Promo Confidence Gap

In the near-term, distributors are less optimistic about the promo business, but smart strategies can restore their faith.

Whether it’s concerns over possible tariffs, growing web-based competition or other uncertainties, State of the Industry data shows distributors are less optimistic about the business climate. For the second straight year, the forecasted industry health rating has dropped, with the most pessimism coming from distributors in the Midwestern U.S.

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Steve Cody, co-founder and CEO of marketing and communications firm Peppercomm, compares the current economic climate to the downturns in 1987 and 2008, in which anxiety in the markets rippled through the American economy as a whole. But, he says, the companies that thrived during those times were those that remained optimistic and aggressive.

“Countless studies have shown that those few daring companies that actually increased their marketing, hired talented people and marched ahead at Mach speed, captured sizable market share from their more cautious competitors when the economy rebounded,” he says. “It can be a once-in-a-lifetime opportunity for you to double-down and continue to innovate and invest in your businesses.”

Mike Emoff, CEO of Ohio-based Shumsky (asi/326300), shares Cody’s philosophy, as it’s helped him navigate choppy waters in the industry’s past. “People are going to be who they are, and the pessimistic people who say, ‘The sky is falling, we’re never going to sell again’ – guess what’s going to happen? They’re not going to recoup. They’re going to go into defensive mode. Eventually, they’re going to go out of business – unless they change,” he says.

Of course, not all the pessimism is strictly rooted in the state of the economy. Jerome Bobis, owner of Beacon3.com (asi/134565) in Glenview, IL, says the possible repeal of the Affordable Care Act (ACA) has put him in a tight spot for the foreseeable future. Why? He has no idea what his personal health insurance premium will look like a year from now – and neither do the health insurance agents he’s spoken with.

“There are always problems with competition and prices going up. You just have to work around that. But health insurance is something you really can’t control,” he says. “You’re just at the whim of insurance companies, hospitals and the government. That’s the problem.”

Bobis has a preexisting condition that’s covered through the ACA legislation passed in 2010 – but the continuing uncertainty surrounding the law has made it impossible to know how much money he can put back into his business. “The thing is, you also have to put a lot of time in and do the research in November and December to make sure your decision is OK for the next 12 months,” he says.

While Bobis’ concerns are understandable, there are steps he and other distributors can take to improve their businesses’ futures – no matter their circumstances. For example, Emoff recommends companies work hard in the near-term to broaden their portfolio of clients. “Too many distributors have too large of accounts that make up too much of their business, and they’re at risk for anything that happens in the industry that affects that particular client,” he says. “Pick a broad spectrum of industry verticals to focus in – it will mitigate your environmental market risk.”

Jim Freund, owner of Wisconsin-based Victory Promotional (asi/352037), knows that web-based firms are a threat to the traditional promo marketplace – but he’s responding by upping the ante. “Web-based competition is there, has been and most likely always will be. You just need to develop relationships with customers, which is something web-based companies tend not to be able to do,” he says.

The easy way to overcome the web guys, according to Freund, is to do the things they obviously can’t. “Supplying a good product at a fair price and offering outstanding service can win over a low price,” he says. “I refuse to be out-serviced by any of my competitors, and when working against web-based vendors, that’s even easier.”

Freund says he personally delivers most orders to his customers, which helps create a deeper relationship and leads to another order most of the time. “When they see me delivering their order of pens, for example, it will remind them that they were just asked to track down some ideas for a wellness program, or what have you,” he says. “People like to talk about themselves and like people that will listen to them. The internet can’t do that.”

On the tariff front, Emoff says distributors can prepare by partnering with suppliers with American-made product lines, as Shumsky has begun to do. “If tariffs come – and I think that they will – it’s going to affect everybody. There’s going to be this initial shock, and then it’ll settle, and people will pay more to cover the cost of the tariffs,” he says. “I’m not too torn up because I think our strategy has us positioned for short-term sustaining of the situation, and then I think it’ll come back to normal.”