Print+Promo 2018 State of the Industry Report: A closer look at the promotional products sector

For Print+Promo’s 2018 State of the Industry report, we dug deep to uncover printing industry trends, learn more about the Trump effect on print and find answers to questions, like: Where is the printing industry going?

As part of our investigation, we reached out to experts in various market segments: printed forms, labels, promotional products and direct mail. Below is an excerpt from my conversation with Tom Goos, president of Image Source, Kirkland, Wash. Find out what he had to say about the current state of promotional products, marketing to millennials and public policy influences.

What are your thoughts on the current state of the promotional products industry?

Tom Goos: I believe the promotional products industry is strong. It is a mature industry that continues to grow. We are seeing growth numbers around 3.5 percent for 2017, which itself doesn’t sound big, but when you are talking about a $22-billion industry, that is $770 million. We see many marketing industries declining (e.g., radio, direct marketing, newspaper), yet the promotional products industry continues to grow. This is a good sign that clients see the value of promotional products in their marketing mix.

I do think the gap continues to widen between those companies thriving and declining within the industry. Pressure around compliance, technology, generational buying habits, procurement practices and many other factors make it more challenging to manage a strong and profitable business.

What are some other big changes that you believe will make an impact this year, and what will drive them?

TG: I think there are change drivers that will continue to affect our industry and most others. Those are technology, evolving demographic shifts and globalization. Forrester Research expects the millennial to be the largest demographic in the workplace by 2020. These folks are digital natives who are resourceful and used to buying online for their personal purchases, and this oftentimes transfers into their buying habits at work. It is not a seismic shift, but rather an evolution of thinking. Both distributors and suppliers need to change how they go to market to relate and connect with these buyers. I see the change in our culture and our marketing. An example of one of our shifts is the move to videos. We have a product that allows us to send short videos from our desktop through email. It doesn’t have to be just words in an email; it can actually be a quick, 15-second video clip. In the last month, we have sent more than 100 of those videos to clients.

How do you think certain public policy influences from the current administration (e.g., small business tax relief, workforce development and vocation education and regulatory reform) will affect the promo industry this year?

TG: I have been lucky enough to lobby on Capitol Hill for the past four years as part of PPAI’s Legislative Education and Action Day (L.E.A.D.), and also [to serve as] a former chair and current member of the Government Relationship Action Counsel. Eighty promotional product professionals hit Capitol Hill annually for two days with 250-plus meetings scheduled. Our goal is to share our collective industry legislative agenda and the power of promotional products. We have created some good relationships and have made real impact with our legislators.

On the issues, 98 percent of the businesses in our industry are small businesses, so the recent tax reform will make a positive impact on those companies, including mine. Over the past few years, companies within our industry have been threatened with impactful proposed legislation including the Border Adjustment Tax (BAT), The Safe Harbor Rule Section 530 protecting independent contracts, deductibility of advertising deductions, simplification of interstate sales and use tax collection and self-employed health care deduction.

Overall, the current administration is positive for small business, and business in general. Many of the major issues that we [had been] dealing with are off the table now. We still have many challenges ahead from a legislative perspective, and we need to be proactive with our legislators so they know the size of our industry and that we employ over 430,000 people.

As with many industries, consolidation seems to be the new normal for the promo sector. In a broad sense, what implications does this have for the promo world and its remaining players?

TG: Overall, I see it as a positive. The industry needs to continue to grow and gain in professionalism, and I believe some consolidation can aid in this. We are also seeing private equity continuing to invest in the industry. I believe there is a thriving marketplace and that outside investors see value in not only online companies, but also traditional distributors and suppliers. There also continues to be new suppliers and distributors entering the market, so the overall number of companies continues to stay steady. My expectation for the future is both supplier and distributor numbers will decline as competition continues to increase and mergers and acquisitions continue.

Based on past trends, what are your expectations for the short-term future of promotional products?

TG: I think we can no longer rely on past trends to predict future performance. The industry has changed more in the last five years than in the last 25 years. The promotional products industry used to be an unknown supply chain with secret codes for pricing and line names to hide the supplier’s corporate name. The internet has changed all that. Type in promotional products codes, and our secret comes out instantly. Many industry companies have been around 50-plus years, and many of those have gone away in the last few years. A company’s history no longer reflects its future stability in this dynamic marketplace.

In 2018, I don’t see any radical shifts in how we do business or in the future of promotional products. We continue to see key categories evolve and online sales continue to grow. For example, three years ago, calendars were a top 5 product category, and now they are a rare sale. We are seeing categories like technology products (e.g., mini-drones, travel chargers, speakers, multi-function cords, water bottles with a built-in speaker, etc.) rise and, oftentimes, are the first product we show. Times are changing and you [had] better be open-minded to the transformation in all aspects of the business; otherwise, clients will move on past you. Change is the new norm, and we all need to be comfortable in that space.

TO READ THE FULL INTERVIEW, DOWNLOAD PRINT+PROMO’S 2018 STATE OF THE INDUSTRY REPORT HERE.