Latest news

The Branded Merch Revolution Happening Right Under Your Nose

HuluNetflixKFC. Little Caesars. Papa Johns. Chipotle.

What do they each have? 

Swag(ger). 

And lots of it.

The swag revolution is real. To wit: Aldi’s dropped a merch collectionAldi’s. The grocery store. The discount grocery store. 

And over the summer, Panera Bread wanted to increase soup sales in the off-season so they did what any self-respecting big brand would do, they wrote a press releasel aunched a branded swimwear line featuring … soup

From solo brands to indie brands to major brands—everyone is getting in on the merch game. 

And it’s not just the low-end of the food chain. Brands ranging from your once-a-day Dunkin’ to your once-in-a-blue-moon Ritz Carlton are raging about merch. 

Example? If you’re a Fortnite fan, you can play the game for free, but if you want a Fortnite+Balenciaga t-shirt, you’ll have to shell out $475 for it unless, of course, you prefer the $725 hoodie

And the collabs (oh, so many collabs):

Justin Bieber x Tim Hortons merch.

Chipotle x Carhartt merch.

Popeye’s x Megan Thee Stallion merch.

McDonalds x pretty-much-everyone merch (BTS, J, Balvin, Saweetie, etc.) 

Ten years ago, if you dropped someKFC crocs on your audience, you’d inherit a kingdom: pallets upon pallets of patriarchy who rule the warehouse forever because they ain’t budging a damn inch. But today, KFC merch flies.

And speaking of patriarchy, Taylor Swift broke records with her new album Red and the longest song to hit #1 (‘All Too Well’) as swifties flocked to buy out the stock of the famous “F— the Patriarchy” key chain mentioned in the lyrics (as well as virtually every piece of Red merch on her site). 

In fact, “band merch,” long a staple of the music business, has recently exceeded even its own bounds: Kanye’s ‘DONDA’ event broke records for the highest-grossing US tour in history based solely off of merch sales

And streetwear examples abound. Kith and Madhappy, two upstart streetwear brands eyeing the Supreme empire, both dropped branded “Curb Your Enthusiasm” collections

Let’s not forget gazillionaires like Elon Musk, who continues to use merch to provoke just about everybody (his latest: the Tesla Cyberwhistle). 

Authors are in on it too. Salley Rooney (hailed as the first great millennial novelist) announced her third novel through influencer kits, sent to folks like Lena Dunham and Lucy Dacus. Her new book included an entire merch roll-out campaign, complete with umbrellas, t-shirts, bucket hats, and tote bags. 

And speaking of totes: How about that New Yorker Tote bag? The one so hot it’s now in the hands of over half-a-million people (and counting), the tote that became more of a status symbol than a $10,000 Hermés bag, the tote so damn popular that it led Vice writer, Sam Wolfson, to pen this clever homage

“Famous tote bag company The New Yorker has become so successful that they also now produce a weekly magazine filled with investigative journalism, restaurant reviews and satirical essays.”

(Brilliant).

But perhaps most astonishing is how the worlds of streetwear and fashion have elevated branded merch to, not just a new level, but an entirely new game. When White Castle celebrated its 100th birthday, they enlisted Liberian-American fashion designer Telfar Clemens (whose brand Telfar is upending the fashion world for its inclusive stance and brilliant designs) to design their uniforms, which include all unisex designs of T-shirts, polos, aprons, visors, and do-rags. (Shout-out to our very own Telfar-obsessed Aly Brunton who noted this for us). 

Merch has become so popular that books are even being written about it. A24 films released a book celebrating a boom era of promotional movie merchandise, and the famous Japanese writer Hauraki Murakami, whose book sales exceed 2.5 million copies, recently released a new book celebrating his favorite t-shirts.  

If you haven’t noticed, the world of branded merchandise is in the middle of one of the biggest evolutions since Michael Vasilantone created a multi-color garment printing machine in 1960 to screenprint slogans on t-shirts. 

Over the past few years, virtually every major publication, from Forbes to The New York Times, has written about merch. Sometimes it’s negative, such as the Fast Company article written by our friend Liz Segran, It’s time to stop spending billions on cheap conference swag. (After Liz’s article, commonskuresponded and also asked Liz to join us for a podcast chat and as aguest speaker at skucon). 

Or, articles like The New York Times report, The Cotton Tote Crisis (“How did an environmental solution become part of the problem?”). An article published by the very same New York Times that sells not only one branded tote on their site but twothreefourfivesixseveneightnineteneleventwelvethirteenfourteen different tote bags. 

[Sidenote: There are touchpoints in those articles we (and many conscientious sellers in the merch business) agree with, such as the abuse of wasteful, mindless spending and its harm to our environment, which we will address in subsequent posts].

But it seems we notice and react to negative news (understandably) more so than realizing the revolution happening right under our nose. 

Branded merch is not just ubiquitous, it has become a cultural staple evolving to a higher form of identity, self-expression, and art, commanding headlines and sparking brand obsession like never before. 

The positive news about merch vastly outweighs the negative. Articles abound, such as If You Notice Branded Merch Everywhere, You Are Not Alone—Here Is Why (Forbes); What Your T-Shirt Says About You (The Atlantic); How Supreme-Style Merch Drops Took Over Corporate America(Medium); Why Does This Simple Hat, Worn by Emily Ratajkowski and TimothéeChalamet, Keep Selling Out? (Vogue).

