Score Larger Order Sizes
Wearables Sales Forecast 2013
By Christopher Ruvo
When promotional budgets tightened during the economy's worst moments in recent years, price became paramount for many buyers, superseding other considerations. But despite the overall economic malaise and cost still being a primary concern, quality and style appear to be rising in importance when it comes to apparel. The shift in buyer taste has helped increase the average dollar size of industry apparel orders, resulting in more revenue for distributors. "The trend for wearables business in general is heading up," says Anita Brooks, owner of ASB Marketing, a Geiger (asi/202900) affiliate.
This year, the average amount spent on an apparel order increased to $873 – 12% better than 2011, and continuing an upward trend that saw average apparel orders increase by $211 since 2010. The experience of A&P Master Images is firsthand proof of the positive swing. It used to be that the Yorkville, N.Y.-based company's school clients ordered, on average, between $300 and $1,500 worth of apparel at a given time, depending on the school's size. Now, that average range has increased to $500 from smaller schools to $3,000 from bigger ones.
A&P Owner Howard Potter says the increase is the result of clients being willing to pay not only for quality apparel, but also for the superior service – fast turns, top-notch in-house embellishment – that his team provides. Recently, Potter won the business of a middle school that paid $2 more per shirt than what A&P's competitor had been charging after being disappointed in the competitor's product and service. "More people are buying based on quality not price," Potter says.
The dollar level on many of Mike Welker's apparel orders has been rising, too. The senior account executive for Touchstone Merchandise Group (asi/345631) says the increase is, in part, the product of clients turning away from "standard, boxy T-shirts" and opting for styles that, while still cost-effective, mimic retail looks and are slightly more expensive. "The average order is 10% to 15% more because clients want something with a soft hand with a higher quality imprint," says Welker.
On a recent deal, Welker sold a school SanMar's (asi/84863) Concert Tee in neon (DT5000), which resulted in more profit for him than in years past when the client had bought baseline T-shirts. "The tee has a higher cost of roughly 50 cents," says Welker. "I sold them between 80 cents and $1 more than the shirt last year. On a 500-piece order, that's an extra $500 in sales or roughly $200 profit."
Welker is achieving similar success with other clients. Taking a consultative approach, he and the Touchstone team helped a corporate customer undergo a hip re-branding by designing a retro-style distressed logo and applying it to a ring-spun cotton, fine knit jersey T-shirt from TSC Apparel (asi/90518). "It was a more profitable order than it used to be when they went with a basic two-color imprint on a standard boxy shirt," says Welker.
For some distributors, an increase in the sheer volume of apparel they sell is driving up their wearables business. "We've received more apparel orders this year than last year," says Mike Anderman of Proforma 123 (asi/300094). A homebuilding company's typical order of employee apparel has increased from 100 or 200 pieces to 400 pieces. Meanwhile, a car dealership is ordering more frequently, ramping up wearable-related revenue for Proforma 123. "They order a couple times a month, as opposed to every few months," says Anderman, noting the increases from both clients are the result of them adding more employees.
Despite the surge in average order size, margins have remained about the same, distributors say. Generally, this is expected to continue, with two-thirds to three-quarters of distributors indicating they expect no change in margins on the various apparel categories they sell, according to the Wearables sales forecast. But even with margins remaining static in a percentage sense, a 30% to 40% profit on a $3,000 order is, after all, better than a 30% to 40% margin on a $1,500 order. Says Potter: "Buyers are smartening up and realizing it makes sense to pay more for quality, and that's good news for us."