Are online sellers destroying the promotional products industry?

It’s important to first make the distinction between a traditional distributor who is using the internet to grow sales, and suppliers who bypass distributors to sell direct to end users.

Because both methods involve a well optimized, well designed, promoted website, it’s easy to lump them together, but that’s a mistake.

The traditional supply chain for promotional products goes:

  • Product is (typically) manufactured in the Far East
  • Suppliers import the product and hold large quantities of it, ready for branding when required
  • Distributors act as the sales force for the suppliers and find customers for the product
  • The end user buys from the distributor.

DiscountMugs, and other ‘disruptive’ suppliers, import product, decorate it on demand, then sell directly to the end user. Because their products are not passing through another set of hands, they can afford to sell at reduced margins, and undercut the pricing of just about every ‘traditional’ distributor in the industry.

Whether you’re in North America or Europe, suppliers like this are understandably unpopular with the rest of the industry!

Does suppliers selling direct to end users present a threat to the traditional model of selling promotional products?

They’re an irritant to traditional distributors, for sure! But there are disadvantages to their model. They can only offer very cheap pricing on the items they import themselves, and that gives their customers limited choice.

According to Counselor Magazine’s data, the average small distributor buys from 24 suppliers. That’s 24 x the choice that importers like DiscountMugs can offer their customers, if they stick to their ‘own’ merchandise. There’s nothing stopping DiscountMugs from buying from suppliers in the US, but they lose their USP of being the cheapest because they have to add their margin.

They won’t be as responsive to new product trends, and are unlikely to carry specialist merchandise for niche industries.

They don’t have the bandwidth to offer consultancy services; they can’t make proactive suggestions about the best product to meet a need, or take the time to really understand their customers.

A distributor who positions themselves correctly can absolutely win business where service is more important than price.

So what about the ‘online price cutters’?

To make the distinction clear, by this I mean distributors who buy from suppliers, but whose main marketing tactic is the internet.

These guys get some flak from distributors who prefer to sell via networking and referrals, because they’re seen as promoting a ‘price first’ strategy. This flies in the face of what promo coaches tell us, that for distributors to succeed, they need to adopt a ‘needs first’, consultancy led approach.

I just want to dig into the statistics before addressing that.

Online sales statistics for the promotional products industry

According to PPAI, in 2013 there were 22,770 distributors turning over <$2.5 million p/a. The average turnover was $433,018, of which 10.7% of that was generated via their website.

That means the average smaller distributor generated $46,332 in annual sales via their website, and that number has been growing on average about 15% year on year.*

According to a Forrester Research study in 2014, 30% of business-to-business buyers said they made half or more of their work-related purchases online, but 56% say they expected to buy that much online “three years from now”.

Their more recent research from Q1, 2015, shows that buying online is growing in popularity with B2B buyers:

B2B Buyers Prefer Self Service

Here’s what Forrester are projecting will happen by 2020:

  • Order takers,” who generally process orders that customers could easily place through online self-service. Job loss: 33%, or close to 550,000 out of 1.6 million jobs
  • Consultants,” who have extensive knowledge about the buyer’s company to help the buyer understand what her company needs to purchase. Job gain: 10%, to 550,000 from 500,000.

Where am I going with all of this?

The type of promotional product buyer who wants 150 mugs for their office, 1,000 pens for their exhibition giveaway, or 50 caps for their field reps, is increasingly looking to buy online.

If you don’t offer that option, they’ll find someone who does. There’s no point in expending energy getting mad about that – the buyers are driving this change, and online sellers are just reacting to that.

This doesn’t mean consultancy led sales is a dying art!

Look at the above statistic: a distributor who takes the time to get under their clients’ skin, and offer insightful suggestions which demonstrate their understanding of their needs, is destined to succeed.

However, distributors who respond to an email request for ‘cheap plastic pens’ with a quote for cheap plastic pens… This is the sort of activity that’s on its way out.

The customer is just going to google your suggestions, and buy the cheapest pen online (and no, masking the manufacturer’s product code doesn’t prevent them from doing this! It’s just as easy to google a product name as it is a product code).

Why not have the best of both worlds?

If you’re a seasoned promotional products distributor with loads of creative ideas up your sleeve, that’s wonderful!

As a marketing professional myself, I want that. I want your ideas about how I can grow engagement and increase loyalty through promotional products. I want to know how to get the best possible ROI.

But equally, if I just want to get 25 t-shirts printed for a charity event, I’m going to go online. If you’re my go-to person for consultancy, I’ll go to your website first. And if I can get what I need, reasonably priced, I’ll buy from you.

The same applies the other way around; if you do a great job of following up on a web sale of 25 t-shirts, and make sure the recipient knows about your value added service, they’ll contact you when they have a need for that.

We’ll follow up this article with some suggestions on how you can successfully sell promotional products online – it’s not as simple as flicking a switch, we do realize that – but I’d really like to get your feedback on how you see the industry evolving. Please use the comments box to share your experience!