An exercise: Take a hobby of yours, any passion you have, and see if you can’t google a merch connection. Own a Peloton? Merch. Ted Lasso fan? Merch. Even a book-nerd like me can make a merch connection. Recently, I resubscribed to The New Yorker just so I could get the swanky new green tote bag, and I noticed that The Paris Review dropped a merch line just so this idiot could shell out ten times the cost for a T and a tote. See? Merch. It’s a brilliant exercise to see, not only how far merch has come, but how impactful merch is for every single brand

Anna PaczkowskaThe Branded Merch Revolution Happening Right Under Your Nose
read more

Crisis or Opportunity?

China is a manufacturing powerhouse. Known as “the world’s factory,” China is the world’s largest manufacturer in terms of output. The country’s GDP reached $17.7 trillion in 2021, up $3 trillion from 2020. This year, China is targeting to grow another 5.5%.  

Outside of textiles, nearly every promotional product comes from China—or has components from the country. China’s speed, low labor rates and strong manufacturing capabilities have made it a global manufacturing hub and the go-to source in the promotional products industry. 

China is the world’s second-largest economy behind the United States and its most populous nation with 1.4 billion people. But the country is changing rapidly. So is the relationship between China and the U.S.—and China and the world.

Is the promotional products industry ready for what comes next?

Tumultuous Times

Doing business in one of the world’s most dynamic countries has become increasingly complicated. First came the China tariffs in 2018, leading the world’s two largest economies to engage in a bitter trade war. Some economists say the U.S.-China trade war could go on for years. 

The United States currently imposes a 25% tariff on approximately $250 billion of imports from China and a 7.5% tariff on approximately $112 billion worth of imports from China, according to the Tax Foundation. Chinese tariffs on American products are about 20%. Before the U.S.-China trade war, U.S. tariffs on Chinese goods were on average 3.1%, while China’s tariffs on American goods were about 8%.

While meant to punish China for its unfair economic policies, the tariffs that were started by the Trump Administration ended up harming the U.S. Multiple studies have shown that U.S. importers and consumers have primarily paid for the tariffs.

"We're paying the bill and it's hurting our earnings" - quoteBen Zhang, president and CEO of Greater Pacific, says his company builds the tariff into the prices he charges distributors. His distributor clients then do the same with their end-buyer clients. “Who eventually pays the price? Not China factories—American businesses,” Zhang says. “We’re paying the bill, and it’s hurting our earnings. We’re suffering.”

After the tariffs came COVID-19, causing economies to grind to a halt. Since the beginning of the pandemic in 2020, China has instituted a strict zero-Covid policy to crush outbreaks and chains of transmission. The central government enforces large-scale lockdowns, mass testing and international travel bans as part of its zero-Covid strategy. 

China’s strict approach over the past two years has created numerous bottlenecks in the global supply chain, with factory shutdowns and logistics closures. However, experts doubt the country will change its strategy. In March, China locked down tens of millions of people as it experienced its largest Covid outbreak in two years. With the world seemingly turning a corner on the pandemic following the Omicron variant’s global spike this winter, China’s shutdown affected 19 provinces, including Shenzhen, which is key to supply chains because of its ports.

In the wake of the debilitating trade war and pandemic came supply chain snarls that entangled the world. Every aspect of the global supply chain was upended, from the factories manufacturing items to the cargo ships to transport the goods to backlogs at ports to unload the shipments. 

Zhang says that while it used to take about a week to get freight once it arrives in the port, it may now take months. And once a shipment clears customs, there may not be a truck driver to transport the goods. This leads to a domino effect. Suppliers like Greater Pacific can’t bill distributors for undelivered freight. Distributors can’t bill their clients. And end buyers purchasing promotional products must wait several months—time they often don’t have—to get their goods in hand. 

Companies shipping products from China are shelling out substantially more than they did pre-pandemic. Zhang says that a typical 40-foot container from China used to cost $3,000-$4,000, but now costs anywhere from $18,000-$25,000. “It’s unbelievable, but we have to pay it. We have no choice,” he says.

Brennan Mulligan, founder and CEO of California-based Skyou, has never seen anything like it. “Everybody says it’s unprecedented, but it applies in this case,” he says. “Everyone was blindsided.”

Pivoting To Closer Shores

Anna PaczkowskaCrisis or Opportunity?
read more

Industry Reaction: Corporate Gifting Market May Be Much Larger Than Previously Known

According to a recent study conducted by Coresight Research, corporate gifting has swelled to previously unrealized levels since the onset of the pandemic in early 2020.

A 2018 estimate placed the market at $125 billion, but the newer study finds it to be far more robust, an estimated $242 billion in 2021, and likely to swell to over $300 billion by 2024.

Naturally, promotional products distributors and suppliers specializing in corporate gifts are excited to hear the updated estimates, and say the new numbers are reflective of the uptick in business they’ve experienced since many office workers began to perform their duties remotely starting in the initial quarantine period, leaving their employers seeking ways to keep them feeling engaged and appreciated.

“During COVID, companies were trying to stay connected with staff,” says Pat Barry, executive vice president of sales at Austin, Texas-based distributor Boundless. “That has continued with a greater emphasis as companies are now are looking to retain staff and attract new employees due to record low unemployment.”

The new estimate comes from a survey of 300 corporate gift buyers across companies up to $30 billion in revenues. “The first thing we set out to do was determine the actual size of the corporate gifting market,” Kevin Payne, vice president of corporate marketing at study sponsor GiftNow, told Forbes. “We felt it was bigger than previous estimates, but how much bigger we didn’t know. We also believed it grew extremely fast over the past year and the study confirmed it. Corporate gifting is growing faster than the rest of the gifting market.”

