One of the luxuries I have at Quality Certification Alliance is access to the principals of some of the industry's top suppliers and distributors. While working on my article, I reached out to 30 key executives and asked them, "If you had to pick just one, what factor would you say represents the promotional products industry's biggest challenge to long-term growth?" The industry certainly has shown some healthy indicators of late, but there are some major changes waiting in the wings.
I wondered if the concerns would revolve around increased governmental regulations, or the breakdown of the traditional supply chain. Was it the migration of ad spend from promotional products to other platforms, like digital? How about the significant effect Millennials will have in purchasing habits as they become larger influences in the U.S. work force? There were more responses than I had room for in QCAConnect, so I thought I'd share some of them here.
David Nicholson, president at Polyconcept North America, pointed to the rise of the Millennials, calling it the "silent, but significant demographic shift occurring in the U.S. workforce. This 'Generation Y' has a far different view of the world and will represent 50 percent of the B2B workforce in 2015. They are digital natives with an approach to business relationships, expectations of their employers, loyalty to brands and purchasing criteria (to name a few), that is a marked shift from prior generations." What are the implications? Nicholson went on to explain.
"The implications include the shift to online research and purchasing within our industry, heightened focus on social accountability and product quality/safety, increasing awareness for environmental concerns, and need for more, faster and better information. The challenge for our industry will be to address these changing expectations of the Millennial generation while maintaining the value and strength of the current structure."
The risk of product failure is the primary concern of Mike Emoff, chairman of Shumsky. "I am a firm believer that a tragic high-profile product safety event could lead to potential deep governmental regulations being imposed as a result," he said. "The challenge is deeply rooted with the unqualified provider who is negligent due to margin pressure. It will be very difficult to keep it from happening, and I believe it's a matter of when, not if. We can only reduce the odds through a self-regulated model and, perhaps, delay the inevitable."
Joe Hazan, president at Overture, very much agreed with this point of view, saying, "It would cripple our ability to inspire the confidence and trust that our customers have in us every time they place an order. 100 percent guaranteed is what our industry should stand for, and that's how it should be."
Terry McGuire, senior vice president of marketing at HALO, pointed to changing purchasing habits. "The biggest threat to the industry is the potential migration of ad spend from promotional products to digital advertising," he said. "Americans spend roughly 12 hours with their eyes on some form of digital delivery system, from TVs to computers, tablets and phones. That provides an open canvas for advertisers with a relatively easily targetable audience. Digital advertising will continue to take overall spend from traditional advertising sources, like print and promotional goods. The overall advertising spend 'pie' won't grow enough to offset the loss of market share for traditional advertising mediums."
To avoid that migration, David Clifton, alphabroder's chief marketing officer, suggested, "we're one of the last 'tangible' media—the question is who/what kind of companies will be producing/delivering the media...who will continue to adapt and 'add value' as the speed of change in trends, delivery, and consumption continues to accelerate?"
Finally, Jason Krakow, vice president at Caps Direct and Dri-Duck, offered his opinion on the biggest industry threat. He believes it revolves around integrity. "Our system clearly defines distinct roles for suppliers, distributors, and end-users. The integrity of each player in the supply chain—remaining committed to their distinct place in the chain—has made the industry work."
Krakow continued, "When removing links in the chain, the chain definitely gets shorter and margins increase, but the chain doesn't necessarily get stronger. It's important to recognize that being in the middle of the chain forces excellence and proof of value to emerge. The urge for all suppliers to become one-stop shops certainly increases ease for the distributor, but it also forces more product to move into the market without subject matter expertise in product quality and safety. It's a movement toward vanilla and watered-down product. Our industry was built with a focus on creativity and an understanding of how each link in the supply chain could add value."
Their thoughts leave us with plenty to consider, but I would love to hear from you as well. What is YOUR biggest threat? Are you prepared to optimize for the changes ahead, even perhaps capitalizing, if one of your competitors stumbles over one of them?
Jeff Jacobs has been an expert in building brands and brand stewardship for more than 30 years. 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 is the executive director of Quality Certification Alliance, the industry’s only non-profit dedicated to helping suppliers provide safe and compliant products. Follow Jeff on Twitter, or reach out to him at [email protected].