According to a survey, which was published by the British service providerSourcingCityat the beginning of the year, the overall turnover of the British promotional products industry totaled around 754 million Pounds (approx. 933 mil. Euros) in 2011. This figure is calculated in a similar way to the comparable estimations in other European countries, based on the amount of money spent by promotional products users – in comparison: according to the estimations the overall turnover of the German industry in 2011 was 3.46 billion Euros, in France the industry turned over 1.4 billion Euros in 2011. If the British industry association, BPMA, had its way this amount could be higher: The Chairman Neal Beagles announced at the start of the year that the British market could reach a volume of 3 billion Pounds (approx. 3.71 billion Euros). An ambitious target – especially in view of the general economic climate on the island, which is still unsettled: Only a month ago the British media announced thatGreat Britainis experiencing the first double-dip recession since the 1970s. This is what a recession is called when the gross domestic product (GDP) displays negative growth after having originally showing positive growth after one or two quarters. Whereas the analysts were expecting a modest growth of 0.1% to 0.2%, the British economic performance in the first quarter surprisedly recorded a decline of 0.2% in the first quarter of 2012, which has placed the market that had suffered immensely from the effects of the crisis in a precarious situation: In 2008, i.e. before the crisis, according to Sourcing City the annual turnover was 913,800 Pounds (approx. 1,132,600 Euros), then since the beginning of 2009, 360 distributors and 138 suppliers had to go into administration because of the crisis. According to the survey there are currently 1,797 suppliers and 2,041 distributors inGreat Britain.
“I think it is fair to say the market remains massively challenging and tough,” reports Gill Thorpe, Managing Director of the promotional products agency, The Sourcing Team, and long-term BPMA board member. “Most of us feel we have been in a recession for so long it feels like the new norm. There has been some optimism amongst businesses since January and that demand for manufacturing is said to be holding up and beginning to translate into more jobs and investment. But big challenges remain from the global economy, the stability in the Euro zone, high oil prices and fragile confidence among businesses and households.“ Alistair Mylchreest, CEO of Sourcing City, is of a similar opinion: “The market is doing OK, but OK is flat. There is still a lot of work to do. Leading economists are still predicting another two to three years of hard times.”
The everyday working life of the suppliers is consequently still full of challenges. “There is a lot of competition and price-fighting, so it is important to have an alternative and unique offer,“ said Richard Wood, Managing Director of plastic specialist High Profile. “Lead-times are also getting shorter and shorter.”
Professionalism is what counts
As in other parts of Europe many suppliers are additionally faced with the challenge that they are having to put down the money up front for their distributors, because the majority of the British distributors are small firms: Of the 2,041 distributors named in the Sourcing City survey only 129 achieve an annual turnover of over one million Pounds (approx. 1.23 mil. Euros), in the case of 1,714 firms the yearly turnover is less than 500,000 pounds (approx. 619,000 Euros) – the consequences are clear. Many British distributors have no assets, payment deadlines of 60 days are standard. Shrinking margins further weaken the cash flow situation. The catalogue business, which is on the decline in other countries, is still booming inGreat Britain. Several flourishing catalogue groups divide the market up between them, and some suppliers are of the opinion that the high popularity of the full-range, but at the same time impersonal and unbinding catalogue reflects the mentality of many of the distributors.
Luckily, this doesn’t apply to all British promotional products agencies, many of them are extremely creative and are thus improving the image of the promotional product in the classic marketing mix, because as in other parts of Europeenormous resources are lurking especially in classic advertising. “The challenge is definitely for promotional products to be taken seriously round the marketing table,” says Mylchreest. “The only way this will happen is by professional distributors being taken seriously and if the true value and ROI of products is properly presented and understood.” Gordon Glenister, Director General of the BPMA, adopts a similar position: “We have to fight our corner and raise our game – marketers will invest in more promotional products with proof and professionalism. That’s why our industry must share great case studies and independent research. The truth is, we have one of the best advertising mediums compared to other media. The problem is that the industry doesn’t shout it out enough. I often remind our members we are in the ‘advertising business’ – it just happens to be a pen!”
