Each year, the Advertising Specialty Institute publishes a "State of the Industry" report through its flagship publication, the Counselor magazine. The Counselor is highly respected by industry professionals and widely read by both distributors and suppliers, it is considered the information source for the 19.6 billion dollar promotional products industry.
The chart below is culled from a listing of the Top 40 Promotional Products Distributors featured in both the 2000 State of the Industry report and the 2008 State of the Industry report (for brevity's sake, "State of the Industry" will be referred to as SOTI for the rest of this post). Comparing this list side-by-side highlights one obvious fact and one surprising shift occurring in the promotional products industry.
First, the year 2000 was (arguably) the year the dot-com bubble burst. In fact, in the 2000 SOTI report, the key question asked of every Top 40 distributor was: "Do you see dot-com firms as a positive or a negative for the industry?" These were the days of multi-million dollar investments into technology that, today, costs mere thousands (if not hundreds) of dollars. (Who could forget outrageous deals like Starbelly?)
Second, you will notice the arrival of newcomers on the 2008 SOTI report. These companies have steadily built a strong presence in the industry compared to several years ago. For the most part, these newcomers provide promotional products as a value-added extension to an already successful business model. Uniform companies, trophy companies, print companies and more are now offering advertising specialties as an additional offering in their branded products portfolio. The highlights in the 2008 column below reflect the vendors whose revenue does not come solely through the traditional promotional products industry or primarily through a traditional promotional products distributor model:
| Top 20 in 2000 | Top 20 in 2008 |
|---|---|
| CYRK | BDA |
| HA-LO | Corporate Express |
| Aspen Marketing Group |
Proforma |
| American Identity |
|
| Corporate Express |
Group II Communications |
| Geiger | Geiger |
| 4Imprint |
Cintas |
| Bensussen-Deutsch & Associates |
National Pen Corp |
| Boise Marketing Services |
4Imprint |
| Summit Marketing Group |
HALO/Lee Wayne |
| Case-Dunlap |
Adventures in Advertising |
| Brown & Bigelow |
Tic Toc |
| Vernon |
Workflow One |
| JII/Sales Promotion Associates |
Banyan Incentives |
| Wood Associates |
American Solutions for Business |
| Jack Nadel |
Summit Marketing Group |
| Kaeser & Blair, Inc. |
Kaeser & Blair |
| Newton Manufacturing Co. |
Myron |
| Group II Communications |
Corporate Edge/Inner Workings |
| AdGap Group |
MidWest Trophy Co. |
So what does this list really prove? It proves a fundamental shift has been happening with our buyers' purchasing habits which possibly serves as a wake-up call.
Consider the acquisition of Corporate Edge, (a promotional products distributor), by Inner Workings, (a print company), the acquisition is a microcosm of what is going on the industry, so is the dramatic case of WorkflowOne. WorkflowOne is a print company whose entry into the market was no subtle affair: Dan Welborne, vice president of the promotional division stated in the 2007 SOTI report, “Promotional products is the number-one initiative in the company. And that’s pretty big for a billion-dollar company to pick a space that we’ve been doing $35 million in and say that is our number-one initiative." Another example: when Staples, (the B2C office supplies giant), recently announced the acquisition of Corporate Express, (the B2B office supplies giant), this further proved that big companies are putting big money into streamlining their product offerings. Staples had already acquired industry purebred American Identity in 2007. The battle for buyers' mindshare is being fought as much on the acquisitions front as it is with competing distributors on the streets of our local cities.
On one hand, the key to these mega-companies and their assimilation into the industry through astounding growth can easily be attributed to market demand. The melding together of branded products and the confluence of industries is a simple response to the market: buyers want simplified systems and fewer vendors. They have become fiercely jealous of their time and will not extend it to just anyone, which makes entertaining multiple vendors the very last option on a very long list. Does this mean that fragmentation enjoyed by traditionalists in the industry might be coming to an end?
A frightening aspect to consider with some of these mergers is that by considering promotional products a mere portfolio builder some of these companies can possibly further relegate branded products to commodity level purchases. This is dangerous because customized branded products that generate revenue, increase goodwill (and more) cannot possibly be equated to copy paper and uniforms.
On the other hand, because of the nature of a highly customized industry and many unique traits (as easily dissimilar as similar) with other industries, the growth of professional specialists within the industry could skyrocket. We are one of those companies who, although considerably smaller than the ones on the list, have been able to make a unique product offering with all types of branded products. This doesn't mean it is easy. It is actually quite difficult. The barriers some buyers have erected between branded mediums are every bit as strong as the barriers salespeople have erected to keep from crossing over into new territory!
One would argue (I certainly would) that branded products are branded products. Midwest Trophy was always in the branded products business; they just happen to be, primarily, a trophy manufacturer. BDA is a promotional products company who happened to carve a very successful niche in sports marketing (whose growth also seems to be fundamentally organic). For some of these companies, absorbing additional types of promotional products makes good sense. It will be fascinating to glimpse in several years how these changes have affected a highly customized business. How, for example, some of these companies can withstand the structural changes necessary to build a complex but effective sales and support environment for promotional products or how they can achieve symmetry with different types of branded products in the minds of their buyers. One thing is certain: much remains to be seen how this will affect our industry, long term, but until then, there remains an incredibly bright spot for both niche distributors and small distributors (more on this in the next post).
This is the first post in a series aimed at discussing (and discovering) critical keys to building a successful promotional products business and a healthy industry. The series, in its entirety, can be found here - Promotional Products: Keys to a Branded World.
Update (11/5): I just received my Nov. issue of the Counselor and read an excellent article by Betsy Cummings, A Whole New Game, Nov. 2008, 125-127 (subscription required) that sheds even more light on the competition traditional distributors are facing from yet another type of competitor: online sellers of promotional products.