The study was conducted in May and released in June. It includes ample information relevant across the entire promo industry, including gifting trends and key data on the purposes of corporate gifts and the types of gifts most frequently sought.

Corporate Gifting Infographic

Distributors say the remote work trend and rising transience in the workforce have increased the importance of gifts being particularly thoughtful, rather than compulsory or routine.

“Overall, our clients are using moments to unleash the power of human connection and deepen their relationships, which in turn increases retention,” says Hillary Feder, MAS, president of Hopkins, Minnesota-based distributor Hillary’s. “Two years ago, people just wanted to get something into their employees’ or clients’ hands to say ‘I am thinking of you.’ Today, we are working more strategically with them to step back and look at the big picture.”

Both Boundless and Hillary’s won PPAI Pyramid Awards for exceptional gifting programs in 2021.

“A thoughtful corporate gift includes knowing where people are, where their heads are at, what is keeping them up at night,” Feder says. “There is a ‘thinking investment’ to land on the right products. You need to know your client, their company brand, values, culture and voice. Know who will be the recipients—it is not one-size-fits-all, even in bulk gifting. It might mean a couple of different options if you are going to implement authentically and with heart.”

As for the specific items corporate gifters are looking for, gift cards—both physical and digital—lead the way, making up 37% of all gifts, with 51% of study participants including gift cards in their programs. Everyday branded products, gift baskets, edibles and apparel still represent large segments of the marketplace, but electronics and elevated branded merchandise are on trend. Barry says clients are looking for “brands, brands, brands.”

Anna PaczkowskaIndustry Reaction: Corporate Gifting Market May Be Much Larger Than Previously Known
read more

More Manufacturing Slowdowns as Chinese Factories Face Power Plant Shutdowns, Electricity Rationing

Chinese factories have been working hard to keep up with global demand as they recover from complete COVID-related shutdowns in China’s manufacturing sector, both earlier in the pandemic and more recently.

sixtwentysixMore Manufacturing Slowdowns as Chinese Factories Face Power Plant Shutdowns, Electricity Rationing
read more

Latest COVID Surge Hampering Factory Activity in Asia

The development spells more supply chain trouble for the North American promo products industry.  Manufacturing output is slowing in key production centers in Southeast Asia due to the rampant spread of COVID-19’s delta variant, making it more difficult and more expensive for western brands to get goods produced and shipped to North America.

The slowdown in activity has the potential to get worse in the weeks ahead in the wake of developments like stay-at-home orders issued by the government in Vietnam, a key country for the production of everything from apparel and shoes to upholstery.

The grim news comes as the global supply chain for virtually every industry is already in disarray due to COVID-caused complications.

The promotional products market is no exception.   Rising raw-material prices, congestion at ports, insufficient labor and domestic transport capacity, skyrocketing costs for shipping containers/ocean freight, unfavorable monetary exchange rates and more have resulted in promo experiencing inventory shortfalls, higher product prices, lower customer service levels, longer production times, shortages of important decorating materials like screen-printing ink, and delays in order delivery.

One thing driving up costs and making it harder and pricier to get promo goods manufactured is constraint on factories related to attempts to control outbreaks of the delta variant in Asia, where the vast majority of domestically sold promotional products are produced.

COVID clearly weighed on Southeast Asia factories in August, where manufacturing managers in Vietnam, Thailand, and the Philippines all reported deeper contractions in activity.

The IHS Markit purchasing managers’ index (PMI) for Vietnam dropped from 45.1 in July to 40.2 in August. It was the third straight month of declining activity and the lowest reading since April 2020. Readings above 50 denote expansion; below 50 signifies contraction. Vietnam produces more than 30% of the United States’ shoe imports and is second only to China when it comes to supplying the shoes and apparel that are imported to America.

 

 

Meanwhile, Thailand’s PMI retreated month-over-month from 48.7 to 48.3 – the seventh time in the last eight months that activity eroded. The Philippines recorded its lowest PMI in some 15 months, falling from moderate expansion territory in July (50.4) to contraction in August (46.4).

Indonesia’s PMI rose more than three percentage points month over month to 43.7 in August, and Malasyia’s inched up to 43.4, but that still means contraction was occurring in both countries, just not at as rapid a rate. Elsewhere, India bucked the trend, with IHS Markit data showing that manufacturing remained in expansion with a PMI of 52.3 in August. Still, India’s rate of expansion declined, having slipped from 55.3 in July.

Analysts say the fact that the overwhelming majority of people in these countries are unvaccinated is fueling the COVID outbreaks and thus impacting factories’ ability to function.

“Southeast Asia’s under-vaccinated economies have been fighting record levels of infections and deaths, including in Thailand, Malaysia and Vietnam,” Bloomberg reported. “Of 53 countries in Bloomberg’s latest Covid Resilience Ranking, the bottom five are all in Southeast Asia.”

In August, more than 80 apparel and footwear brands, including Nike, penned a letter to President Joe Biden pleading with his administration to donate vaccines to Vietnam. “The health of our industry is directly dependent on the health of Vietnam’s industry,” the letter said. 

The White House is reportedly providing an additional 1 million doses of the Pfizer vaccine to Vietnam, a rollout expected to start on Sept. 1/Sept. 2.

