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March 23, 2020

Promo Firms Grapple With New Closure Orders

The governors’ decisions in Pennsylvania, California and New York are the strictest preventative measures yet implemented in the country’s fight against COVID-19.

By  Sara Lavenduski

In the latest move to combat the spread of coronavirus, the government of Pennsylvania now requires that all nonessential businesses across the Commonwealth must close, according to an order by Gov. Tom Wolf announced on March 19. That includes all companies that are not “life-sustaining,” such as promotional products firms. Enforcement went into effect at 12:01 a.m. on March 20. The same was implemented across the entire state of California, by order of Gov. Gavin Newsom, for at least a month, as well as New York, announced on Friday by Gov. Andrew Cuomo.

“To protect the health and safety of all Pennsylvanians, we need to take more aggressive mitigation actions,” Gov. Wolf said in a statement late on Thursday. “This virus is an invisible danger that could be present everywhere. We need to act with the strength we use against any other severe threat.”

Closed Restaurant

While the closure order doesn’t include remote work, physical locations that are found to be open could be slapped with fines, loss of business licenses and even jail time, and may be prohibited from seeking disaster aid. Exempt businesses include farms and their suppliers, food manufacturing, medical care facilities, medical products suppliers, banks, eateries (limited to takeout), gas, automotive parts and building materials.

Pennsylvania is home to alphabroder (asi/34063), the largest supplier in the industry. The company announced today that its distribution centers in Harrisburg, PA, and Fresno, CA, are now temporarily closed, though all orders placed from these centers on Mar. 19 will ship.

“We are working with our Northeast and West Coast sales, services and operations teams to ensure a smooth transition and the best customer experience possible,” said CEO Norm Hullinger in a statement. “Our mission remains as strong as ever – to serve and support you in any way we can. We will continue to communicate with you as we get more information.”

In a supplier webinar with ASI president and CEO Tim Andrews on March 20, David Nicholson, president of Top 40 firm Polyconcept North America, based near Pittsburgh, said the situation had “changed quite a bit” over the previous 24 hours. While Miami-based Bullet (asi/42424), Charlotte, NC-based Journalbooks (asi/91340) and Toronto-based Trimark (asi/92121) are in relatively good shape for the moment, New Kensington, PA-based Leed’s (asi/66887) and Oxnard, CA-based ETS Express (asi/51197) are in a different situation.

“ETS’s California facility will be closing at the end of the day today,” said Nicholson. “All of those orders will start being shipped out of our Concord, NC facility starting next week. We don’t expect an interruption for customers there.”

In a statement issued late on March 20, PCNA announced its Trimark decorating facility in Pennsylvania and ETS offices in California would be closed, but the business is “fully operational” since orders would be fulfilled from alternative locations.

During the webinar, Nicholson added that year-over-year sales for the company are down 40% to 50% just over the previous five days, across all product categories and brands, and that the industry will continue to feel negative economic effects into the third and fourth quarters. The company also launched a microsite that includes suggestions for sales and strategies that address the current crisis.

Kippie Helzel, senior vice president of sales for Erie, PA-based Custom Plastic Specialties (asi/43051), near upstate New York, said they’ve implementing a “strategic tightening plan for staff reductions/layoffs.” Fortunately, because the company has on-site manufacturing capabilities, it received a special dispensation to remain open with reduced staff and production. All orders are being accepted and processed on a standard five-day production time only, while all three-day and 24-hour rush orders have been suspended temporarily, as have all sample requests.

“We’ve already met all standards regarding social distancing, with a robust cleanliness program to protect those staff who have continued to work during this period, and we’ll continue to follow all guidelines as they’re presented,” said Helzel. “We’ll continue to produce orders within our standard production guidelines as best we can.”

Modern Line (asi/65910) in Clearfield, PA, is also closed. “We’re going to be shut down at the end of the day today,” said Joe Davis, national sales manager. “I’ve been designated to work from home so customers may reach me personally at jdavis@modernline.com or they can reach us at adsales@modernline.com for general inquiries. However, our factory and offices will be closed until further notice.”

Following Gov. Newsom’s announcement, Mayor Eric Garcetti of Los Angeles issued a “Safer at Home” public order today to keep the city’s 10 million people isolated in their homes and to close nonessential businesses until at least April 19. While no one is on lockdown and it’s not a “shelter in place” order, it is legally enforceable and a violation is a misdemeanor. Garcetti said “today is a day that will be seared into the story and the streets” of the city and will be a “moment when everything changed.” Residents are only allowed to leave their homes to purchase food, for example, or take care of a loved one.

