“We will emerge from the crisis stronger than before”

Corona, Brexit, centralisation, forward-looking investments in sustainability and the digital transformation: PF Concept can look back on a turbulent year. The CEO, Ralf Oster, about change management from the home office, customers capable of learning and critical children.

Mr. Oster, what began over a year ago as a roller coaster ride is still ongoing today. How did PF Concept experience the year 2020?

Ralf Oster: In 2020, March and April were characterised by a “shockwave of surprises” and tough crisis management. We gained an overview fast and reacted accordingly regarding expenditure items, orders and working capital with a focus on liquidity. We achieved this aim quickly so that in close collaboration with the respective country organisations we were able to register short-time work or comparable programmes and reduce costs throughout Europe. As far as the outstanding receivables were concerned the customers were very helpful. In cases where the odd company was struggling, we were generous too.

What happened then in the summer?

Ralf Oster: With a good overview, good liquidity and a still motivated team we were able to soon move back out of the crisis management mode. We started to continue planning cautiously for the coming months and asked ourselves: What has changed? Are our products in demand? How can we reach our customers, when everyone is working from their home office? This is how ideas such as digital presentations, where we offered suitable products such as stationery or home office items in a targeted manner, came about. Through our production in England, we supported the British health service, the NHS, with products for the pandemic – such as mask strips made of plastic. That is how our Stay Safe collection evolved, which went on sale in Europe shortly afterwards.

Did you also place your bets on masks – the boom product of 2020?

Ralf Oster: Yes, whereby we didn’t participate in the whole hype – with good reason: We only sold masks on demand, and only those that were totally conform and certified. Especially at the beginning there was a real flood – all possible suppliers sold masks. Some of our fellow competitors stormed onto the mask business big-scale, which is proving to be a huge disadvantage now that the hype has died down, because the low demand for the core business is still a massive challenge. Our top priority in the crisis was and still is to navigate the company safely through this period with perspectives for the customers, employees and shareholders.

Which changes have you introduced to pursue this approach?

Ralf Oster: Because the volumes in our factories in Poland and England plummeted at first and then fluctuated, we had to be flexible. We reduced the temporary staff in parts, linked with the promise that they could return as soon as the order situation stabilised. In this connection, the automation i.e., via robots and the digitalisation of the processes in the factories that had been initiated before the coronavirus broke out took on a key function. The fact that we have invested extensively and permanently over the past few years has helped us enormously. A second focal point of our change management during the pandemic lay on the centralisation of PF Concept, which we have pushed forward.

Centralisation in a spatial or system-oriented sense?

Ralf Oster: Both. On the one hand we have centralised all of the processes via a software solution, we have bundled all the finances and thus simplified handling the different currencies and price calculations in Europe – which is always a challenge. On the other hand, we relocated our Asian office of PolyConcept International Markets to the Netherlands. We have restructured our business unit, WorldSource, which specialises in custom-made designs by setting up a platform and employees, who organise the WorldSource business from Europe. And last, but not least we have gained experience with the colleagues from the country offices with regards to home office work, efficiency and a continued personal customer address. In many countries we are thus now working with hybrid models, partly at office, but frequently from home offices, in the cases where this is what the employees want and where it is possible.

A direct result of the pandemic and the changing work philosophies in other words?

Ralf Oster: Precisely. And we have ascertained – for example through surveys – that many employees welcome this. Since activities like marketing, finances and logistics are already centralised anyway, most of the sales staff already operate from home and customer service works excellently on a digital basis, this change process is logical. We have created a work-from-home protocol for the whole of Europe, according to which we provide employees with resources and equipment and have asked them to work from home wherever possible. In addition to this we have recruited an external HR coach, who trains all of the regional teams and at the same time finds out, where the new tasks and challenges for the respective executives lie. It doesn’t work completely without meeting up. When necessary, the teams can meet up in an office at any time. This works very well for all of our colleagues and also for our customers.

And the field sales force – has it been put on ice?

Ralf Oster: No. Our sales representatives throughout Europe were on short-time work in-between, but we had a “Task Force” in every country, which worked normal hours so that communications took place nevertheless. The sales representatives are still not travelling yet, but they use digital tools that we have developed intensively, such as training courses, presentations, the PF Academy, personalised eCommerce marketing, the personal catalogue, etc. In this way, we have in some cases more contacts, which are above all much more efficient overall.

What about trade shows as a sales platform? PF Concept already strongly reduced its presence at trade shows prior to the pandemic.

Ralf Oster: That will also be very selective in the future as well. If a Country Manager wants to take part in regional trade shows, he has to implement the budget available to him as efficiently as possible. However, our regional executives are in the meantime very critical. Because the level of efficiency and reachability at many trade shows has been very low for some time. Customers are expecting direct as well as digital products and information more and more frequently. We have been observing this trend for years and have placed our resources in the further development of our services – not in trade fairs.

Instead, you rely heavily on digital channels. What role does your web portal play here?

