Retail Brands Crossing Over to Corporate Channels
The number of retail brands crossing into the the corporate channels continues to accelerate. However the number of retail brands pulling out of the corporate markets is also on an upswing as failed launch after failed launch continues to doom otherwise successful companies.
Ping made a splash a few years ago when they decided to sell their popular apparel line in the corporate markets. In choosing Sanmar as their main supplier for the industry they choose a business with a long standing reputation within the market. By going with a top 5 ASI Supplier they essentially guaranteed maximum exposure and a deep network of sales and marketing reps. There appeared to be tremendous upside but sales lagged and it was announced earlier in 2009 that Ping would be leaving the corporate market entirely. One of the problems encountered stemmed from the need of Ping and subsequently Sanmar to strictly enforce prices in order to protect the retail golf network. Those efforts are never popular with distributors and in the end the outcome was predictable.
Other moves into the market have been more successful. Scripto partnered with top 5 supplier Leeds in 2009 to release a line of branded writing tablets and low priced budget pens. Although sales have reportedly been going strong the potential cannibalization of existing product lines will be a going concern. For instance the Scripto Jr. Journal Bundle Set is available with a decorated pen for far less than the cost of just a journal from many other vendors. The problem may be that it is also much less than similar items within the same brand. Where they may hit it out of the park is with items like the Scripto Constitute Click which is an ergo pen with large grip similar to much higher priced retail competition for significantly less. For those looking for ergonomic pens the Scripto Scroll Click has the "pro grip" which mimics what is available from retail brands. The idea behind the pro grip is comfort and style. It is also an accent point on the pen which at this price is expected to compete directly against products from Bic and Sandfords Papermate line. Other brands have been folded into the main lines and the result is products such as the Bamboo USB Flash Drive 1GB which are among the many products available in time for Earth Day.
It has not all been a success for Leeds. Last year to much fanfare they released the Karim Rashid line of products. This year they are down to just two and opted to not expand the line at all. Although the brand has some distinction in the retail channel it failed to carry over into the corporate markets and fell flat.
Safety Goes Mainstream in Ad Specialties
It finally appears that the trend towards environmentally friendly promotional products has taken firm hold in the promotional products industry. With the release of so many promo products from brands like Sweda and Norwood that are without a doubt eco-friendly the last remaining hurdles involved lead and BPA.
The threat from BPA is still debated but consumers had already decided they did not want products with BPA and sales of BPA containing items fell through the floor in 2008. As a result many suppliers began producing goods for release in 2009 that were "BPA Free" and these goods are now readily available. The question of whether BPA is safe or not is no longer relevant as BPA free alternatives such as the Excursion BPA Free Sport Bottle are easily to find and affordable. Most of these bottles are made from a type of rigid plastic but several are now arriving that have been developed by a division of Eastman. These materials are virtually indestructible. The Paradise Sport Bottle is one of the bottles made from the newer materials and was combined with a neat contoured handle to make it easy to carry. PromoManagers has released dozens of BPA Free Sport Bottles and most are available at discounted shipping. Custom Stainless Steel Drinkware is almost always BPA free as well but you do have to watch the interior liners. Luckily almost all the products currently in the channel are free of the chemical.
Next up will be guarantees that items are without lead. This started to happen last year but most distributors quickly pulled any such verbiage as it is impossible at this stage to be absolutely sure and providing a false sense of security can be harmful. The best advice we can give is treat all products with care and keep any shiny metal type trinkets away from young kids mouths. If kids do play with them make sure their hands are thoroughly cleaned afterwards.
Tomorrow we will be discussing the dangers in printing ink used in many products and what can be done to mnimize the risk. Check out our earlier article on Green Promos in Time for Earth Day.
Green Promos in Time for Earth Day
I am a huge fan of environmentally friendly promotional items. I am also a fan of socially friendly items that only come from areas and manufacturers who take the time to check on the quality and also verify the products are being made in a socially acceptable facility. All too often products are coming from factories half a world away with little concern for product and labor safety.
Just in time for April comes the release of several recycled promotional items that actually have great looks and are built off of previously successful models. The Recycled Cotton Expo Tote features strong handles and is made from recycled cotton. Built off of the hit Expo model this tote has a large carrying capacity and can double as a shopping bag. The Recycled Cotton Zippered Tote keeps true to the namesake by having a solid and smooth zipper and enormous storage capacity. What I like about this tote is that you can use the multi color imprint method from Gem that keeps costs down over traditional multiple color imprint methods. With the constant barrage of commercials today from the major shopping chains promoting reusable shopping bags there has been great demand for products such as the Recycled Cotton Market Bag which has 22" handles that can be used over the shoulder or as a traditional arm carrying. For those looking for a little more color in a tote the Accent Tote provides several exciting colors and multiple decoration locations. There is even the opportunity to decorate with embroidery which is somewhat rare in the lower price range.
