The Spanish industry, which was deeply struck by the crisis, but which like so many European markets, is slowly managing to overcome the economic low with inventiveness and entrepreneurial spirit.
The history of the promotional products industry in Spain, one of Europe’s largest economies, took a similar course as in many other European countries: Something like a promotional products market already came into being in the 1950s and 1960s. Calendars, writing instruments and smokers’ accessories were implemented as advertising media in a more and more targeted manner rather than just as gifts and Fyvar, one of the oldest European promotional products associations, was already founded in 1953 (see box). Initially, the products were manufactured locally or were imported from Europe, primarily from Italy. The first companies started importing from the Far East in the 1970s. By the end of the century, one of Europe’s biggest promotional products markets had evolved in Spain. Major players in the import sector such as ITD (which together with Impex and KCF later merged into Mid Ocean Brands), a high number of manufacturers – for instance in the calendars, writing instruments, plastic injection-moulding, zinc die-casting (Zamac) and textile (Frottier) sectors, as well as internationally renowned distributors characterised a market that was otherwise highly fragmented. The latter continues to have an effect up until this very day and is also reflected in the association landscape: For example, there is an association purely for suppliers – Aimfap – and Fyvar, a general association. Fyvar distinguishes between suppliers and distributors, but also has divisions for printing companies and service providers. “There is a high number of printing service providers on the Iberian market,” explained Rafael García, promosistem. “Many distributors prefer to work together with such specialists and don’t tend to have the items imprinted directly at the suppliers. On the other hand, many printing service providers sell promotional products themselves.”
The same applies for the Iberian Peninsula as for nearly all European markets when it comes down to putting a figure on the size of the market, primarily due to the fact that there is no clear definition of the profession: “Unfortunately, there are no reliable current figures for the Iberian market. Since there isn’t a unique tax identification number for our profession, it can’t be clearly defined either,” explained Gabriel Moëse, Chairman of Fyvar. “So, the figures can only be estimated, instead of accurate values being determined. In 2005, Fyvar carried out a survey, in the course of which an estimated overall turnover of 1.2 bil. Euros was determined for the Iberian market, i.e. in consolidated form approx. 750 mil. Euros.” The above-mentioned survey estimated the number of promotional products distributors in Spain to be around 5,300 and the number of suppliers to be approx. 350.
Whereby it must be noted that these figures are from 2005. Due to the economic crisis, Spain experienced a downturn from 2008 onwards that affected the economy, society and of course the promotional products industry. The consequences on the daily business were dramatic: “In some cases, the business literally came to a standstill. The Spanish customers simply stopped placing orders,” said Cristina González, Clipy. Xavier Marín, Gamax, reported: “It was very tough for the Spanish industry from 2008 onwards. Many market players – including also good ones – simply disappeared from the face of the earth.” For companies, who were in a position to push their export business, reorienting their operations in the direction of other markets saved them from going bankrupt in many cases. Whereas the average export share of the Iberian suppliers was around 13% in 2005 according to the Fyvar survey, a few years later an export share of 50% to 70% was no rarity for many companies. On the other hand, some distributors were able to secure themselves a competitive edge through direct imports – which is far less common in Spain than elsewhere: “For us the fact that we import directly provides us with an advantage, because the majority of the distributors work together with local suppliers,” reported García, for instance.
Changes have also occurred on the trade fair scene: Reed Exhibitions, the organisers of the most important industry platform to-date, the Expo Reclam in Madrid, withdrew from Spain in 2012. Together with Ifema Madrid, the two associations Aimfap and Fyvar took the initiative and launched the Promogift, the concept of which is aligned with the economic framework conditions, as Aimfap Chairman, José Carlos Sánchez Muliterno explained: “After the Expo Reclam was discontinued, we thought about which trade fair model could be sustainable. The concept of uniform stands presented by us involved significantly lower costs – many of the exhibitors returned to this principle and the trade show has expanded since its premiere. In recent years at the Expo Reclam, it had turned into a real competition as to who had the largest stand and who had the best design. This became problematic against the background of the crisis.” The empty aisles that were common at the Expo Reclaim during the worst years of the crisis were just one indication of how badly the Iberian Peninsula was hit by the crisis. “Overall, the market must have shrunk by 50%,” estimated Moëse. “Today, we are assuming that the consolidated turnover of the industry is between 300 and 400 mil. Euros.“ Not only the size of the market, but also its structures changed, as Moëse continued: “In Spain, the market is strictly divided up into suppliers and distributors. However, the crisis has in some cases led to these structures becoming diluted.” “The problem is that it is very simple to enter the industry,” added Sánchez Muliterno. “Particularly in times of economic instability, many unprofessional players try their luck on the promotional products market, many of them go bankrupt just as quickly. This leads to a high fluctuation.” On the other hand, the crisis led to a certain process of selection: “A market shake-out definitely took place”, said Marín. “In addition to this, the Government carries out a lot more controls, for example regarding taxes and legislation.”