Ralf Oster: A decisive role, that is why we also further developed the portal in 2020 turning it into a highspeed functional tool. It is not merely a webshop, it is much more – it provides masses of information, videos, product training, furthermore all available certifications can be found on the site. On top of this, the portal contains tools for visualisation and enquiries, live chat modules and digital catalogues. PF Concept has many customers, whose annual turnovers are only low and irregular, but who always come back and buy, so they form an important share of the business. You can find answers to all questions you may have in the Store. This makes everything much faster and more efficient. What’s more, the fact that we hardly have to speak with customers on the phone to fulfil their wishes, saves time and was particularly beneficial for us when the sales department was working short-time.

Does the customer journey really end in a business transaction? Many webshops in the promotional products industry still serve more as a shop window rather than a source of revenue.

Ralf Oster: In the meantime, between 65% and 80% of the incoming orders on the main markets reach us via the web portal. The aim was always to set up B2B shop with a B2C shopping experience that makes it as easy as possible to place an order and also satisfy the claim “you get what you see”: Our visualisation tool not only shows the actual, customised product, but also says at the same time whether the colours are right and whether the logo is suitable for the respective customising technique as it is. It is clearly visualised to the user in which positions the logo can lead to unsatisfactory results for certain products and customising techniques. We are the only company to offer this service so far. Since in this way physical release samples become superfluous in almost all cases, the delivery times are of course reduced and the reliability strongly increased especially for follow-up orders. Naturally, the customer can always still decide to request a physical sample.

You offer promotional products distributors the opportunity to “switch over” to your system – with which advantages?

Ralf Oster: We offer a turnkey webshop that functions according to the “Plug & Play” principle. Promotional products distributors can thus offer our entire portfolio immediately. All they have to do is add a margin and – of course – sell. Which they can focus on completely, while we take care of the rest. That’s how everything comes together: When the customer notices that there is an improvement and that he is appreciated and doesn’t have to keep making telephone calls to conclude a convincing business transaction, he says to himself: “Wow!” We want to share this experience with more and more customers.

The different customers are at different learning levels as far as the digitalisation of the customer service is concerned. Has Corona accelerated the learning process?

Ralf Oster: Yes, our figures underline this clearly. The digital adoption rate has risen significantly within a few months and we are investing further. It is a neverending evolution process and why is that? Because the whole business is becoming more digital. There are still people working in this business, thank goodness, but thanks to the digitalisation they can concentrate on the essential aspects.

Your latest, significant digital investment was taking over the British print-on-demand specialists, T-Shirt & Sons, in March 2021. Why did you take this step in spite of the challenging times?

Ralf Oster: Because we believe that print-on-demand is the trend of the future. The market is experiencing two-digit growth and has been for years. T-Shirt & Sons grows permanently every day too. We have been contemplating for a long time how it is possible to reduce the minimum order quantity to one item and still remain profitable. In order to be able to access this dynamic market as a – for our industry – first mover and also satisfy highquality demands, the logical consequence was to purchase this know-how and with it a direct position on the market. The acquisition increases the complexity on the one hand, but on the other also the chance for us to cover a bigger portfolio and diversify the risks – not only in Europe, but also in America. We can add our products to the line-up of T-Shirt & Sons and integrate our printing and IT competence without our platforms competing with each other. On the contrary, the offer of T-Shirt & Sons predominantly addresses eCommerce platforms. We are currently checking how we can offer our distributors the infrastructure of the new subsidiary too so that they can sell to their customers in the B2B sector. We have already received very positive feedback to this additional offer from large distributors. Then priceaggressive strategies like the ones some of our rivals are following, will no longer play a role, the decisive factors will instead be reliability, selection and quality.

T-Shirt & Sons is primarily a significant player on the British market. This acquisition means you are further expanding your presence in Great Britain, after already taking over SPS – today PF Concept UK – in 2017. How do you assess these moves with regards to Brexit?

Ralf Oster: Our investment strategy is paying off. If we hadn’t begun to establish a British subsidiary in 2017, we would have clearly lost market shares in the United Kingdom. As it is, we are one of the largest suppliers on-site. We produce “made in the UK“, operate our own warehouse and own printing shop, are initiating the same automation process in both Poland and Great Britain. We believe we are well-aligned, have been able to optimise our lead-times and are also observing a more positive mood in Great Britain, because the companies can and want to take a pro-active, forward-looking approach again.

Nevertheless, on the one hand import goods have to make their way to Great Britain and on the other hand products that you manufacture there have to get to the mainland. Have you had to combat logistic problems in the face of the new customs border?

Ralf Oster: The route into England is less problematic than the way out. It was particularly difficult in January, because the British Government hadn’t got the customs processing off the ground yet. In the meantime, we may not be able to talk about normal delivery times yet and some of the forwarders are not yet 100% geared up for the new situation, but the interplay between the logistics partners and the logistics system at PF Concept UK has already improved greatly. All of the cogs should be interlocking that well soon that products coming from England should only take one to two days longer to arrive than goods that we deliver from within the EU.

