry, especially with a web or e-commerce offering, need to have an optimized mobile experience.”
Matt Rosenbaum of PNCA said online-focused distributors (such as QLP) are “growing at a rate much quicker than the overall industry.” He also attributed the growth to the way customers are making transactions these days, comparing it to an Amazon-like shift.
“Those buying habits are becoming more of a trend,” Rosenbaum said. “You get in with a lot of the younger people and Millennials out there, they don’t necessarily want to have the face-to-face meeting or pick up the phone. They want to do it all online. The model is growing at a much larger percentage.”
You may have noticed an increase in name brand items (such as New Balance, Nike, and EOS) being offered by suppliers this year and you would be right. Rosenbaum said his company now has 30 brand names under their umbrella. He predicted more suppliers will add retail brand partners going forward.
“Brands grow with us faster than…any other non-branded items,” Rosenbaum said.
Jeff Solomon said having brand names attached to tech products is an advantage for suppliers and distributors. “It seems like some of the products are getting more upscale,” Solomon said. “The price tends to go up with that, too. So the question becomes then, is price really an objection because you’re going to pay more for brand names?”
Challenges for 2016
Lack of Innovation
A major sticking point for several people I talked to is a lack of innovation. Bret Bonnet, co-owner of Quality Logo Products®, said it’s been years since a company in the industry has created a product that has been noteworthy.
“Polypropylene tote bags became a thing that went nuts,” Bonnet said. “There hasn’t been something like that in years. I’d say we’re going on eight years.”
Kippie Helzel said this year didn’t see a lot of new products come out. Still, “Overall I think that the classic promotional items really held their own in a year of slower innovation and pricing pressures.”
Jeff Solomon said innovation isn’t just product related but also comes in the form of social media and other technology. “What I do think is lacking in this industry is innovation in communication strategies,” Solomon said. “This industry does not understand social media. It seems to be focused on a steady stream of product specials and eblasts without providing how these products provide marketing solutions.”
Bonnet said we can expect more consolidation next year as well. While there will be more suppliers teaming up with other suppliers and distributors with distributors, eventually the conversation will turn to suppliers buying out distributors and vice versa. Bonnet added, “It’s just going to be a matter of who is going to do it and who will be the first to act.”
Matt Rosenbaum said we can expect to see more suppliers teaming up with other companies that offer services they don’t currently have. It goes back to having more power and options for customers so they don’t have to go elsewhere to find the products they are looking for.
Bonnet said the cost of oil will likely go up next year and could have a big impact on prices. Since oil prices affect the cost of plastic and in turn the cost of a product (not to mention the shipping of products), a significant increase in oil could disrupt product prices, hurting smaller companies.
“There was a time when we would do almost quarterly updates on our prices because of oil costs,” Bonnet said. “It’s been nice not to have to do that so often, but I think we’re going to see, if oil costs increase, prices will jump.”
Push for More Safety
Jeff Jacobs said that for distributors who are looking to get business from larger companies and customers, safety will continue to be a big topic. He added, “For a large number of suppliers, because the bar was set low for a long time, there is certainly more to be done.”
Jeff Solomon said that as more recalls happen, the more important product safety becomes in the industry. “One would think safety is very important, but the question is are we doing enough service to it?” Solomon said. “Do people care enough about safety, or is it still all about price?”
Solomon said that going forward, there has to be a discussion about the roles distributors and suppliers play in providing safe products for customers.
Jacobs agreed, saying that right now the incentives for a lot of the sales organizations are led by the price of the product. All parties involved should recognize that safety benefits everyone (customers, distributors, and suppliers) in the end.
“It really is a ‘pay me now, or pay me later’ proposition,” Jacobs said. “You can build the cost of compliance in at the beginning and openly discuss it, or you can take the risk of the much higher cost of legal fees, penalties, fines, and the damage to the brand and business when a product fails. This issue is really about the sustainability of our industry- we are just one major product failure away from a lot of people being out of business.”
These topics only begin to scratch the surface of issues and newsworthy stories that will come in 2016. Don’t worry, we’ll back next year with another full recap, and you can always check back on our blog all year long for relevant news about the promo product industry!