Increased Costs Downfall of Recycled Products
A little more than ten years ago when a major ASI supplier first introduced recycled products made from reclaimed rubber the industry collectively ignored the offerings. Although the brand name was nationally recognized there was very little interest in the products and within three years the offering had vanished from the product line. A couple of years ago recycled promotional items were again introduced into the mainstream corporate channel and almost instantly became a mega success. Several issues have come together to create a perfect storm that is blunting sales.
First consumers and distributors were burned last year with horribly underestimated inventories. With some manufacturers the Spring of 2008 saw entire lines back-ordered for the critical Earth Day celebrations. Other products had serious quality control issues including melted buckles and inferior fabrics. Distributors had to deal with both of these issues in unmet expectations on delivery or worse angry customers when the more expensive recycled products proved to be of lesser quality than their non-recycled counterparts. Adding insult to injury some industry players such as Norwood suffered through inclement weather and flooding at some locations only making the problems worse. Manufacturers rushed to address these issues and the lack of color choices for the 2009 season.
Which leads to the next problem - collapsing sales the result of the ongoing recession. Everyone wants to promote eco friendly options but when budgets are severely cut customers are left with two choices, spend less money or spend no money at all. Although there is nothing official yet released by the major suppliers a quick look at online inventories shows excess quantities and also demonstrated no shortages this year leading up to Earth Day. This is partially the result of the economy but also directly reflects the increased costs associated with these products. Recycled apparel has been a major dud by most accounts with end users not liking the feel of recycled shirts and fleece. Taking a look at second quarter sales from suppliers there is an abundance of recycled and organic items which would again indicate an overstock situation. Higher prices and the recession explain much of the decrease but an overall change in buyer behavior may be behind the shift. It is too early to draw any conclusions but the 2010 "green" season will likely determine the fate of recycled promotional products in general.
Manufacturers need to bring to market some sub $3 items in popular categories to help continue the shift to recycled items. They also need to source some in the USA versus bringing them all in from overseas factories. Given the state of the economy and particularly domestic factories United States sourcing would help sell recycled items.
Broder Bros.appears to have dodged bankruptcy. Although there is no official word as of tonight it would seem they secured the needed percentages to prevent their filing. This is good news for the industry as the recent filing of Norwood already had the industry on edge. Changes are already underway at Broder with Columbia being dumped from the product offering. Once they sell through the remaining inventory it will be the first time in decades that Columbia has no presence in the industry. Meanwhile Callaway has landed at Perry Ellis. Once Ashworth officially exited the business Callaway was left orphaned until the announcement was made last week.
We do have an update to the Major Retailer Provides Lessons in Poor Customer Service but will update that story Monday morning. Suffice to say the demonstration is ongoing.
Major Retailer Provides Lessons in Poor Customer Service
The economy is struggling and retailers are closing all across the country. The cost of acquiring a new customer continues to exponentially increase as retailers fight the battle of not only getting customers to choose their stores but to shop at all. Despite this one major retailer has demonstrated how not to provide customer service and how to lose a customer for life.
First a quick detour as we discuss some new custom coolers. There are many ways to keep your food and drinks cold. Some choose portable mechanisms such as the Gemline Party To Go Cooler which provides for storage of up to 32 cans. With a mega 16" opening even the largest of bottles or containers will fit easily. The less bulky Life In Motion Collapsible Cooler is also heat sealed and has a front zippered pocket. With a top grab handle and sporting PEVA lining it is a safe alternative to less expensive and less safe coolers promoted by some organizations. The limited size of the cooler will make it less popular with the beach crowd which is where the Life in Motion Cooler comes into play. With a huge 36 can capacity it can also hold about any size container. It is also useful in carrying bottles and has an attached metal bottle opener. When in doubt by a PEVA cooler as they do not contain PVC which requires the use of environmentally dangerous materials in production.
Equally dangerous is trusting a major retailer. Sears sells all manner and types of appliances including refrigerators. The recent purchase and subsequent disaster is a perfect case study in how not to conduct the servicing of a client. As an example a fridge is purchased for $170 and lasts exactly three months before the compressor fails. Under warranty for one year as part of the stores premium brand name the refrigerator is repaired. In order to facilitate the repair a technician is first sent to the location. A normal service call from the same company runs at least $125. The technician determines a compressor is needed. The cost of shipping the failed part and installing it runs over $300 per the slip. The part is installed and the refrigerator works for another month before failing under the same circumstances. Another service call is made at presumably a similar cost and another compressor is sent this time overnight. Compressors weigh a substantial amount so this was not an inexpensive shipment. The servicing technician determines the compressor is fine and instead believes another part has failed which is replaced. Total cost to date of repairs in terms of shipping and labor totals over $700 per the slips provide by the servicing firm. Customers suggestion that the refrigerator be replaced after the first failure are ignored. The customer believes there is no justification in repeatedly repairing a refrigerator that costs the store less than $150. After the second repair the refrigerators lasts approximately three days before failing yet again under the same circumstances. The local store realizes how fruitless the situation is and agrees to replace the item with the identical model. The customer has no problems with the identical model but new refrigerator. Total cost to the retailer is over $700 and in the end they ended up replacing the item and taking a dead loss of $150. But they also lost the customer for life but did manage to acquire enough bad will to steer dozens of customers away from the store for years to come. Somewhere along the line executives need to use some common sense and realize the costs of fixing an item repeatedly both in terms of loss of goodwill and hard costs far exceeds the costs of replacing an item and appeasing a customer. As the economy continues to contract retailers of all types are sharpening their pencils. The above example illustrates how an over zealous pencil pusher can inadvertently cost a company dearly down the road. Once a legitimate problem is identified and repeated attempts to resolve an issue have failed sellers need to find and provide alternative resolutions. As the saying goes in this case this particular retailer won the battle but lost the war. They held their ground and may have won the battle initially on getting an item replaced but lost the war in the end as not only did they end up replacing the item but all faith is lost in the business.