 

 

The official PMI for China, which has temporarily shuttered certain ports and implemented localized lockdowns in recent months in attempts to combat delta flare-ups, declined slightly from July (50.4) to August (50.1).

The reading indicated manufacturing expansion was still occurring in August, but there were headwinds. The new export orders sub-index declined to 46.7 in August from 47.7 in July. Furthermore, the Caixin Media and IHS Markit PMI for China showed that manufacturing there had fallen into contraction, with a tally of 49.2, the lowest level since February 2020 when societal shutdowns grounded production activity in China.

Manufacturing activity continued to expand in Japan, Taiwan and South Korea, but those countries experienced month over month PMI declines that indicated the expansion was slowing.

By Christopher Ruvo, PROMOGRAM 

sixtwentysixLatest COVID Surge Hampering Factory Activity in Asia
read more

U.S. Job Growth Strong, But Industry Hiring Difficulties Remain in Promo

The U.S. added 943,000 jobs in July, according to the Bureau of Labor Statistics. This is ahead of analysts’ expectations and helped push the country’s unemployment rate down to 5.4 percent. Tracking this growth, The Conference Board’s Employment Trends Index increased again in July for the fifth consecutive month, reaching 109.8, up from 108.96 in June.

“The Employment Trends Index remained on its historically strong upward trajectory, suggesting rapid job growth is likely to continue over the next several months,” says Gad Levanon, head of The Conference Board Labor Markets Institute. “This high mark comes off the back of nearly one million new jobs added in both June and July and a steep decline in the unemployment rate.  However, recruiting and retention difficulties—and rapid wage growth—are expected through the summer, particularly in industries key to the reopening of the economy, such as food service and leisure and hospitality.  The rapid wage growth is likely to lead to higher inflation in the coming year.”

Levanon adds, “Despite the still-high unemployment rate, many employers are having difficulty finding qualified workers. According to the National Federation of Independent Business, 49 percent of firms reported being unable to fill open positions in July—an all-time high. For many of those currently unemployed, job-search intensity remains low due to an array of factors: enhanced unemployment benefits, fears of getting infected, a lack of childcare, and interest in pursuing and preparing for a different type of career. Going forward, we do expect economic activity in in-person services to be negatively impacted by the current resurgence of infections fueled by the ‘Delta’ variant. While this Delta wave may produce slight slowdowns in hiring, we expect job growth to remain very strong overall.”

Businesses in the promotional products industry are approaching hiring from new angles to manage the tight labor market. Dawn Conway, CEO of distributor Boost Engagement in Dayton, Ohio, says, “We have been affected; it has been challenging finding candidates to fill entry-level positions, specifically warehouse associates. The most successful step in recruiting talent is referrals from our employees. We have a points-based referral program that is heavily promoted through our proprietary engagement platform, which is one of Boost Engagement’s core offerings.”

Kevin Walsh, CAS, president of supplier Showdown Displays in Brooklyn Center, Minnesota, says, “We’ve had to become more creative, flexible and aggressive. Pre-pandemic, Showdown had built a healthy pipeline of prospective employees as a desirable employer and fun place to work. Those prospects and that pipeline has evaporated post-pandemic. As a result we’ve taken multiple steps to increase interest for applicants and attract the type of team member that wants to be part of Showdown Displays. This includes; No.1, increasing our existing referral bonus program for associates, No. 2, offering signing bonuses to new employees, No.3, increasing entry-level rates—as well as the subsequent rates for existing employees—and No. 4, re-instating our profit-sharing program. It’s a competitive market out there so offering a suite of incentives is required.”

Labor shortages are not confined to the U.S.  Yesterday, The Wall Street Journal reported that as global demand for goods surges, Chinese factories are having difficulty filling jobs because many young people are rejecting factory jobs in favor of service-industry jobs that pay better and migrant workers are staying home amid COVID-19 fears. The story goes on to say that the trends may be indicative of longer-term demographic changes, including a shrinking labor pool.

sixtwentysixU.S. Job Growth Strong, But Industry Hiring Difficulties Remain in Promo
read more

The Story Behind The Supply Chain Trouble…

Global sourcing experts weigh in and provide strategies for navigating the disruption.

Below are highlights from the story by Christopher Ruvo

 

The supply chain disruption that’s affecting the promotional products industry and virtually the entire global sourcing network probably isn’t going to relent anytime soon.

Still, there are strategies and practices that suppliers, like other importers and product sellers, are implementing that will help mitigate issues to the extent possible.  That’s the message from global sourcing experts outside promo who work on supply chain issues.

“The supply chain crisis is one which is going to take a while to sort out, but there are many ways of doing so, and combining a number of techniques may help us to sort it out sooner rather than later,” says Teri Shern, co-founder of ConexBoxes, a provider of steel storage container solutions.

Relief in 2021 Is Unlikely

By now, most promo pros are familiar with the impact of supply chain upheaval on the industry. Fueled by issues tied to COVID-19 like societal shutdowns, labor shortages and a gigantic global bounce-back in demand for all manner of products following the economic lows experienced in the coronavirus’ early waves in 2020, the supply chain troubles have led to stock shortages, higher product prices, increased delivery/transport costs, longer production times and delays in delivery of orders, among other headaches.

 

New fiascos for promo are emerging too, with apparel decorators now reporting shortages of key materials like screen-printing ink.

 

The big question in promo – and in all industries affected by the upheaval – is when will things get better?

