Market Makers

Exclusive ASI Survey Reveals Latest Trends, Habits Of Apparel Buyers

Market MakersAn exclusive ASI survey reveals the latest trends and buying habits among apparel buyers.

There's an unmistakable pulse of the apparel sector within the ad specialty market. It's one of movement and growth, where buyers' budgets have loosened and distributors are beginning to tap into a wealth of new opportunities.

That's revealed in an exclusive ASI survey meant to find out the most pressing trends that are impacting the apparel market, and see how distributors are capitalizing on them. Read on to find out three of the most important factors impacting buying decisions of promotional apparel today.

Budgets and desire for quality are driving up the average order. When promotional budgets tightened during the last few years, price became paramount for many buyers, superseding other considerations. But, despite some lingering economic uncertainty 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.

In 2012, according to the ASI Wearables Sales Forecast, the average amount spent on an apparel order increased to $873 – 12% higher than 2011, and continuing an upward trend that saw average apparel orders increase by $191 since 2010.

The experience of A&P Master Images is firsthand proof of the positive swing. It used to be that the Yorkville, NY-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 and 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, 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 ringspun 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-based business. "We've received more apparel orders this year than last year," says Mike Anderman of AM sourcing (asi/491510). 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 the distributor. "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 ASI survey. 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."

Name-brand apparel is becoming more popular with clients. Whether it's a brewery or aerospace corporation, many of Matt Gledhill's clients have one thing in common: They desire name-brand apparel. "For the majority of people I work with, brand is an important factor," says Gledhill, marketing consultant at San Antonio-based Walker Advertising (asi/354440). "They like to have the branding of the apparel on their shirt in combination with their brand because it adds prestige."

Gledhill is among the swelling ranks of distributors who say that clients feel it is important that the threads they buy be name-brand. Since 2010, the percentage of distributors who believe name brands are important to clients has steadily risen, increasing from 42% to 47%, according to the 2013 survey.

"The interest we're seeing in name brands goes against the grain of the narrative that customers are only interested in the lowest price," says Zachary Tyler, president of San Francisco-based Creative Marketing Concepts (asi/170631). Since name brands typically carry a heftier price tag, distributors who can capitalize on interest in such apparel stand to generate more lucrative orders. "The interest in name brands presents everyone in the industry with opportunities," Tyler says.

Distributors have different ideas on what's driving the uptick in name-brand interest. It could be that some companies are rebounding and, with more budget to spend, want to invest in apparel that has a higher perceived value. "You can get a comparable shirt for less money, but my clients are willing to pay more for the brand image," says Gledhill.

It could be, too, that interest is being driven by the fact that more name brands than ever before are available in the advertising specialty space. Still, some say it's the other way around: Market demand has compelled name brands to enter or increase their offerings to distributors. "There has been pent up demand for years," says Tyler.

Whatever the reason, many distributors are scoring successes with name brands. Creative Marketing Concepts sells crates of American Apparel (asi/35297) clothing to the technology companies that populate the greater San Francisco area. Powered by a young workforce, the start-ups want the hip cache associated with the L.A. clothier's lines. "It's routine for customers to come in asking for specific brands," says Tyler, noting name-brand T-shirts and track jackets are especially popular with local customers given the Bay Area's climate.

For Gledhill and his clients in the South, name-brand polo shirts with moisture-wicking properties are popular. Nike and Adidas sell well with the beer companies that Gledhill services, while an aerospace corporation recently purchased hundreds of Nike polo shirts for executives and supervisors. "They're the people who are very visible to the company's customers, and having that Nike branding on the shirt adds a perception of greater value to their service," says Gledhill.

For those clients still on the fence about purchasing name-brand apparel, many distributors say that price remains a driving determinant for clients, who might dismiss name brands as too expensive. And, while price considerations remain crucial, distributors may be missing opportunities by not pitching more name-brand gear. Tyler tells how a nonprofit client recently asked him to suggest a hat it could give to executive-level attendees of a golf fundraiser. While Tyler instantly thought of a Ralph Lauren Polo hat that would be just right, he balked at suggesting it.

"I really didn't believe they'd buy a $35 hat," he says. Nonetheless, he acted on his initial instinct. Good thing he did. The hat was a resounding success. "Later, I got an e-mail from them saying how amazed they were with the hats and how the hats were nicer than the ones in the golf resort gift shop," says Tyler.

Distributors are opting out, but there are benefits to both approaches. Apparel distributors are eschewing in-house decoration, citing everything from the rising costs of overhead (including payroll, machine investments, equipment maintenance and facility bills), to the challenges of remaining competitive during an uncertain economy. In fact, the ASI apparel survey shows that 39% of distributors offered some in-house decoration services in 2012, which was down from 49% in 2010.

Is that the right decision for your business?

Jeff Holt, vice president of marketing at Image Source (asi/230121) in Kirkland, WA, says his company decided to forgo decoration capabilities from the get-go, and instead relies on its decorator partners to be experts in the different techniques. The primary reason for contracting the work out is the overhead required for space, machinery and additional staff. "It just doesn't add up for us," says Holt. "We'd rather focus on selling and have our great partners concentrate on the decoration."

Ultimately, Holt says, it's a matter of a cost-benefit analysis. "The client doesn't care where the decoration is done, as long as it's done correctly," he adds. "So why tie up the capital?"

But doing without in-house decoration is not an open-and-shut case. Tej Shah says offering in-house decoration has proved quite lucrative for Overture Premiums & Promotions (asi/288473) in Vernon Hills, IL, which offers screen printing, embroidery, heat transfers and digital garment printing. "We control the final step of the product supply chain process," explains Shah, vice president of marketing and e-commerce. "Because we have it in-house, we have control over the quality and we can scale it up and down."

Shah cites as an example a recent order for 125,000 screen-printed tees. Overture was able to scale up and add second and third shifts to make sure the shirts were finished on time. "Sub-contractors will only go so far for you," he says. "We offer product quality control; flexibility, particularly in turnaround times; and cost control because we eliminate the middle man."

To successfully start with in-house decoration, or add it to an existing business, distributors should determine the focus points of their operation, whether those include product sales, decoration sales or both, and how to commit to them while remaining conscious of finances.

While distributors like Image Source have decided to concentrate mainly on the product selling end, Overture Premiums & Promotions has struck a balance between the merchandise and decoration sides. Ultimately, the decision to offer in-house decorating or not comes down to the cost factor. "Decoration is a value-added benefit for our clients," says Shah. "We can say, hey, most distributors will outsource or sub-contract the work, but we do it all in-house. Here are the advantages of that." – Sara Lavenduski