*Source: www.ppai.org/inside-ppai/research/Documents/2013SalesReport.pdf

11 Responses to “Are online sellers destroying the promotional products industry?

  • hi Liz. You’re so right! We’re rethinking out operation totally hopefully to catch these buyers as they split out into the categories you describe. It is a worry but only if you stay as you are and do the same things you always did. As distributors we can sell product that are on trend and move with the trends. Eg USB /powerbanks / selfie sticks. We also have to change ourselves.
    Hope you are well and the U.S. Is looking after you.
    Lloyd

    • lizallencf
      2 years ago

      Thanks Lloyd, I really appreciate the feedback, and wish you the very best of luck! I’m heading back to the UK at the end of the year so look forward to catching up with you at PPE next year 🙂

  • Hi Liz. I found this very interesting as it is a subject I am constantly debating with my team. We are presently trying to build a model that works for promotional items. We have found one that seems to work for the other half of the business which is uniforms but promotional is much more challenging. I think the key has got to be customer loyalty and specialist advice and leave the cheap end of the market to all those online sellers who’s only usp is cheap.

  • I had a customer who decided to not distribute his “cheap” pens because they would have hurt his reputation.

    • lizallencf
      2 years ago

      And therein lies the value of a distributor-as-consultant, who can advise on items which will really add value. Thanks for contributing, Wayne!

  • Great article, Liz. I despise companies like DiscountMugs (aka: Bel Promo/Hurricane Line) undercutting distributors (they don’t like people knowing they are the same thing, but they are and have the same physical address and won’t deny it if you confront them about it on the phone). I feel that industry organizations like ASI and SAGE should ban suppliers that compete with distributors because it defeats the purpose of even joining these organizations. DiscountMugs has some of the worst reviews in the industry (so I guess end users get what they pay for.) I’ve noticed that that DiscountMugs even gives free shipping on a lot of their products to end users, but as a distributor they charge you for shipping on the same item so not only can you not compete on the product price you certainly can’t beat free shipping. Even if you had EQP with them you still cannot compete… They, and “suppliers” like them (ahem… RMK Worldwide) are the scourge of the industry and should be dealt with by industry organizations. If all of the other suppliers start doing what Bel Promo has done then it all falls apart and there will no longer be the need for distributors.

    • lizallencf
      2 years ago

      Hi Mike,
      Thank you – I personally agree with you that industry organizations have a role to play in policing the industry. Appreciably most are for-profit organizations but if they tacitly support practices that undermine distributors, without whom they couldn’t function, then they’re potentially sacrificing long-term relationships for short-term gain. I don’t have the answers for that one but it’s great to have it discussed, so thank you for raising it!

    • Dan Fitzgerald
      2 years ago

      I agree with Mike that the Industry Associations (ASI/PPAI/SAGE/UPIC/etc) should ‘ban’ direct sellers like BelPromo/Discount Mugs from the industry for their ‘wanting sales both ways’…ultimately defeating the purpose of the Distributor. If we allow these vendors to remain in the industry and operate both direct sales and distributor sales, with pricing lowered on the ‘direct sales’ side (as in the case of Bel Promo/Discount Mugs), the vendor should be pointed out and black-balled by all Industry Associaitions (ASI/PPAI/Sage/UPIC, etc). Otherwise, the Industry Associations will become irrelevant and manufacturer’s will continue to go direct whenever possible, thus damaging the industry effectiveness in the long run.

  • Very good article LIz.

    As a former distributor of over 15 years, I never worried about the online presence as I would educate my customer on the pitfalls of purchasing online. Such as when things go south, and you don’t have a go to person to contact for rectifying a challenge. Plus I had my own online store they could go to shop or browse for ideas. I was also one of the consultant style sales professionals you mention. I would constantly take business away from my competition because I dug deeper, asked more questions, listened intently and offered a greater valued added service and creativity than my counterpart.

    As a supplier currently, it amazes me how the conversation almost always starts with suppliers going direct, and believe me when I say some of our competition have facades of direct to end user businesses and while I would love to divulge all of these, it serves us no purpose.

    There is however, the other side of the story where there are many top 50 distributors and others who are venturing into the sourcing field, and bypassing the supplier network. With offices now in Hong Kong, Shanghai and India for apparel, I am awed and dismayed at the growth of overseas direct sourcing. Many of whom are customers of ours and who have admitted that yes, we are sourcing your products direct from overseas due to the commodity nature of our products. Well, heck, our whole industry is based on commodity products.

    In addition, many overseas factories are setting up shop as supplier entities, undercutting the traditional supplier chain of supply and offering our products to distributors for what we purchase them for. Several of these suppliers are represented at our industry trade shows.

    However, none can match the unparalleled award winning service, integrity, transparency, warranties and partnerships that we can offer as a US owned stateside supplier.

    So while the banter continues and suppliers get the brunt of the shame, there will be a time when suppliers will have no choice to venture into a direct selling situation due to loss of revenue from direct overseas sourcing from our trusted and most reliable customers.

    It’s evolution of business.

    p.s. our company has no desire to delve into the B2B. We have great, loyal, distributor partnerships and have worked hard to earn their trust.

  • Yes it is true, but we have to face this type of challenges according to the market needs.

  • cool website , bookmarked

Leave a Reply

Your email address will not be published. Required fields are marked *

UA-50207067-2