In a survey on the implementation of promotional products that was published last autumn, the BPMA took an important step in the direction of professionalisation. The survey not only demonstrates the high popularity of the promotional product and the long length of time it stays in the possession of the recipient, but also proves that promotional products can provide a higher ROI (return on investment) than radio spots and posters and are on a par with the ROI of TV spots and print advertisements. Furthermore, the survey lays down a contact price (cost per impression) for the promotional product, as has been the case in other advertising disciplines for some time already. On average this contact price is 0.003 Pounds inGreat Britain(approx. 0.0037 Euros).
According to the BPMA survey, it is precisely the standard products, which enjoy high popularity inGreat Britain, especially the USB stick, followed by electronic items, writing instruments and cups. And the top-sellers of theSourcingCityproduct database are – in this order: Bags, writing utensils, writing cases, key pendants. According to Mylchreest many users still tend to be conservative as far as the application areas are concerned: “I am definitely seeing an upward trend of onpack promotion, which is great. But apart from this, buyers are taking the traditional and safe routes for their campaigns.” So there is a lot of upward potential for a market that is on a par with other European markets in terms of its creativity.
As many industry insiders confirm, there is a current trend for “Made in theUK“. Glenister: “At a number of regional meetings held by the BPMA, certain members said that they had been expressly asked if the products were made in theUK. As the manufacturing costs inChinacontinue to rise the tide is turning back towards home manufacture, both from a cost and corporate responsibility viewpoint.” Thorpe shares this opinion: “I think the recession has had a longer term effect on how we and our clients buy. Certainly, for us and many of my peers there does seem to be a growth in local spend and moving away from some of the Asian procurement. At the beginning of the recession clients were tending to buy very last minute and in lower volumes, leading to less opportunity to buy directly inChina. In addition, I think that generally there has been a move towardsUKmanufacturing with factories making a more positive approach to the right type of manufacture.”
The year of the mega events
The trend towards “Britishness” is particularly being spurred on by two mega events, which will be occurring inBritainthis year: The Olympic Games inLondonfrom July 27 –August 12, 2012and the Diamond Jubilee of the Queen in June. “I think these two great events have also driven a real renewed sense of Britishness – a true desire to push for ‘designed’ and ‘made inBritain’,” said Thorpe. A trend, which is also being reflected in the retail sector.
There are divided opinions as to whether the two events will have a direct effect on the annual balance of the British promotional products players. “The benefits from the Olympics will be virtually zero,” predicts Mylchreest. “The brand guidelines are so strict and well policed, very few will benefit from the Olympics. The Diamond Jubilee will definitely be a welcome boost though and a lot of distributors have reported good interest and orders here.” As is the case with all sports events that are bound by strict sponsor guidelines, the industry will also profit indirectly from the Games in London, as Thorpe assumes: “I imagine there will be significant activity the closer we get to the Games with all the local businesses wanting to get the most out of the Games including retail, restaurants, hotels and transport for example.” Thorpe rates the potential of the Diamond Jubilee higher: ”From our own experience there has been increased demand for ‘commemorative’ type items along with street party products – we do love any excuse for a party here in theUK.”
The high popularity that devotional items enjoy on the island and the high number of corresponding suppliers is symptomatic for one of the striking traits of the British promotional products market: It is very limited in large parts of the island – namely compared with other European countries there is very little export. “TheUKmarket is very parochial,” comments Mylchreest, “with only a small minority of distributors gearing up a pan-European operation, and equally a small amount of suppliers making it a core element of their operation. You would think there was an upward trend in a recession, but this does not appear to be the case.” Glenister is more optimistic: “This is a great time to promote British business with great innovative products and printing applications. Some of our members seeNorthern Europein particular as an important growth channel, manyUKsuppliers now employ multi-lingual staff or support in these areas.” The BPMA has been encouraging its members to export their goods across the channel for years and was even able to win over the British Chamber of Commerce: “The support from UK Trade & Investment has clearly helped,“ reports Glenister. “In fact over 17,000 Pounds – approx. 21,000 Euros – in grants were spent at the 2012 PSI show.”
Giving the industry a boost
The BPMA has also been active in other areas over the last few years. For example the association wants to double its budget for market surveys, and above all it is pushing an ambitious education programme. The BPMA Academy that was established several years ago – according to Glenister more than 200 promotional products players have successfully completed the course to date – is to be further expanded: “We have a huge programme of investment in training and education to accelerate this even further and we will be launching this later in the year,“ reports Glenister.
Small steps on the way to an ambitious goal. There is no doubt whatsoever that the British market has a lot to offer. The following pages present several examples.