What developments do you predict for the British market?

Ralf Oster: I am convinced that Great Britain will be able to generate more growth than the rest of Europe this year. A large share of the population is vaccinated already and the Bank of England has improved its growth forecasts. In spite of all concerns regarding British politics and Brexit: The Corona timetable seems to be working. Because many British companies are already looking to invest more again, there is more spirit of optimism among our British sales representatives than in the rest of Europe.

What is your forecast for the pan-European promotional products sector?

Ralf Oster: At the end of 2020 we presented a recovery plan to our shareholders, which assumes that it will take at least two to three years for our industry to surpass the level of 2019 again. I think we will register slightly positive changes before the summer and hopefully move back into the growth mode again from the end of the summer onwards. The psychology, a better mood, the progress of the vaccination process and events being able to take place again, play a major role here.

Will the promotion business with favourably- priced give-aways – once a huge market – be able to return to its former size in the near future?

Ralf Oster: No, that will take a while, because some of the markets have sustained long-term damage. We have been observing a shift in the product categories since the start of the pandemic already: away from lanyards, favourably-priced ballpoint pens and co., moving more towards gift items, stationery, home office, home & living. This will continue. The themes health care, hygiene and prevention will remain important as well. It will take a long time for sales markets such as trade fairs and events or tourism to return. They really will have to start from scratch again. We can count ourselves lucky that we have different risk diversifications in different markets and that we offer a wide range of products, rather than being a specialist in a single segment. In the clothing segment for instance, we have been able to register slight growth again over the past few months. What’s more, we have adapted our product development and our line-up to include more functional products that provide the recipient with a true benefit and which he thus uses for a longer time span.

The question of the sense of purpose and long-term usage of products brings us to another issue: Sustainability. Is the topic taking a back seat due to Corona?

Ralf Oster: No, on the contrary, it has become much more relevant during the Corona crisis. In the meantime, the users are deliberating carefully about what they buy and we also have to take this into account in the B2B sector. Our industry has, as we all know, come under criticism. We now have the opportunity not only to talk about sustainability, but also to act and provide measurability.

Do you have any examples here?

Ralf Oster: Yes, for instance the complete – i.e., including the customisation – GOTS-certified textile collection that we presented in October 2020. The GOTS seal (Global Organic Textile Standard) is generally considered to be the highest standard in the textile area. By having the customisation certified too, we have gone a step further in the direction of credibility. We have undertaken similar efforts to ensure a more sustainable alignment across the entire supply chain in all product areas. Our recycling items are now certified according to the Global Recycled Standard (GRS), we are currently working on a FSC certification for paper products. In a pilot project in the factories in England we are presently testing circular processes with self-produced drinkware items. In the scope of our Roadmap for Sustainability we have laid down what we can and what we can’t do (yet). The current 20% to 25% share of new products that are sustainable is to be increased up to 100% over the next three to five years. “Historical” products that don’t satisfy this claim are to gradually be replaced. We have now clearly defined goals regarding the product selection, suppliers, certifications, compliance and packaging. And our claim is to be ‘best in class’ because: What we do here in Europe at PF Concept, serves as a blueprint for our parent company, Polyconcept, in the USA. Because the theme will become of huge significance in America as well.

Where do you currently rate PF Concept in the sustainability benchmark compared to your competitors?

Ralf Oster: I enjoy testing this on my children. They are already grown up and very critical in terms of sustainability. I ask them whether they find us or our products credible. They then tell me where we have to improve and where we are already on the right track. I think as far as certifications are concerned; we have reached the highest standard in the industry. Not one of our categories doesn’t have a sustainable focus. It is the same with sustainability as with all of our other big projects: We do what we announce we are going to and we do it thoroughly.

Plans and intentions are a tricky theme in times like these: Companies are being forced to rethink everything and carry out some fine tuning. What is your resumé of the past months from a management point of view?

Ralf Oster: Together with our employees we have reached a point which allows us to operate from efficiently again. I am thus very satisfied with and proud of our staff, because it is not easy to run a company from home offices. We talk to each other a lot; it feels like I have a lot more meetings than ever before in my life and sometimes I’d be delighted if we had a power cut (laughs). I am also glad that at the same time we have been able to get so many new, disruptive things off the ground too, that we had the opportunity to invest further. If we hadn’t been as strict and as focused – and didn’t have such a good team – we wouldn’t have got this far yet.

Some people would perhaps add here: It is easy to say that with the background PF Concept has…

Ralf Oster: That’s right, we are a private equity-driven and performance-oriented company, but we are at the same time also service-oriented and we provide our customers – our most important stakeholders – with massive support, not only during the current fight for survival. Many companies of a wide range of alignments – big, small, family businesses or not – have been hit hard in our industry. In this connection, our strength is how fast we can adapt as well as our concentration on and consistent implementation of necessary change processes to make us agile, resilient and thus fit for the future. I am thus convinced that we will emerge from the crisis stronger than before.

// Till Barth spoke with Ralf Oster.

photos: PF Concept