Promotional Products & Items Report

Market Report – Promotional Products

Two new global reports have recently been released providing a glimpse in to the market surrounding promotional products, with new studies undertaken that offer insight in to buying power, risk and projected pricing changes over the coming years. There are some interesting findings in both studies, which AAC has outlined below, along with some comments and feedback from the perspective of a promotional products supplier.

Great news for buyers

IBIS World released a report this month based on data collected over the past few years. Notable points worth mentioning include their rating of “buyer power” within the promotional items industry as 4.2 out of 5. This is a very high rating and goes hand in hand with the other conclusion they drew with regards the market being highly competitive, with no single company in possessing a significant market share.

With so many promotional product companies offering very similar products at very similar pricing, a consumer has so many options to choose from. And as we know – if supply outstrips demand, then prices are going to be low and the power of the market shifts to the consumer. The benefits here include lower pricing as suppliers reduce their margins to win business.

Pricing within the industry has remained relatively stable, with minor price increases forecast. This is good news for consumers, because it allows stability and planning to be more effective. Having the confidence that a price for certain products will remain the same from one month to the next reduces time pressures which can often influence a decision to purchase.

The risks of the market

The IBIS World report does suggest though that the biggest risk within the market relates to the vendor and supply chain. Their rating of ‘moderate’ risk is accurate and is a result of several factors in our opinion.

1. The constant launch of new suppliers within the industry who are convinced they can make a quick dollar by putting together a quick website and purchasing promotional items off the first factory they get in touch with. They lack the experience to really deliver effective service and products to the market and more often than not, let down their customers and then disappear from the industry.

2. Working with the wrong partners, factories and manufacturing facilities. It takes years to screen and review potential suppliers, freight companies, freight forwarders etc to ensure that product quality is high and delivery is reliable. Too many companies rely on the first partner they have had without consistently reviewing their service and delivery standards. As with any business, we should always be undertaking reviews of who we partner with and determining how well they support our own business standards and objectives.

How are suppliers surviving, and what should they be doing to flourish?

In a market where most suppliers are offering the same products and very similar prices, there are only a few avenues open to a supplier to achieve the key factor – differentiation.

Most suppliers are currently slashing prices in an attempt to win business, but as many industries have proven, this does nothing for the industry long term except lower the waters for everyone and make it even harder to complete in the following years. Sadly, this cost cutting has also directly influenced product quality, with suppliers using cheaper and less effective materials and methods of customisation in a desperate attempt to retain some of the margin they expected from certain jobs.

What should suppliers be doing then if it is not all about cutting costs? In the promotional products industry, this comes down to a) a quality website with ease of navigation b) a fantastic customer service experience that focuses on strong relationships and a genuine desire to assist customers and c) fantastic market knowledge and supply chain relationships to ensure consistent and reliable production and delivery. All of the above will, in the best cases go hand in hand with longevity and experience; in such a volatile and competitive market, the suppliers who have been doing it the longest benefit from the added advantage of trust from potential customers.

Our Second Report – the Effectiveness of Promotional Products

An ASI Global Study recently concluded that promotional items represent an extremely effective way of increasing brand recognition. The study was undertaken with 7,000 consumers in 21 cities across North America, Europe and Australia and found an average recall of a particular brand was 82% due to the use of promotional products.

Whilst this supports what most promotional product suppliers say anyway, the study provides a useful backing to support the theory! Of course, such sweeping statements cannot be made, and such strong benefits enjoyed, without an effective series of planning undertaken prior to the purchase of promotional items, taking in to account target market, goals etc. We have reviewed this in other articles here and here.

Where is the market going now?

We expect more of the same. New suppliers will keep cropping up and existing smaller suppliers will continue dropping out of the market. Price pressures will remain within the industry, forcing suppliers to reduce their pricing, but as consumers become more knowledgeable on the market situation, we forecast an increase in the importance of trust and experience when making decisions to purchase promotional products. Key questions that should be asked by consumers include; How long have you been working within this industry? How big is your team? What referrals can you provide me to validate your experience and knowledge of this industry before I spend money with you?

One new trend expected by AAC is that of simplification of product offering. The market has swayed too far in the direction of “here are 150 types of nearly identical baseball caps, pick one” – instead we believe the industry needs to move more towards simplification of the product offering, allowing consumers to view categories of products with more emphasis on their needs in terms of budget, turnaround time and quality, rather than the needs of the supplier.

For more information about the promotional products industry, please contact AAC ID Solutions.

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