You can follow updates to this blog on our twitter page as well as reading previous articles such as Green Promos in time for Earth Day.
The High Cost of Product Samples
During times of strong economic growth the often insidiousexpenditure associated with providing samples for customers gets overlooked. Across many industries the general policy of the early part of this century was to ship first and ask questions later. Entire internet communities sprung up to take advantage of these freebies and in many cases exploit the goodwill of stores that offered these niceties under the guise of potential future business. The end result is a growing list of online stores that no longer offer free samples because after careful analysis they realized it was a tremendous cost with little return.
An item such as the Quest Wheeled Cooler will run between twenty and thirty dollars depending on the distributor offering the product. The cooler is huge and will ship by what UPS calls dimensional weight. That means the cost of shipping will end up somewhere on the higher side of $30. Any vendor that ships this item without restriction would need to sell 7 to 10 of the same item just to break even on the one given away. Now repeat that by dozens of products a day and you get the picture the true cost of free samples is higher prices. A year ago online distributors advertised their very generous sample programs as a bullet point for doing business with them. As the recession deepened those policies have become much more restrictive. An increasing number now require a deposit that is credited to a future order within a set time frame. Otherwise the customer is charged for the item and shipping which seems very reasonable. A quick look at many of the top retailers this evening shows no evidence that those sample policies are still in place.
We talked recently about building custom promotional packages for success in a downturn. With the news now dominated by the spread of a potential pandemic consumers and businesses are rushing to find sanitation products. Bundling opportunities now exist in this area and the wise distributor would begin to combine inexpensive cleaning solutions with higher priced packages. As we highlighted earlier in safety goes mainstream in ad specialties there is a growing focus on product safety.
Build Custom Product Packages for Promotional Success
One of the largest growing segments in the trinkets industry in the last twelve months has been the gift set. What manufacturers have figured out is that customers and distributors are constantly struggling to put together packages of items sourced from widely varied sources. By pulling these all in house and offering one concrete package economies of scale can be realized in terms of reducing shipping and often product costs. Unfortunately though manufacturers offerings tend to go stale very quickly and in fact many are stale from the very beginning.
But that does not mean you cannot create your own packages to keep your customers from straying. Take for example a package that would be geared towards spring and summer marketing events. Many consultants would simply suggest a cooler or similar item. Why not put together your own custom package featuring some popular items? The Front Pocket Koozie Kooler has been a mainstay of the lunch sack market for several years since it was first introduced. By itself it makes a great gift by why stop at that point? Instead combine that item with the Koozie King Kooler and you have one imprinted bag that can be carried inside of another. I have even heard of customers buying multiple smaller items to fit inside of the single larger item but make sure you properly measure and that the promised package fits. Offering a discount on the combination is a great way to keep potential customers in house. Another example may be combining the ever popular and summer mainstay the Zip-Up Bottle Koozie Kooler with another popular item. That may be a cooler if the budget is more limited or a custom bottle of one type or another. But why not combine the koozie with a Captain's Chair and provide the customer with an end to end solution? Rather than opting for expensive additional imprint locations on the chair have your client use that money towards an entirely independent item. There are endless combinations above and beyond the traditional pen with pad and bottle with cooler and you do not have to wait for the manufacturer to provide the incentive. Plus by self branding your own packages you have something others do not.
We received countless questions surrounding our piece on What Plastic Resin Codes Mean and as a result we intend to illustrate the differences in products in an upcoming article. By this we mean we will take imagery of several different promotional pieces to demonstrate how some manufacturers continue to lead by example in terms of recycled and recyclable while others not so much. Pay particular attention to the packaging materials your goods are shipping in as recently we ordered recycled goods that shipped in 100% new cardboard. This seemed counter intuitive to us but undoubtedly it was less expensive for the manufacturer. So far it has been unfortunate that some of the larger retail brands that are crossing into the corporate markets are still not shipping in an earth friendly manner. Hopefully with continued pressure from customers and distributors that can begin to change.