With inflation running sky high, now is the time to raise prices so that you maintain your margins. Failure to do so could put your business in jeopardy.

Such was one of the top takeaways a panel of four promo products industry leaders offered attendees of a keynote on the state of the industry. Hosted by ASI Vice Chairman Matthew Cohn, the event kicked off the first day of exhibits at the ASI Show Chicago on Wednesday, July 20.

The promo leaders addressed pressing industry issues in the panel that kicked off the first day of exhibits at ASI Chicago 2022.

“You need to raise your prices now and preserve your margins,” said panelist Ross Silverstein, president/CEO of Top 40 distributor iPROMOTEu (asi/232119) and a member of Counselor’s Power 50 list of the industry’s most influential people. “Everyone else is doing it, why shouldn’t you?”

Sales Are Up

Margin maintenance was just one of many important industry topics that the panel of experts covered in a wide-ranging conversation before a packed ballroom at McCormick Place.

Sales and client product preference was another. And there was good news on that front. All four panelists – two distributors, two suppliers – reported that revenue was up compared to last year. Silverstein noted iPROMOTEu’s sales were running 25% above 2021’s levels through the first half of the year. Trevor Gnesin, a Power 50 member and owner/CEO of Top 40 supplier Logomark (asi/67866), said his California-based firm’s revenue was up 38% over the same time frame.

Inflation that’s fueled higher selling prices for promo products has contributed to the increase, but it’s also been driven by strong demand for promo and what panelists described as clients’ growing preference for higher-end, more expensive items.

“Clients want products with a higher-perceived value. They want to give something that leaves a lasting positive impression,” said panelist Teresa Fang, vice president of supply chain at Top 40 supplier alphabroder (asi/34063).

“You need to raise your prices now and preserve your margins.” Ross Silverstein, iPROMOTEu

One key tactic that panelist Tammy Cernuska Hoth and her team at distributorship Cotton Candy Global Marketing (asi/169186) have used to both increase sales and keep margins strong is to add value through offerings like creative kitting, fulfillment and packaging. The executive sales manager encouraged all distributors to deliver such solutions.

“The number of orders have gone down, but the value of each order has increased,” said Hoth, “because of higher-end products and value add-ons.”

Silverstein described a similar scenario, noting that order volumes are down from – but approaching – pre-pandemic 2019 levels. However, revenue is still up 15% compared to that year.

The Biggest Challenges

Panelists also discussed the biggest challenges they’re facing.

Suppliers Fang and Gnesin identified supply chain disruption that’s made it difficult to maintain inventory as a top issue. They said forecasting stock has become much harder given realities like quickly changing marketplace dynamics and the increased time it now takes to get product from overseas factories shipped to and stocked in North America.

“You really have to try to understand the forward trend and where you expect to be,” noted Fang. Added Gnesin: “You have to forecast six months out. It’s a crapshoot every day.”

Hiring enough labor to meet demand – and keeping those employees consistently on the job amid COVID and its related ills – has also been a major challenge for suppliers. Gnesin shared that if 10 employees are out on a certain day, it could negatively affect output by 30,000 units.

Even so, the suppliers said there have been improvements on the supply chain front. Costs for cargo containers – which transport goods from overseas and affect the price of products – have come down considerably. Shipping has improved a bit, too.

Still, with China continuing to follow a zero-tolerance policy on COVID that leads to societal shutdowns that impact supply lines, there is always the threat of further disruption. Factories in China produce most promo products sold in North America.

Sales are up significantly and end-buyers are purchasing higher-end more expensive products, report panelists at today’s #ASIChicago keynote. #promoproducts @asicentral @EliezaB_ASI @ASI_MBell pic.twitter.com/Qfz232p8MK

— Chris Ruvo (@ChrisR_ASI) July 20, 2022

Responding to a question from attendees, the supplier panelists said it’s infeasible to expect a large-scale return of promo manufacturing to the United States.

The labor pool and necessary infrastructure simply don’t exist here to support the move. Plus, massive onshoring would take a long time and be prohibitively expensive. Nearshoring – the process of moving production to countries closer to end-markets where they’re sold – could bring more promo production to Latin America, including countries like Mexico, for instance. Nonetheless, China and Asia more broadly are expected to remain the workshop for the promo industry for the foreseeable future.

Distributors shared some of their biggest concerns and challenges, too. While sympathetic to pressures that suppliers are enduring, Silverstein said a major sticking point for distributors has been suppliers failing to communicate adequately about inventory, production, delivery timing and more. “There’s an awful lot of frustration among distributors,” he said. “I fear some are facing burnout.” 

Hoth noted that ensuring that employees are happy and well-supported is essential in what continues to be a tight labor market. “They’re our most valuable asset,” Hoth said.

Panelists also addressed sustainability within promo. There was general agreement that it’s become a bigger focus, with Fang noting that alphabroder, for example, is undertaking initiatives to be more sustainable in its operations and offering more products that have a sustainability story.

Hoth said demand for eco items is rising.

“We get asked more than ever for products with a sustainability component or a giveback component,” said Hoth, who credited suppliers for increasing their stocks of sustainable products.

Silverstein believes that all things being equal, more clients want to purchase eco products, but what can be higher pricing and availability can curtail that drive. “Depending on a buyer’s commitment to sustainability, they often won’t go for the more expensive item,” he said.

‘Don’t Panic’ & Other Tips

The panel concluded with participants offering quick-hit advice for attendees. Beyond the suggestion on margins and other insights, Silverstein encouraged promos pros to “prospect daily and watch your expenses. Cut costs wherever you can.”

Fang said to communicate early and often to get stakeholders on the same page. “Create a business continuity plan,” she also advised. “Companies that can do that are more agile.”

“Do what you say you’re going to do for customers,” Hoth said. “Make things simple for them.”

In the fast-changing times the world is currently experiencing, Gnesin had a tip that’s worth applying in one’s business and personal life. “Don’t panic,” he said. “People who panic make mistakes. Stop, pause and think about where you are and what you need to do.”