The economy continues to stumble with no clear sign of a recovery in sight. The markets took a beating today due to continued fear about the automobile industry and the potential for eventual failure. Combined with poor data from around the World the equity markets slumped over three percent. There is little hope for an immediate recovery but the idea continues to be promoted of a recovery in the second half of 2009. Although this seems somewhat plausible one has to keep in mind the millions of jobs lost and the jobs we continue to shed each week. With home prices continuing to coast down and with so many out of work the drag on the economy will continue to be severe. Efforts to promote the economy and spending will include tax breaks on car purchases, overall tax breaks and even home purchase rebates. The problem ultimately is that with so much of the world suffering through difficult economic times there is little hope for meaningful recovery soon. As I discussed in Marketing Your Way Through A Recession the best course of action for many will be to continue to aggressively market their businesses in these tough times.
Marketing Your Way Through A Recession
Recessions can provide a unique opportunity to build your business and market share but requires a level of planning and patience. Under most theories economic slowdowns require rapid and measured budget cutbacks. However these actions are contrary to what you would need to do in order to grow your business and proportional market share.
Instead consider expanding your promotional and marketing budgets during downturns such as the one we are in currently. Your competitors are probably cutting back and spending less money while cutting staff. Pick up any newspaper and it is full of stories involving cancelled trade shows, conventions and other corporate retreats. In some cases it's necessitated by a business in jeopardy of failing but in other cases it is the result of over compensation to perceived market conditions. If finances allow these periods can be full of opportunity for your business as you fill a void being left by your competition. While they are spending less to keep and capture new clients any dollars you spend will go further and have less direct marketing competition on the other end.
The American Marketing Association has a multitude of information on their site as do groups such as the Direct Marketing Association for those looking for general marketing information. If you are looking for promotional product information PPAI is a great place to start. Taking it a step further there are various vendor websites end users can browse such as Sweda and sites such as Ashworth. Most of these manufacturers are prohibited by agreement from selling to direct end users and instead use a network of local distributors which you can generally find by browsing their sites.
Take the opportunity as it presents itself and get a head start on the recovery. Most of the recent economic data points to the economy now being in the trough and showing the beginning stages of recovery. Now is the time to increase your marketing efforts and make new contacts.
Tighter Budgets Lean Times
Not every economic downturn is created the same. This one is global and is occurring at the same time which has major ramifications for all industries. It is also the best time to gain market share for those willing to double or triple their efforts.
Take for example big box retailers like Costco and Walmart who are both still enjoying solid success despite the current climate. They have done this through a concerted marketing effort and accompanying message of low prices. By now everyone knows the bouncing yellow smiley face and many of you probably remember the cowboy version of the smiley face slashing prices. Walmart positioned itself properly going back several years during the good times. Back then lower prices didn't seem all that important as the economy was booming and people were flocking to stores like Target which was perceived as having a higher value.
Fast forward twenty four months to today. Target has announced major changes to both store expansion and to the credit portfolio their bank holds. They are tightening credit standards, lowering and eliminating limits all the while they are trying to get the message out that they are now the low price leader. A few years back they prospered being portrayed as the higher end retailer and they are now left scrambling to make customers understand they too are price competitive.
Costco is another interesting case. By providing massive amounts of goods at reasonable prices they have done very well and in many respects have been recession proof. Instead of promoting low prices they instead have promoted maximum value which was done by selling large blocks of goods at bulk prices. Whether or not the bargains are really there is still up to the consumer to decide which to this point they have by continuing to spend money in the stores.
These are two dramatically different approaches but they illustrated the importance of picking a message and sticking with it. Both brands have flourished and continue to prosper during difficult economic times by having a multi-year coherent message. The economy is going to have some historic lows and will continue to be extremely volatile over the next two years. Use this time to build your brand message and brand loyalty.
Oil Greased The Economic Tracks
The Nikkei has hit a 5 year low in early morning trading in Japan. An ocean away the ASX 200 was down over 4 percent and Topix was down close to 6 percent. The rout cuts across all sectors. The economic turmoil continues to slam the economies of the World.
This afternoon on a major business network owned by GE (hint hint) one of the on air reporters said his sources are telling him business essentially came to a halt on or about September 30th. Our sources within the marketing industry tell us much of the same with dozens of ASI suppliers and distributors reporting slow sales at recent trade events. Of course the figures released later this winter will show a growing industry in 2008 but those numbers can end up being about as accurate as the real estate numbers we kept hearing the last two years from NAR.
Media advertising budgets continue to be ravaged by the economic stall. Newspaper advertising sales are at decade lows with no end in sight as readership of the traditional print offerings has vanished. Online advertising sales continue to grow but for the big print publications it will likely not be enough to offset the losses. Compounding the problem is the demise of the US Auto Industry and as a result all of those weekend sales advertisements that helped support the bottom line.
Consumer confidence is falling by record amounts, car sales are terrible, consumer sales are terrible but hey we have lower gas prices! It is disgusting to see how far off the predictions have been for oil prices and oil consumption since the spring. One has to think it was deliberate manipulation, how can any expert have predicted $200 for oil and actually believe it wouldn't collapse demand? How can everything have changed so quickly in just 70 days that oil prices have fallen 50%? What are we doing to prevent such manipulation in the future? All the candidates talk about it but will any of them refuse the money from the oil lobby to protect the citizens?
