Promotional merchandise pricing – what’s going on?

LighthouseThe promotional merchandise industry has been severely impacted by the COVID-19 pandemic.

No events, the closure of hospitality, and non-essential retail coupled with disruption in supply have pushed many companies to the edge. Many clients have reduced, or withdrawn marketing budgets until the future seems more certain.

As the sector emerges from the most challenging period in its history, its long-term survival seems to depend on innovation.

What’s come down in price?

The prices of products, already in stock before and during the pandemic, have come down. Importers and wholesalers are discounting in an effort to liquidate existing stocks. Warehouses are full, cash flow has been disrupted, and physical space is needed for new product lines.

Face masks, sanitisers, and other associated personal care products are now all over-supplied. Pricing, for these items, has crashed.

Many local printers, embroiderers, and engravers (the guys who brand the imported stock) have seen a huge reduction in turnover. They are forced to operate expensive machinery which has to be located in commercial premises. Their business model relies on a consistent volume of production. Many cannot afford to discount as they operate on such tight margins to begin with, but some are offering free delivery or no origination charge.

What’s gone up in price?

Prices for new products are higher than was envisaged. Pricing for the replenished supply of existing lines has also increased. In short, if it wasn’t in stock before COVID, it is more expensive!

The cost of some raw materials has increased, or at least has been volatile, during the pandemic. Labor capacity was reduced for a period, either due to local lockdowns or because factories switched production to other types of products such as PPE.

Most notably COVID’s disruption of the global supply chain has significantly impacted shipping costs. There has been a shortage of shipping containers (many are full of PPE and stuck in the wrong place) and some seaports have been short-staffed. Airfreight capacity has been reduced as a proportion is carried in the holds of passenger planes. Put another way, canceled passenger schedules mean less freight capacity. All this means that shipping stuff from A to B now costs more.

Brexit has created some minor import delays but more cost for the exporters. Getting products into the U.K., from centralised E.U. warehouses, is now much more complicated and, predictably, that complication equals cost. Brexit is expensive.

So price volatility and general Inflation is set to make quoting and budgeting more problematic for everyone.

What next?

The sad truth is that many merchandise, event, and associated suppliers will not survive the next 12 months.

The events industry is sure to rise from the ashes and may even be stronger and more innovative than before. Changing attitudes to air travel (and higher prices) might push clients to create a greater number of more localised events. Maybe the ‘event tour’ will become more common, taking the message to the audience rather than expecting the audience to fly in their thousands to one central location to hear it. This would harm the massive multiple hall venues but benefit the smaller ones.

Many merchandise wholesalers and importers have been strategically naive in their over-reliance on Chinese production. Changing the ‘China’ mindset will take time. Sourcing a wide range of products, with the right eco-credentials for the right price will take years. Those suppliers who don’t recognise their vulnerability in this area will surely fail. Yet the challenge of weaning ourselves off of Chinese production, and environmentally damaging products, also represents a tremendous opportunity.

Brexit and COVID have been a double-whammy for the merchandise and events industry. COVID will pass, but the true economic impact of Brexit may not become apparent for a decade. It’s widely accepted that in the medium to long term, the U.K.’s growth (excluding any COVID bounce back) will be lower and debt much, much higher.

Conclusion

  1. Old stock and PPE are cheap, new stock is more expensive.
  2. Delivery of new stocks has been delayed, but the situation with supply chains is improving.
  3. It will take years for the promotional merchandise sector to recover from the effects of the pandemic.
  4. The sector has to reorganise its supply chain in light of geopolitics and climate change.

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