Supply chain professionals believe troubles will persist into 2022 and potentially beyond.  “There’s a lot of fundamental restructuring going on as a result of the pandemic-induced demand shifts and geopolitics that we are probably 12 to 18 months away from being in a new steady state,” says Aaron Alpeter, founder of Izba Consulting, a supply chain consulting, outsourcing and technology firm.

Similarly, Patrick Penfield believes it will be at least the end of 2022 before global supply chains can settle into something like a new normalized stability.

“You have the delta variant causing issues for supply chains now and you could have intermittent disruptions like that throughout next year,” says Penfield, a professor of practice in supply chain management and director of executive education at the Syracuse University Whitman School. “Those interruptions make it difficult for supply chains that are already overwhelmed to catch up.”

The problems could intensify in the fourth quarter, according to sourcing pros.

As just one example of how that might look, retailers could be scrambling to get products that were produced overseas out of shipping containers that have been delayed in delivery/unloading and into their distribution centers and then onto shelves. That could lump considerable extra weight on already overstressed domestic transport providers – a pressure that ripples throughout markets, including the promotional products industry, contributing to backlogs and delivery delays.

“Getting timely deliveries will be a challenge,” Penfield predicts. Transport services are likely to be more expensive too, given planned surcharges from carriers like FedEx and the Postal Service.

 

Speaking broadly about the global supply chain, some sourcing pros think there’ll be bellwethers to look for that signal the return of stability and relative normality.

“Right now, the secondary market for parts is very hot, which only happens when there’s a supply imbalance and poor planning on a macro level,” shares Alpeter. “You’ll know that we’re in a new steady state when the arbitrage opportunity for parts and components begins to evaporate.”

Even when that happens, though, prices for things like air and ocean freight may remain well above their pre-pandemic costs – a potential reality that could mean higher product prices in promo and other industries are here to stay as such expenses factor into what promo suppliers are obligated to charge per product to remain viable.

“I think you’ll see prices for air and ocean stabilize, but they could stay elevated long term,” Alpeter says. “Going back to 2018 – I don’t see that happening.”

Best Practices

There’s no magic spell to cast to cure the supply chain ills. Even so, there are things companies that import and ship product can do to cut paths through the jungle of complications. Penfield recommends working closely with freight forwarders to maximize supply chain efficiency. “They can help you minimize your costs,” Penfield says. “They can also provide advice on things like which ports to use given conditions. You have to engage with them to leverage their expertise.”

Another smart tactic for suppliers would be to beef up inventory levels, ordering in advance and carrying more stock than would normally be the case. Leading proactive promo suppliers like Polyconcept North America, Gemline and others have already been executing this strategy for months. “You want to have enough inventory to protect against disruption,” Penfield says.

 

As companies build inventory, they should do so strategically, stocking up on best-selling SKUs rather than wasting time, expense and precious cargo space on items that generate relatively marginal sales. “It’s a good time to look at what’s selling and what’s not selling and make decisions accordingly,” Penfield says.

The strategizing should also include proactive planning and making potentially difficult purchasing decisions based on marketplace realities, supply chain constraints and costs.

Alpeter gives an example. He’s working with a brand whose factory has said that it will only be able to support a portion of the requested amount with the current component commitments it has from vendors. The factory feels it can produce a higher portion of the requested amount but would need to increase the bill of materials dramatically to secure components on the secondary market.

“By evaluating this in advance in the summer, the brand can evaluate the trade-off between reduced sales and lower margin, as well as come up with a broader business plan, as opposed to having things hit all at the same time and potentially making emotional and unsound business decisions,” Alpeter says.

Meanwhile, Penfield and others say that reducing the amount of packaging used to ship product from overseas is a smart way to get greater quantities of products to domestic shores faster. “Shipping full container loads can help immensely,” he says.

Longer term, promo suppliers should be working to automate processes to reduce reliance on labor. More automation makes companies less susceptible to labor shortages that can slow down production and fulfillment when there’s simply not enough staff. Suppliers in promo are making steps in this regard.

They’re also executing another long-term improvement strategy recommended by global sourcing experts, and that’s diversifying the countries and regions from which they source products, which makes supply chains more resilient and less vulnerable to disruptions that can come from natural disasters, COVID shutdowns, labor strikes, and societal unrest that may occur in any one area and cripple operations at key factories.

Penfield notes that geographic sourcing diversification will include companies increasingly looking to source closer to home, such as within their own hemisphere. More could – and should – look for domestic sourcing options where possible too, advice that promo distributors could also take. “Look locally and find domestic providers at least as an alternative,” Penfield says.

“While the current supply chain challenges are severe, they’re also about exposing inefficiencies in different areas,” says Mario Veraldo, a 25-year veteran of the global shipping and logistics business who is CEO of MTM Logix, a supply chain and logistics company. “So, while there is no silver bullet answer to the disruption, you can start improving things now by focusing on specific areas that feed into the supply chain.”

Source: PROMOGRAM on

 

sixtwentysixThe Story Behind The Supply Chain Trouble…
read more

Promo Price Increases Loom Due to Importing Woes

Shipping challenges and rising raw material costs are poised to drive product price hikes, as COVID lockdowns threaten promo supply chains in China.

Call it a perfect storm.

A complex concoction that includes skyrocketing shipping container costs, rising raw material prices, reduced shipping capacity and log-jammed ports, much of it fallout from the COVID-19 pandemic, is creating an international sourcing nightmare for North American promotional products importers and fueling the potential for price increases on a gamut of products.