Extreme price sensitivity
Extreme price sensitivity, which hallmarks the business more than anything else, is one of the characteristics of the market that was further aggravated by the crisis. Price is the number one criterion: “The customer wants a low cost solution for everything,” stated García. “We always make it clear to the Northern European suppliers we collaborate with that the prices here are not the same as in the North. But the general level of quality is lower too and unfortunately not all EU product laws are taken seriously.” There is a clear reason for this, as Sánchez Muliterno explained: “If nobody is prepared to pay for quality, the result is that the level of quality drops.” This is why the Spanish market is difficult territory, especially for foreign players. Moëse therefore recommends companies to inform themselves in detail before planning to enter the market or to do so via a local representative: “Spain is a very special, demanding market that is very competitive and highly fragmented. Comprehensive knowledge of the peculiarities of the market are necessary to penetrate it. Many companies didn’t take this into account beforehand and failed as a result or wasted their investments. The best approach in order to achieve satisfactory results for a modest financial outlay is probably to collaborate with a Spanish company that functions as a representative.”
Those, who want to take the plunge in spite of this, should take the languages barriers, cultural peculiarities and tough competition into account, as Alexandre Gil from Paul Stricker made clear: “If you want to operate as a client I think the Iberian market has got a lot of potential to offer. However, for any foreign supplier, honestly speaking I would say that the Iberian market is a ‘nightmare’. Prices are crushed and margins squeezed, operating without conceding credit is simply impossible and trying to develop a customer basis without a team fluent in Portuguese and Spanish reduces the potential market down to only 10% of it. There are strong local players in terms of stock delivering non-printed goods in 24 hours and printed goods within a week. Also the collections offered locally are totally tested in Europe as modern collections and totally adapted to local taste in terms of colours.” This is why the international players should also take the “Mediterranean taste and lifestyle” into consideration. Even though “promotional products Europe“ continues to grow together in terms of product trends – writing instruments and electronic accessories such as power banks are also bestsellers in Spain – tastes do differ and there are other focuses, as Marín described: “Weather defines culture, and the culture defines habits. In a region, where one can more or less run around in a T-shirt from April till October, T-shirts are naturally popular promotional items – the same applies for other summer products such as hats, etc.” In turn, high-quality products are less popular – Gil: “Iberia is such a price sensitive market that the premium segment of promotional products, which represent a significant share of the North European countries, is almost non-existent in Portugal and Spain. Expensive products – especially without an associated brand – have a difficult life in Iberia.”
The latter is true because many of the industries that were high spenders up until a few years ago, have severely cut or completely stopped their consumption of promotional products – such as the finance or pharmaceutical sectors, which according to the Fyvar survey were still the best sources of turnover in 2005. “Unfortunately, we can no longer rely on the ‘goose that lays the golden egg’, i.e. the pharmaceutical industry,” commented Moëse. “This has led to diversification and in turn to less clarity. Last but not least, the promotional product is still considered to be the ‘poor and ugly step-sister’ of classic advertising in Spain too.” The tourism industry, which makes up around 11% of the Spanish GDP, still remains important. “There are no reliable figures regarding the tourist sector’s share of the industry’s turnover,” noted Moëse, “however, when one considers the enormous share of Spain’s GDP that is achieved by the tourism industry, it becomes obvious that the tourism sector and those industries dependent on it also play a major role for the promotional products market.”
During the crisis years, the tourism industry was a stable ‘anchor’ and was the only branch of industry able to record positive developments. However, since 2014 there do seem to be far-reaching indications for – at least cautious – optimism. And even if many Spanish promotional products companies managed to keep their heads above water with the export business, everyone would of course welcome an upturn in the domestic market. “Of course, we would also like to do more business on the domestic market – it is less complicated and we have a competitive edge because we produce locally,” Marín said. “We all need our market to be strong. However, there does seem to be reason for optimism since last year. For about twelve consecutive months, our turnovers at the end of each month have been better than in the same month of the previous year. This wasn’t the case for the five years previous to that.” Indeed, the Spanish economy is growing more strongly than ever since 2007 – the Government has forecast a growth rate of 2.9% for this year and next, which is almost double the growth rate of 2014. “The unemployment rate is declining, the market is experiencing a slight upturn and since last year one has been hearing optimistic voices again for the first time,” reported Joan Pera, Arpe, and García added: “The customers are gradually becoming more open-minded and the order books are looking better. However, the average order volumes have decreased significantly. This is something we have to live with, because we have to develop our company now and can’t wait until the pre-crisis status returns.”
However, it is still a long road, as Sánchez Muliterno estimated, “The trough of the crisis may have been overcome, but we still have a long way to go to reach the pre-crisis level and the challenges don’t get any easier.“ An ongoing theme: The conflict about Catalonia’s status – an unofficial, non-binding public opinion poll was held on the topic in November 2014. An overwhelming majority of around 80% voted for an independent Catalonia – not without good reason: In the course of Spain’s strong centralisation, in the opinion of many Catalans, Spain’s strongest economic region, which boasts the second biggest harbour on the Mediterranean, i.e. Barcelona, is still being left out in the cold by the Government in Madrid. Furthermore, many people from Catalan consider the national transfer payments to be the reason for the high debts of the strong economic region. “When I was at school around 15% of the people were in favour of Catalonia’s independence,” Pera said. “Today, it is around 50%. If the Government in Madrid doesn’t make extensive concessions soon, we are certainly heading towards independence.”
The results of the Parliament elections in the autumn of 2015 are awaited with trepidation. Whereas the Conservatives are fearing a ‘Greece effect‘, the Euro-sceptics from the new Podemos Party are celebrating successes everywhere, where the public is fed up with the rigorous cost-saving policy of the Government. “Austericido“, death by saving, is how a neologism describes the price for the economic upturn – if this price becomes too high for the majority of the Spaniards, the economic recovery could be curbed again very soon. So, the Spanish industry remains exciting.
photos: iStock (2 ); Thinkstock (1)
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