Episode 236: Counselor State of the Industry Report with ASI's Michele Bell and Nate Kuscma

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. SkewCast is the official podcast of Common Skew.

Each year, ASI, the Advertising Specialty Institute, reveals insights from their State of the Industry Report. It's the single most researched report about the promotional products industry. It provides in-depth analysis on multiple topics, including trends and growth, challenges in manufacturing, industry verticals that possess the most opportunity, and a whole lot more. The State of the Industry Report, or what's known as the SOI, serves as a benchmark and bellwether for trends. It allows both suppliers and distributors to create KPIs against industry averages and really helps catalyze plans for change. ASI releases this report every July, and last week we held a webinar featuring two of the architects behind this report, Michelle Bell and Nate Kuzma. Michelle is ASI's Vice President of Editorial, Special Events, and Education. With more than 30 years of journalism experience, she's been with ASI for 25 years and is the recipient of multiple Neal Awards, known as the Pulitzer Prize of business journalism. Michelle also covers the overseas promo markets extensively, attending shows around the world to profile for ASI's content platforms. Nate Kuzma is ASI's Senior Executive Director of Research and Corporate Marketing. Nate joined ASI in March 2014 and has nearly 25 years of domestic and international marketing research experience. He received his MBA from Rutgers University and prior to ASI worked at Dow Jones, MetLife, and Educational Testing Services. And hi friends, I'm Bobby LeHew, Commonsku's Chief Content Officer, and we're honored to republish this webinar conversation with Nate and Michelle here on the SkuCast. Today we cover a wide range of topics affecting both distributors and suppliers, including the number one challenge to our industry's health, which verticals are growing in their usage of promotional products, how to analyze your business mix to ensure greater diversity, labor challenges, services distributors provide clients, and trends in margins, profitability, average order size, and a whole lot more. But before we get to that interview, two quick mentions. We launched preregistration for our incredibly popular event called SKUCon, held in Las Vegas on January 8th. SKUCon is the industry's one-day conference for innovators, explorers, and dreamers in the branded merch industry. It's an all-day, high-octane event meant to kick off your year right, and it always sells out quickly. So I encourage you to hop on over to skucon.com to preregister so that when tickets become available, you'll be able to secure yours for you and your team immediately. Also, one more event I want to tell you about, and this one is an event hosted by our friends over at BrandChain. It's a really unique experience called Brand Together. I invited Matt Bruno, BrandChain's Executive Vice President, to hop on Skucast for just a few minutes to tell us about this special experience. Here's Matt.

So Matt, tell us, what is BrandTogether?

BrandTogether is a gathering of leaders in brand solutions. Really, it's a chance to bring together our entire community where distributors can learn from one another and understand the unique solutions that are in our industry today, all while raising money for a good charity.

Who's the ideal audience for this?

Well, there's— I think there's really two that we like to look at, right? There's the distributor teams. You know, we have this great partnership with Margaritaville Orlando where we get to offer our attendees cottages, and the cottages have 2, 3, or 4 bedrooms in them with their own bathroom. And so we see distributor companies to bring down, you know, leadership, operations, customer service, sales. Then we're also seeing some buy-up from distributor individuals who want to share a cottage with, you know, peers that they haven't seen in a long time so they can, you get the experience together, almost like their own team or their own, you know, peer group. It's cool.

And tell us about that, that format, the venue. It's like these little cottages all together, built obviously for good collaboration and strong collaboration.

Yeah, so it's really a unique property. It's at Margaritaville in Orlando, Florida, and they have a traditional resort that has about 150-200 rooms in it where, you know, if you come to the event, you can get a singular room if that's what you'd like to do. But it also has this little village of cottages in it, and it's a street of these 2, 3, and 4-bedroom cottages. And the way we have it set up is, again, as you mentioned, our distributor teams can get a cottage and each one has their own bedroom, but they also share like a family room and a kitchen. And some of them might even have a pool or a game room. But also some of our supplier partners, only about, it's a limited opportunity, it's only about 20 or so, can also have a cottage. And they're converting those cottages into showrooms/meeting rooms. You kind of envision this community, really the essence of what Brandchain is. That's our aspiration, where you can have distributor teams amongst their supplier partners trying to build better relationships.

Really feels like this event embodies the vision of Brandchain and where you want to go with things. And is that— obviously this is done very intentional in terms of the location and the interaction and things like that. How do you feel like it embodies your vision for Brandchain?

Yeah, I mean, you already, you just hit it on the head, really. I mean, you know, when we became Branch Chain, if you will, you know, our mission statement is really to, you know, be serving the distributors who recommend, source, and execute brand solutions for clients and the suppliers they partner with, right? And the biggest word that we always share internally and with our leadership is community. And this property, as we just discussed, I mean, it literally is a community where we can put distributors in teams who can meet with their suppliers to partner with them to deliver it, right? So it's like it really embodies specifically, you know, our aspirations as an association.

Yeah. What can attendees expect different from any other event that they might attend?

Yeah, so I mean, clearly the village, as we've talked about, is the most dynamic experience of this.

You know, they can—

we're going to dedicate the morning to education and the afternoons to being in this village, and we're going to provide them with a solutions map that takes them through the village And at every stop along the way, they get a chance to, you know, have like a passport book filled by the supplier. And when they turn that in, we're going to donate $25 per passport book to a local charity there in Orlando. And our hope is to, you know, get up to about $4,000 or $5,000 for those charities. And then of course, you know, we want to incentivize the people that will be there as well. So we're going to give out, you know, random winner a large cash prize of some sort. So you can kind of think about the mornings are going to be this really cool education, and then the afternoons are going to be just community building, checking out new solutions together with your peers, and being in a cool, unique setting.