The challenges could intensify in the coming weeks as the calendar builds toward China’s Lunar New Year on Feb. 12 , and as authorities in Beijing re-institute strict societal lockdown measures in parts of the country to corral coronavirus spread amid a recent reemergence of new COVID cases.

“It’s been one thing after another,” said Jeffrey Nanus, president of Norwood, NJ-based hard goods promo supplier AAA Innovations.

Shipping Expenses Surge
Factories in China manufacture the majority of promo products sold in North America, with other countries outside the U.S. and Canada also producing many items for the market.

One of the biggest current challenges facing suppliers who import product, as well as distributors that source direct from overseas, is the availability of shipping containers to transport product from those international locales to domestic shores.

The containers are essential. They store items that are carried from China, or other countries, on ships to the U.S. and Canada. Only now, there’s a critical dearth of containers, and the scarcity is sending prices for available containers through the stratosphere.

“We have seen container costs rise 25% to 35%, depending on the lane and the carrier,” said Andrea Lara Routzahn (pictured), senior VP of portfolio and supplier management at Trevose, PA-based alphabroder, the second largest supplier in the promo industry.

It’s been worse for Nanus.  In recent months, AAA Innovations had been paying a contract rate of about $3,000 per container to ship from China to California and about $4,000 per container to ship from China to New York. Now, the supplier is paying $8,000 to $9,000 for California-bound containers and more than $10,000 for New York-bound ones.

“We’ve had quotes as high as $12,000 per container – that’s crazy,” Nanus said. “No one is honoring contract rates. It’s the first time in my 29 years in this business that I’ve seen anything like this.”

Routzahn said the competition for containers is fierce, resulting in locked-in contract rates being tossed aside and the containers going to those willing to pay elevated rates. Alphabroder has worked diligently to consistently identify the most affordable options via these “spot buy” transactions. Still, what some termed opportunism among container providers appears to be rampant, critics maintained. “Some carriers,” said Routzahn, “are offering a premium service to lock in rates which require customers to commit to monthly usage commitments whether they ship or not.”

A number of factors are causing the container shortage. A key one is that it’s taking longer for empty containers to be returned for refilling. For instance, the average turnaround time for containers returning to China was 100 days in December, up from the usual 60 or so days, according to the China Container Industry Association. The slow return is a consequence, in part, of it taking longer to deliver and unload containers, which has resulted from labor shortages and pandemic health-and-safety protocols that slow the process down.

“Containers are taking longer to unload at port of entry,” said Cheron Coleman, alphabroder’s VP of global supply chain. “Then they’re taking longer to get to their final consignee destinations due to domestic rail and long haul shortages, and they’re taking longer to unload at consignee warehouses due to warehouse labor issues. Finally, empty containers are taking longer to get back to the ports to head back to origin.”

Relatedly, it’s more difficult for importers to secure a spot for containers on a delivery ship.  As Nanus and other import experts explained, shippers shelved portions of their fleets in 2020 as demand plummeted amid the global economic crisis that the pandemic caused. Since then, demand has rebounded robustly, especially for goods made in and exported from China, which in November logged a record trade surplus of $75 billion. Still, shippers haven’t returned their fleets to pre-pandemic levels, which has put space on available ships at a premium, Nanus said.

“The growth in exports, combined with the reduction in ocean carrier capacity, has created a situation where there is simply not enough shipping capacity to meet demand,” said David Nicholson, president of New Kensington, PA-based Polyconcept North America, the fourth largest supplier in the promo industry.

Nicholson continued: “As a result, carriers are taking advantage by putting through price increases – with shippers desperate to get inventory replenished willing to pay just about anything to get their orders out.”

As Nicholson and others explained, there’s always a mad dash among importers to get product from China stateside before the Lunar New Year in February, which typically sees factories in China close for a couple weeks, with workers often traveling to see family.

This customary surge in market demand has exacerbated the challenges related to container and shipping capacity issues, and comes as some importers scramble more than usual ahead of the Lunar New Year, as they’re worried that COVID-related health-and-safety initiatives tied to the travel of factory workers could lengthen how long factories close and/or operate below peak capacity.

“We’ve heard that some factories could close earlier than normal for this time of year,” said Nanus, though he noted AAA Innovations’ factory partners are fully operational.

An alternative to ocean shipping is air freight. However, that’s a more expensive option – one that’s become even more so. “We’ve seen air freight more than triple,” said Nanus. “Normally, we’d be at about $3 per kilogram. We’ve paid up to $10.” He noted that, as of Wednesday, Jan. 13, the rates were in the neighborhood of $4.80 to $5. Even so, there’s volatility in the market, and rates are subject to increasing again.

Container availability and insufficient shipping capacity have caused promo products to arrive after expected in-hands dates and, in instances, miss the deadlines by which they were required by distributors’ end-clients. Nanus described a situation in which the shipping issues resulted in not being able to meet such a deadline for a distributor. AAA Innovations communicated the reasons, and the distributor called the end-client to explain.

“The end-client laughed and said that was the 12th call he’d gotten on the issue of product not making it in time from overseas,” Nanus said.

Suppliers said the freight woes could remain an issue throughout 2021, especially if demand intensifies amid societal re-openings, which business leaders are banking on as vaccinations potentially inoculate broad swaths of the population against COVID-19.

