Viewpoint: How I See Our Industry Evolving Post-COVID-19


With all the opinions coming from what I call the “ivory tower” (upper management and owners who sit around the table discussing what they think), I thought it would be interesting to share a few candid thoughts based on my experience of being an owner, partner and multi-million-dollar producer with three different promo companies over a 22-year period.

There are many great minds in this industry, and it has been a really fun ride learning from them and mentoring some of them as well. Since I am in the fourth quarter of my career, my passion dictates sharing some candid thoughts based on the realities we face right now. The summer of 2020 will forever be remembered as the time when everything changed in the promotional products industry.

Trade shows: Private suite, invitation-only meeting events were already eating away at show attendance before COVID-19, but the lockdown will not be the final nail in the trade-show coffin. However, the after-effects of COVID-19 will forever change the number of trade shows and the number of people attending, and force our industry to adapt to change driven by technology. Online shows via Zoom and Google will become the new normal followed by the private suite events with trade shows lagging way behind. I believe shows like the PPAI Expo will become stronger than ever because they offer everything from education to networking to opportunities to acquire or flip companies. It will be interesting to see the show floor at the PPAI Expo 2021 when the dust settles. My instincts tell me there will be a solid core group of suppliers that will still rent booth space. There will also be an increasing number of switch-hitters and mid-tier suppliers that will use hotel suites and meeting rooms to leverage their opportunities—a trend well underway prior to COVID-19. While I believe the Expo will be safe, my prediction is that about 75 percent of regional shows will disappear in less than three years.

Suppliers selling in the promo industry: Over the next two years, COVID-19 will have a dramatic effect on outside sales personnel. There will be a huge increase in the utilization of inside sales personnel, with technology driving online meetings that used to be conducted by outside salespeople at lunch-and-learns and in distributor offices. Our industry will pivot in a way that many of us hoped would never happen. In short, over a three-year period, about 80 percent of the outside sales personnel on the supplier side will likely no longer exist. Efficiencies and lack of disposable capital will drive a new path to sales, and we can expect to see suppliers starting to sell products online to distributors sooner rather than later. Money will drive that, too.

Distributors selling in the promo industry: “Location, location, location” used to be the key phrase in real estate and office space, but that’s been replaced with remote, remote, remote—especially for inside and outside salespeople. Like everything else happening in the COVID-19 business world, technology will be the driver. There will be fewer quality distributors that can handle large enterprise accounts, so that section of the business will be locked up by the top 20-25 distributors that have the capital to play in that arena. This has been a declining market since the Great Recession. The bigger question is who will be calling on the millions and millions of small- to mid-size businesses that need promotional items and apparel? New niches will emerge driven by Millennials and Gen Z’s, which will be primarily web-based. Internet sales, like the 4imprint, DiscountMugs and Vista Print models, will adapt and remain as some of the largest distributors. It will be interesting to see how their acquisition models evolve over the next 12-24 months.

There will be more significant changes coming with internet sales leading the way. Online retail sales of promo products and apparel will explode with the creative flair Millennials will bring, including fresh shirt designs that will translate to hard goods as well. Almost all of these sales will be transacted online by consumers in their teens to 40s (at least for now). It would also not surprise me to see more than 100,000 new distributor websites pop up in the next couple years. Technology will drive sales moving forward—forever. Say bye-bye to the trunk-slammers; they are officially history thanks to COVID-19.

Mergers and acquisitions: I have been waiting for an elephant on the supplier side to acquire an elephant on the distributor side, or vice versa. The market is primed for that to happen. When the dust settles with acquisitions over the next two years, I estimate an industry of about 250 distributors will account for 90 percent of all sales. There will probably be around 20,000 small, niche distributors that make up the other 10 percent, and if their niche is good, they will make plenty of money. We are already seeing investors buy both suppliers and distributors and that will increase, as will emerging companies that do both. Market conditions are ripe for dramatic changes. A whole new set of best business practices is coming, driven by the evolution of technology and the lack of depth among companies with deep, deep pockets to combat it. If there are 1,000 legitimate suppliers left after COVID-19, that would be shocking. Expect to see thousands of switch-hitters and importers, and less than 100 that offer what is needed to be a one-stop shop for distributors.

Over the next 18 months, we will see where the industry really is; significant change will occur that fast. The last time I invested my life savings into a fledging online distributorship was in 2009 at the height of the Great Recession. Most people thought I had lost my mind. Thankfully, the venture exceeded all of the partners’ expectations. Today, there are similar opportunities out there for savvy entrepreneurs and investors to take advantage of. I expect a new wave of business ownership will emerge, doing what they always do, and creating a very fractured market until, of course, big business likes what they see and starts the whole consolidation process over again. Are we ready for the next ride? We won’t have to wait long to find out.  

Share your opinions and your own predictions by adding comments to the end of this article.

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Jim Franklyn has been vice president of business development at Swag Promo, an Atlanta-based hybrid distributor, since December 2017. He is responsible for co-managing revenue growth and talent acquisition. From 2009-2017, he was a partner at InkHead Promotional Products, an emerging online platform, where he helped the company grow from $3 million to $12 million over an eight-year period. Franklyn started his promo career as the co-founder and owner of Award Excellence Marketing in Hollywood, Florida, where he grew revenue to $4.4 million in eight years. He has been a multi-million-dollar producer at all three companies and has coached close to a dozen million-dollar-plus producers since 2000.

Read time:
words
Comments (0)
Leave a reply