Distributors find that promotional products open doors and increase sales.
Whether promotional products are used to add value to traditional printing solutions or as stand-alone sellers, distributors are becoming more drawn to them because they have the potential to open doors in an industry that has never even been knocked on before. And even though there are some drawbacks to supplying promotional products—like contending with expensive overhead—many distributors concur that promotional items are becoming a more vital part of their overall businesses.
Sales Report
In fact, Bob Troop, CEO of The Shamrock Companies, Westlake, Ohio, reported a 25 percent growth in promotional product sales for 2002.
And while promotional products do not represent one of his most profitable areas, those numbers are improving as his focus shifts to larger and more creative program-type sales while marketing the one-stop-shop concept to customers.
When asked if promotional products will be an integral part of Proforma, Cleveland, in the future, founder and CEO Greg Muzzillo answered an emphatic "absolutely." "Due to the economic downturn, existing promotional products distributors continue to join Proforma as they continue to look for enhanced sales and product lines," said Muzzillo.
The sale of promotional products is also becoming a major part of Merrill's operations and Brian Wiedenmann, general manager of Merrill Corporation, Monroe, Wash., said the company expects to see added growth. "We view promotional products as a large part of our business and it continues to be a high- growth area as we expand our customer base and product mix," said Wiedenmann.
Graham McClean, president and CEO of Global DocuGraphix, Chicago, reported promotional products sales as very robust. "It's becoming obvious to print distributors that clients use and need promotional products," said McClean. "As a result, it has become a very high growth area for us as well."
McClean noted that margins on promotional products are based on two components: company store and events driven sales, with the latter offering a much better margin and much less risk. But, he added that one might have to operate a company store in order to get the events-driven business. "The problem with company stores is inventory, which has to be safeguarded, managed and so forth," said McClean. "And, if the inventory doesn't move, then it costs the distributors."
What's Going On
With the increased interest in promotional products within the forms industry comes increased sales and service, according to our interviews.
"The sale of promotional products allows salespeople to get into other areas of each client's business," said McClean. "They can penetrate accounts better." In order to accommodate the increase of promotional products business, Global has hired a dedicated resource person to assist salespeople in developing product ideas and locating resources.
McClean cautioned, however, that there can be expensive overhead when dealing with promotional products. "That is why distributors like us are a little wary of taking on a lot of financial obligations with a customer that has not agreed to be financially responsible," he said.
Even with the fanfair surrounding promotional products, Wiedenmann reported that they tend to be less valuable in some circumstances. "In certain selling environments they are profitable, however, there are certain scenarios where promotional products are commodity priced. In these instances, we have engineered the sales of promotional products to include additional printed products and solutions."
Wiedenmann did say that the use of promotional products has enabled Merrill to acquire new accounts and has provided the opportunity to sell additional products. "We have a client that spends some $10 million on promotional products every year that had a specific need. We took a look at the request and were able to facilitate for them. It was the first sales opportunity we got with them and it opened the doors to many others."
On another note, promotional products have become so valuable to Proforma that Muzzillo has taken measures to cement specialized relationships in this field. One of Proforma's biggest coups was teaming up with a supplier who has spent the past couple of years experimenting with various distributors for selling a unique line of promotional products used for school and not-for-profit fundraising.
"This line was an addition to their business," noted Muzzillo. "This company's most successful distributor, with whom they experimented in the Houston marketplace last year, earned $1 million in profits in just one year."
As for Shamrock, Troop stated, "Our initiative has been to reduce the number of competitors we have for these products by minimizing procurement costs, and adding value through program selling and bundling products and services for one-stop-shopping convenience."
What to Expect in 2003
Predictions for the performance of promotional products in the future are fairly positive.
Troop believed that promotional products will be a "significant part" of his company's product line in years to come, yet he does not see them playing a major role.
Wiedenmann predicted that these products will continue to be a major part of his company in the future as well. "We will continue to grow our promotional product sales and they will re-main an important component to our value-added offerings."
McClean conceded that the promotional products industry is not an easy market, but it is growing. "There aren't any free lunches in this business. You've got to have samples and resource tools and a very good ordering system," McClean said.
He added that when one considers that a promotional product is seen 55 times a day, the potential for increasing sales in this arena is great.
By Sharon Cole, Maggie DeWitt, Cynthia Graham and Jennifer Hans