“There are simply not enough containers coming back to China, with import volumes lagging behind the export growth,” said Nicholson. “And, as the U.S. economy begins to recover mid-2021, things could get worse before they get better.”

Raw Material Costs Rising; Promo Product Prices Could Follow
Raw materials are another component of a product’s total cost that’s increasing for suppliers.

Nanus, for instance, noted that costs for the metals and woods necessary to make the products he sells have increased between 5% and 8%.  “With the rebound of oil prices and other raw materials, along with moves in the Chinese currency rate, we’re beginning to hear of pricing pressure from Chinese producers,” said Nicholson.

Things could get more complicated.

On Wednesday, Jan. 13 the U.S instituted a ban on all cotton from Xinjiang, as well as all products made with cotton from that region of China, because of extensively documented use of forced labor there.

Many in promo and the apparel/textile world believe the ban was made for the right moral/ethical reasons and are on board with it. Still, the ban stands to potentially drive up cotton prices.

Xinjiang produces about 20% of the world’s cotton and 84% of China’s supply, according to some estimates. China is the world’s third-largest cotton-producing nation, behind India and the United States. Removing Xinjiang from the cotton equation reduces the cotton supply available to U.S. apparel and textile companies, and their overseas factory partners, at a time when cotton prices were already rising.

Paltry crop yields, resulting from insufficient rain, are among the factors spurring a rise in the price of cotton. The Wall Street Journal reported that cotton prices recently rose to their highest level in nearly two years, noting that the most-active cotton futures contract was at a point up 55% from when prices bottomed out on April 1, 2020, amid the early days of the pandemic.

Ultimately, higher prices for cotton and other raw materials, combined with sharply steepened shipping costs, could drive price increases on promotional products that range from apparel to umbrellas and everything in between.

Given the increased shipping costs and the likelihood of buying price increases, there’s a high probability that suppliers will need to consider price increases at some point in 2021,” said Nicholson. “Obviously, there remains sensitivity to the fact that our industry is still in a period of recovery, so how aggressively suppliers pass along these costs will be a question. However, there’s little doubt suppliers will be facing a number of challenges regarding gross margins.”

Ballparking an “average” increase would be misleading, asserted Nanus, because actual rises could depend largely on both materials in a product and the product’s size. In his opinion, larger items stand to see more noticeable increases. That’s in part a result of the rising container costs. Consider, he said in a hypothetical scenario, that if you can fit thousands upon thousands of small items in a container, you can better spread the container cost increase over those items. But if you can only fit a few hundred items in the container, each particular item has to carry more of the container cost in its price tag.

“Because we’ve pre-sold goods at a certain price, we’ve already had to take it on the chin because our costs soared after the fact,” said Nanus. Looking ahead, “we are planning increases. It doesn’t mean we’re passing everything along, of course, but we have to account for some of the cost pressures we’re facing. Everyone is raising prices.”

China’s COVID Reemergence & Promo Supply Chains
In the winter of 2020, authorities in China implemented vast societal lockdown measures to counteract the spread of COVID-19. Those tight restrictions clamped down on factory activity, disrupting global supply chains, including those in the promotional products industry. Now, amid a new flare up of COVID in China, Beijing authorities have placed about 22 million people on lockdown, essentially ordering them to remain in their homes. Further emphasing the situation, on Friday, January 15, reports emerged that Chinese authorities were building a 3,000-unit quarantine facility to deal with a feared overflow of new COVID patients.

The move has awakened anxieties among some Western businesspeople who rely on Chinese production to power their industries here. They fear that factory productivity could again be impacted – and there’s at least some evidence those fears could be founded.

Certain promo suppliers tell Counselor that they’ve received communications from Chinese factory partners indicating that disruptions are in the cards. Suppliers have gotten letters that warn that delays in production and delivery could occur because of COVID-related issues. Those issues could include reduced staff, a potential result of mandated quarantining or actual coronavirus infections, as well as possible temporary factory closures ordered by governmental authorities.

Even so, not every supplier has received such warnings. Executives for such firms noted that their factory partners’ operations have not communicated any pending issues and have not experienced interruptions. “All our partners have integrated mandated COVID protections into their daily operations and are not experiencing any renewed difficulties,” said Routzahn.

Even if there are interruptions, some supplier executives believe that, given current evidence, there will not be a return to the major productivity-damming issues that Chinese factories faced in early 2020. “China’s response last spring and its ability to control the spread of new cases suggests the country should be well-positioned to weather this most recent increase,” said Nicholson.

It’s a prediction promo suppliers, distributors and decorators alike collectively hope will hold true. Nonetheless, the situation bears close watching in the age of COVID, which has made instability the norm and rapid adaptivity essential to business survival.

By Christopher Ruvo    From: PROMOGRAM 

sixtwentysixPromo Price Increases Loom Due to Importing Woes
read more

Notorious Markets – It’s That Time of The Year

It’s officially ‘Notorious Markets’ time again. Every year at this time the U.S. government, by way of the U.S. Trade Representative (USTR), publishes a list of sellers it identifies as being notorious markets. This notorious markets list identifies retailers and online sellers accused of selling counterfeits, as well as those accused of being involved in theft of intellectual property or piracy. For the second year in a row, ecommerce giant Amazon is crying foul for being featured on its notorious markets list and effectively blacklisted by the USTR.

With the years-long battle between the outgoing administration and Amazon CEO Jeff Bezos, it is no surprise that Amazon now claims the designation of five of the company’s foreign sites on the government’s “notorious markets” list in 2020 was little more than political gamesmanship. 