“We need to bend the curve in the state of California,” Gov. Newsom said during a news conference last night. “There’s a social contract here. People, I think, recognize the need to do more. They will adjust and adapt as they have.”

Top 40 distributor PromoShop (asi/300446) in Los Angeles has already begun layoffs and furloughs because of the ongoing situation. “It’s a sad state our world [is in] and the hardest decision we could ever make,” said president/owner Memo Kahan. “We’re holding steady and are trying to stay positive. This is a fluid situation, and we have to [monitor] daily occurrences. If our factories are unable to manufacture and ship, we’re thinking this will stop all commerce for a few weeks.”

It’s a similar situation at Top 40 supplier Logomark (asi/67866), based in Tustin, CA. “We’re going to shut down and have a skeleton staff work remotely,” said CEO Trevor Gnesin. “I certainly hope that the entire industry does the same.” At Top 40 distributor Jack Nadel International (asi/279600) has closed its offices until at least late April, though about 97% of the company's employees can work remotely, says President Craig Nadel. “We’re paying everyone and not doing furloughs and indeed we hope to avoid both of those,” he added. “We've cut a few costs and our headcount will probably fall over the next several months, by attrition. That's pretty much the plan and of course it's subject to change as conditions change.” 

Mark Seymour, CSO of Top 40 supplier Next Level Apparel (asi/73867), said during the supplier webinar with ASI’s Tim Andrews that Friday, March 20 is the last day that orders will ship from their Los Angeles facility. Starting Monday, all orders will leave from the company’s warehouse in Alabama, established after strikes at the port in Long Beach, CA, several years ago.

“We’re going to keep the Alabama facility open as long as possible,” he said. “We’re definitely seeing changes in buying patterns, even from just a week ago. We have to be prepared to serve business, wherever it is. Our marketing has shifted to focus on operations, supply chain and service levels, and helping our clients with tools they can use in the digital world so they can carry on with their business with all the challenges we have.”

Top 40 supplier Sweda Co. (asi/90303) issued a statement today informing the industry that it won’t be shipping most of its inventory from its City of Industry, CA, facility until April 20, though custom socks, custom and standard headwear and lanyards will be available within normal lead times.

“During this time, we have a team working from their homes ready to respond to your emails and phone calls,” said CEO Jim Hagan in the statement. “They can prepare virtuals for projects and enter orders that can begin shipping upon our return in April. I ask for your understanding and hope that you and your loved ones stay safe and healthy. We look forward to being back to work in April and for life to return to the ‘new’ normal.”

In light of the new orders in California, a large portion of fulfillment and inventory from Origaudio (asi/75254), based in Danville, CA, near San Francisco and part of Top 40 supplier HPG (asi/61966), has been moved to HPG’s HandStands (asi/59525) facility in Salt Lake City (fully operational despite this week’s earthquake there) and BEST Promotions USA (asi/40344) in Balch Springs, TX.

“This is a surreal time for everyone,” said Jason Lucash, co-founder of Origaudio and HPG’s senior vice president of marketing and innovation, in a statement. “Firstly, our priority is to keep our staff and their families safe and healthy. Second, we’re grateful, once again, to be part of the HPG family and therefore capable of flexing on short notice. … We do not expect any disruptions at this time and our Accounts team is standing by for any customer inquiries. We know this is already a difficult time for the world, our country, our distributors and our staff, so we’re glad to have a solution in place to keep the Origaudio brand going during these difficult times.”

Top 40 distributor BAMKO (asi/131431) in Los Angeles continues to serve clients despite the ordered closures. “We operate on an entirely cloud-based platform, so there’s no disruption to workflow,” said Josh White, general counsel and senior vice president of strategic partnerships. “We also have redundant warehouses across the country, so we’re well-insulated against distribution disruptions as well. The biggest battle right now is in our minds. We’ve got a team full of mentally tough folks who are great at pulling together and fighting through tough situations. We’ve got a fight on our hands, no doubt about that. But I can’t say enough good things about how our team has jumped into action, seized the initiative and are working together with a sense of camaraderie like I’ve never seen before. We’re not sitting back waiting to be victims of circumstance.”