The equity markets are bi-polar, up one day down the next to such extremes that in the last 40 days the market has been up or down by less than 100 points only three times. On Monday the market goes up and everyone is happy and talking about how it may not be that bad, by Wednesday we are back to hearing about just how bad the economy is now. The bottom line? Major corporations struggled for three weeks to fund operations. While they were searching their market caps were smashed eliminating one possible avenue. Budgets were slashed and expenditures cut. The immediate effects were not felt until the last week or two when businesses further down the chain noted lost sales. Retailers, car dealers and other front line businesses saw the initial shock instantly but it was tough to gauge as business has already fallen off in August. As business fell at an incredible pace organizations began laying off, cutting back hours and pay of staff. This process is accelerating now as we head into the crucial holiday season. A bust of a holiday season will put some retailers out of business including large national brands that were symbols of our success in the 1990s.
It is going to get much uglier before it gets better and it is going to happen quickly in the next few weeks. Oil prices are not falling because the oil companies decided we needed a break, they're falling because nobody is buying gas with 5% decreases in the last month versus the same month last year. That decrease is the result of commerce stalling and Bernanke and company are right in realizing we need another stimulus immediately or the long road down will be another Depression. Hopefully the assistance programs we have in place are enough to help but they will surely get tested barring an economic Houdini by the Federal Reserve and Treasury.
From this point on the discussion will mainly center around the ad specialties industry, products, businesses and trade issues.
Demand Destruction Not In Time To Stop Economic Destruction
Just a few months ago there were wide proclamations of fundamental support for oil prices approaching $200 or $300 a barrel by next year. It is probably somewhat ironic that one of the most frequent predictors of these oil prices was none other than Morgan Stanley, the same Morgan Stanley now reportedly in dire financial straits. As oil prices soared the monetary policies of nations were governed by the fear of inflation as the core price indexes soared on the back of big oil hikes. Unfortunately for everyone in the free world the inability or unwillingness of Treasuries world wide to loosen monetary policy through lower rates has resulted in a once in a lifetime global collapse.
With oil prices now dropping and global demand destruction in full swing we are seeing a precipitous decline in gas prices. Over the last two weeks a record drop has occurred with gas prices sliding down almost 20 percent. It is interesting to note that the gap between oil prices and gas prices still yields higher gas prices than would be historically supported at this price per barrel. Gas Buddy maintains a wonderful gas price survey graph that dates back years. Domestic demand dropped close to 4 percent in the most recently reported period but that seriously lags current market conditions. Probably the best indicator of the recent demand destruction is the weekly oil inventory report. This past week the experts expected very small increases in reserves. We were instead greeted by actual increases that were seven or eight times higher than the consensus. This all provides support to the idea that economic activity diminished by a magnitude commensurate with a serious recession at the end of September. Most experts seem to correlate the staggering decrease with the bailout crisis. Off the record reports from retailers reportedly show a massive drop in retail activity starting at the end of the month as consumers in shock over the financial crisis started hoarding their chestnuts. Car dealers have also reported foot traffic into dealerships fell by 50 percent or more and overall automobile sales plummeted 20-40 percent among the major manufacturers and not even Honda was immune this time.
One TV analyst likened the current price drop as a tax cut. That would be justifiable logic if consumers were accustomed to paying $4 a gallon over the last decade. Prices dropping back to the top edge of the price curve of the last ten years isn't a tax rebate it's pretty much no different than a tax and likewise had the same effect on the economy. Economic activity is going to be sharply negative in this quarter, perhaps as much as 4 percent lower when all is said and done in future revisions. How far into 2009 the recession continues will be dictated by what happens over the next week or two in the equity markets. Despite the proclamations of many pundits saying we have hit the bottom we clearly have not. As CNBCs Jim Cramer has discussed this recent crash is much different than previous historic crashes. This occured in what was still a growing economy. We are just now hitting the economic contraction after enduring several years of falling home prices and months of job losses. There is a lot of bad economic news to come and it is hard to fathom the market rebounding much on the back of terrible holiday season sales.
All industries in this country were hurt by the rampant speculation and inability of our government to reign in the invisible if not naked speculation that allowed for market manipulation. The airline industries were hurt so bad they had to raise prices, cut routes, cut staff and many of these airlines will never regain their financial strength. GM and Ford are subject to continual rumors of bankruptcy and mergers as well as Chrysler. Shipping giants are struggling as are major technology providers to the corporate sector. It's just starting to get bad now and all of these things have already taken place. The damage has been done and gas at $1.50 a gallon in a few months won't do anything to repair the irrepairable damage done to our economy by a few dozen organizations that manipulated prices and markets.
The next few years will be tough for this country. So much damage has been done and much of the blame is being shifted to the subprime crisis with no basic understanding that oil prices started the ball rolling this year to the overall slowdown that put us into crisis mode. Where are all the experts now arguing fundamentals should yield $200 a barrel oil?