“Amazon has, and always will be, a trusted place to shop for authentic products. Including Amazon in this report is the continuation of a personal vendetta against Amazon, and nothing more than a desperate stunt in the final days of this administration. Amazon does more to fight counterfeiting than any other private entity we are aware of,” the company said in a release.

While the notorious markets report from the USTR has no real legal muscle, it is used as leverage, with the hope of inducing more countries and companies to embrace better enforcement of both online and brick and mortar markets. Forty online sites or companies, as well as markets in 17 countries, ranging from Argentina to Vietnam, are on the 2020 list.

“The Office of the United States Trade Representative highlights certain online and physical markets because they exemplify global counterfeiting and piracy concerns and because the scale of infringing activity in these markets can cause significant harm to U.S. intellectual property (IP) owners, consumers, and the economy,” the USTR states.

So, what does this mean for those of us in the promotional products industry? What does all this mean to you and your client, like the one you might suspect may be shopping your prices against those found online, and possibly buying fakes? I’m certain that you’ve talked with them about the dangers of buying on price alone, as well as the impact of counterfeits on both the economy, as well as potentially on your clients’ brand reputation. That said, I believe that this is an important conversation to revisit with those clients, and with all clients, on an annual basis. 

Even if your market is just around the region instead of around the world, the impact of counterfeits on the market as a whole on both suppliers and distributors can be great. Here are the basics of what I suggest you make it a point now, as a new year begins, to discuss with your clients:

  • Losing sales from undercutting prices affects everyone — make it a point not to play in that arena. 
  • Counterfeits can cause severe damage to the reputations of authentic brands, many of whom might well be your clients. 
  • There can be major fallout from dealing with counterfeit brands, including potential legal ramifications, as well as the risk of potential injuries or even death.
  • Long-term term trust is built between clients and their vendor partners over the long term. Engaging in the practice of promoting or selling counterfeit goods can have a significant impact on that trust.
  • It costs time and money to fight fakes, including the cost of product recalls that are a very real possibility. There’s also expert PR assistance brought in to deal with the reputational bad publicity that is an inherent part of recalls. The risk is, most definitely, not worth the prospective gain.

These are important strategic considerations for brands and, as their trusted promotional products vendor partners, it is incumbent upon all of us to help guide them to making smart decisions and protecting their companies. “Brands have never been more vulnerable to the issues of online counterfeiting, piracy, and distribution fraud” said Red Points CEO Laura UrQuizu. In fact, Red Points is working with businesses worldwide to protect their assets across online distribution channels by using artificial intelligence and machine learning to help detect and remove counterfeits.

Finally, a “counterfeits don’t really hurt anybody” attitude is not going to cut it. The International Chamber of Commerce estimates that the global economic value of counterfeiting and piracy could reach $4.2 trillion by 2022, and put more than 5 million legitimate jobs at risk over that same time period. The ICC adds that there are serious unintended and damaging effects counterfeiting causes, like exploiting child labor and increased pollution. It’s both the unregulated manufacturing, and the large quantities of counterfeits seized by law enforcement that are often destroyed by incineration. You can position yourself as part of the solution, for yourself and for your clients, by pointing them towards responsibly-sourced products that are both good for the environment and safe for end-users.

Jeff Jacobs has been an expert in building brands and brand stewardship for 40 years, working in commercial television, Hollywood film and home video, publishing, and promotional brand merchandise. He’s a staunch advocate of consumer product safety and has a deep passion and belief regarding the issues surrounding compliance and corporate social responsibility. He retired as executive director of Quality Certification Alliance, the only non-profit dedicated to helping suppliers provide safe and compliant promotional products. Before that, he was director of brand merchandise for Michelin. Connect with Jeff on TwitterLinkedInInstagram, or read his latest musings on food, travel and social media on his personal blog jeffreypjacobs.com.

From Promo Corner By: Jeff Jacobs, The Brand Protector, 1/25/2021

sixtwentysixNotorious Markets – It’s That Time of The Year
read more

Lady Gaga Launched Branded Oreos to Promote Her Latest Record and People Are Going Nuts

What is it about promotional Oreos that just makes everyone go … dare we say … Gaga? (You’ll laugh in a second.)

First it was Supreme dropping branded Oreos. Those sold out (and popped up on resale sites for stupid money) immediately, which is no surprise for Supreme.

Now Lady Gaga, a titan of promotional marketing herself, created branded “Chromatica” Oreos, and guess what? Those are impossible to find, too.

Some of the first Gaga Oreos were given to fans through an online scavenger hunt on Twitter.

We love a good scavenger hunt. There need to be more of those online these days.

But, anyway, the Oreos were still available in normal stores, whether you participated in the challenge or not.

According to Buzzfeed, however, supplies were limited, probably due to the fact that people have been buying them up like they’re worth their weight in gold.

Come to think of it, after what happened with the Supreme Oreos, maybe they will be worth something.

People are already selling them on eBay for about $15-$25 per pack. That’s obviously quite an upcharge for a pack of cookies.

This is now two Oreo co-brand efforts that people have lost their minds over. You know what this means: Oreo can just keep this train rolling with other brands, and know that they’ll sell all of their supply almost instantly.

By Brendan Menapace, Promo Marketing Magazine, February 2, 2021

sixtwentysixLady Gaga Launched Branded Oreos to Promote Her Latest Record and People Are Going Nuts
read more