SOI 2014 - Competitors in All Shapes and Sizes

How Can Distributors Compete With This New Breed Of Competitor?

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CompetitorsThey’re nontraditional, they cut prices and they provide fewer ideas to clients. How can distributors effectively compete with this emerging breed of competitor?

Miguel Hampton has run into a conundrum that many of his fellow distributors have faced in recent years: the companies that he used to partner with have become his fiercest competition.

“When I worked for a bigger distributor, my main partners were ad agencies and marketing companies, and over the last couple years I’ve lost that business because those companies have gotten into the promotional products business,” says Hampton, owner of F5 Enterprises LLC (asi/191174).

Hampton says these competitors – two of which do business in his neighborhood – often steal clients from him for multiple reasons.

Competition“When they decided to diversify into the promotional product business, my client said, ‘They’re a one-stop shop, I’ll just take all the business to them,’” he says. “In some cases, it just came down to raw pricing: ‘They’re giving this to us for this price. Will you match it?’ I’m not that big; we can’t afford to do that. I’ve always had clients that want the best price scenario, but today it seems like there can be less consumer loyalty in a lot of cases with all the new competitors coming into play, or a lot of folks who are integrated into promotional products as it relates to a direct service they offer.”

That’s why Hampton has had to redefine his business in several ways, such as offering additional services that he hadn’t previously offered in order to make F5 Enterprises a one-stop shop in its own right.

“I’m a photographer, graphic designer, Web developer, I can write code – I can do all those other things, and I’ve integrated that into my business model,” he says. “I just never offered it before because it wasn’t a mainstay of my business, but I’ve been forced to increase my offerings, so to speak.”

And while some of his former partners have turned into competitors, Hampton has still found occasion to leverage his experience and expertise for the mutual benefit of both parties.

“I actually got hired for a short period to work with one of my competitors – a marketing firm that just got into the promotional product business. They paid me to help them bid on some contracts,” he says. “I got a percentage of whatever accounts they had, plus I got a base pay, so it was kind of a contractual deal. They may pay me $1,200 for a day to come in and train their people, and then help them do a couple sales calls.

“There’s a great deal of trust that goes into that. That company had to really trust that, with what they were about to show me, I had no interest in going after their business, and I also had to trust the fact that they weren’t about to go after mine, because I was going to teach them how to be in the business they just got into.”

The New Competitor
The difference that many ad specialty distributors face today is that they can’t always accurately predict exactly who their competition is for clients and for specific orders. Many companies have begun selling promotional products when they weren’t before, and there are an ever-growing number of websites selling ad specialty items – usually at low prices – to contend with.

Those websites, in fact, have become the biggest concern for industry distributors. A full 41% of distributors responding to Counselor’s State of the Industry survey said that websites selling promotional products are their top competitive threat today. In 2008, that number was 26%, representing a 15 percentage point growth (a 58% increase) in just five years’ time. Further, only 12% of distributors say that their most traditional competitor – other local distributors – is actually their top competitive threat today. That has fallen from 20% in 2008.

Indeed, the days of knowing exactly who your top competition is are over. Belinda Gist, owner of Red Truck Promos LLC (asi/529185), knows this well. She has seen some top office supply chains and local screen printers begin to make a bigger mark in the promotional products space. This, combined with the increased amount of inexpensive products on the Internet, has made an already competitive business that much more difficult.

This new reality has made Gist aware of the necessity of customer service and building close relationships with prospective and current customers. “Clients have a lot of options these days, and it puts pressure on us to build those relationships quickly and invest in maintaining them,” she says. “It drives us to be more creative, more service-oriented, and to be able to deliver quickly.

Gist says her company uses service as a differentiator, especially when competing with new companies that aren’t as well- versed in what promotional products buyers are looking for. “Our strategy for being competitive in this space is to deliver the best consistent, reliable customer service,” she says. “It is impossible to compete on price in the long run; that is not a real differentiator in this marketplace, and you cannot grow your business without loyal, repeat clients. We make the time to learn about their event, their business and their organization so that we can guide them to the best choices of products. We learn about who they are, and it makes the experience so much richer.”

CompetitionTake, for example, a young family who lost a son after he was born prematurely, and created a 501(c)3 organization to provide support to other families who have premature children with health issues. They hired Red Truck Promos to create polos for an upcoming charity golf tournament to raise money for their organization.

“In addition to the adult golf polos, we made a little embroidered polo for their young son so he can look just like his daddy,” she says. “This was just our small way to celebrate the success of their event and to honor their work. Generally speaking, our best clients – our most regular clients – are not making their purchasing decisions on price. They want to be taken care of and they don’t want to worry about what they ordered. There’s a level of trust, and it’s not about saving a nickel here or there. That’s not to say that we don’t take care to help our clients manage their budgets. Everybody has a bottom line; we just try to direct our clients to the quality and message that suits their needs and wants, while making sure they completely understand their options.”

Judi Brown, owner of Tacoma Trophy, agrees that distributors must get in front of potential customers in order to demonstrate their edge on their new competition in terms of superior knowledge and understanding of the best ad specialty items for their company or event.

“I deliberately attend local marketing association meetings because I know at least one of my local competitors will be there, and, in fact, he often sponsors the meeting and addresses those in attendance. His inexperience shows in those presentations,” she says. “I’m not sure these new types of competitors are really any different than the online-only promotional product retailers.”

Brown says distributors can distinguish themselves from these competitors by taking time to learn about their prospective customers’ business, goals and target audience; demonstrating industry knowledge via case studies, product recommendations and safety concerns; and highlighting their own involvement in industry associations. It’s that customer service, intuition and industry experience that will lure customers that may otherwise be tempted to do business with these friends-turned-foes, Hampton says.

“Selling is always going to be a face-to-face business,” he says. “The Web has created some challenges, and these guys who are new to the market are going to create some challenges. But a lot like ours, which have been in the industry for 11 years or longer, we’ve got a knowledge and a skill base, and there’s a wisdom that comes with working with us.”