And do you have some speakers you want to announce?

Yeah, so we are excited to announce that Scott Stratton, who is the 6-time bestselling author on marketing and brand experience, is going to be our keynote and it's going to kick off the conference for us. And then we're also going to have some peer-based sessions. The rest of our education is going to be really peer-based and interviews and panels, and we're going to do some, some stuff on print on demand, e-commerce, logistics, customer experience, that type of stuff. And then, you know, as a sort of first touch here, we're also excited to announce that Jay and Jeff of Tacos with Jay and Jeff are going to come down and do a live session for our attendees as well as some interviews along the way, so it should be pretty fun.

That's a lot of fun. Finally, where can we get to register?

That simply is brandchaincommunity.org. You can get everything you need there, and, uh, yeah, we really hope to see, uh, everybody out there. I think it's going to be a really fun, exciting way to, to celebrate as a community.

Congrats to you and the board and everyone who has been laying out this vision for, for BrandChain, and it's good to see you again, my friend, and I wish you the best.

I appreciate it. It's always great to see you, Bobby. Thanks for all you do.

You bet. Today's episode is brought to you by Commenscue, the work-from-anywhere platform that powers your connected workflow, enabling you to process more orders and dramatically grow your sales. To learn more, visit commenscue.com. Now here's my conversation with Michelle and Nate.

Our guests are two of the primary masterminds behind this report. They have a whole team, both of them, uh, to help do this— Michelle Bell and Nate Kuzma. Michelle is ASI's Vice President of Editorial Special events and education with more than 30 years of journalism experience. She's been with ASI for 25 years, is the recipient of multiple Neal Awards, known as the Pulitzer Prize of Business and Business Journalism. Michelle also covers the overseas promo markets extensively, and she leads an incredible team of journalists at ASI. Nate Kuzma is ASI's Senior Executive Director of Research and Corporate Marketing. Nate joined ASI in 2014, has nearly 25 years of domestic and international marketing research experience. Received his MBA from Rutgers University, and prior to ASI, worked at Dow Jones, MetLife, and Educational Testing Service.

So welcome, Michelle and Nate.

Thanks for doing this again.

Thanks for the great intros.

Michelle, first, let's talk about the Counselor State of the Industry Report and what it actually means in case there are folks that are new to the business or brand new to experiencing the report for the first time. Give us some background, and we're going to call the State of the Industry Report the SOI from here on out. So if you hear us refer to it, it's going to be called the SOI. Talk about its background, its place in the industry, and how many years you've been producing this report.

Yeah, sure. Thank you. So we actually did the first one in its very first iteration, which looked way different than it does now, in 1977. So, you know, we're coming up on 50 years soon. So it's been, it's been quite some time. And again, it was very, you know, when I go back and look at that old version, Bobbi, we have a, we have an actual library of all the old counselors. In the editorial department. And it is, it's like an archive, right? It's such a rudimentary version compared to what we have now. And a lot of that is, you know, Nate does such a fantastic job collecting all of the data. So even back then though, it was meant to kind of give everybody a snapshot of the temperature of the industry and help them benchmark against their competitors, help them kind of plan for the next coming months and the coming year. So in that regard, it's remarkably the same. Where it's gotten better and more sophisticated complicated is in the amount of how we collect the data and how Nate slices and dices it, which is, you know, phenomenal. We— everything we do, and Nate certainly could speak to this, is based on the surveys that he sends out to the industry. So he sends out a supplier version and a distributor version, very different questions obviously for, for each one. And based on that data, and, you know, we make sure that we're getting a good sampling from the smaller companies in the industry up to the top 40. And, you know, based on that information, you know, Nate kind of presents it to my team and the editors, and then they, they really dig into it and give it a lot of nuance and color by talking to people in the industry and saying, you know, here's what the data shows, what are you seeing? And that's great, report on it in that way. And then of course in the SOI issue is also the top 40, which, you know, many people— it's interesting, we— I'm able to see through analytics, you know, the top 40 throughout the year is one of our, uh, most 10, uh, top viewed stories. So throughout the year people are looking at the top 40, right?

Right. Right.

And then of course our award winners from Chicago. But really the meat of it is Nate's analytical data that we kind of dig into.

Yeah.

Yeah. Before you get to the analytical data, tell us where we can find the full report. Is it si-central.com? Is there any other link? That's it, right? Is it si-central.com? And if you're new to the business, when you hear Michelle refer to the top 40, that's a list of the top 40 suppliers and the top 40 distributors by revenue in descending order of size. And so, Nate, what percentage of folks respond? Like, what, what time frame does this cover? Give us a little more of the, the research person's details behind something like this. Sure, sure.

So I'll try not to bore people with the research, with the actual methodology, but I'll do— but I can't guarantee it. So what we do is the study is fielded every year in Q1, right? Last year, putting aside 2020 and 2021, which was just an odd year all around, the survey is always fielded from like, let's say, February all the way through April of the year. And what we're doing is we're covering the prior year. All right, so as relates to that though, what we do is we get a, we get a sampling, we get a sampling from distributors and suppliers. This isn't a census, right? We're not going out there, we're not interviewing everybody. If everybody wanted to respond, sure, but you don't actually need that from a research point of view to get the statistics that you need. So, but we get a very large sample. So from distributors, we're getting feedback from, um, over 1,000 distributors every year, and we're getting feedback from around 300, a little bit over 300 suppliers every year. So that's a really good sampling. Normally, once you get above a certain number, 200, 300, you're normally set, but we go way above that. And then what we do, depending on what types of questions we are, we weight the data. You know, in some cases we, every distributor and every distributor and every supplier is created equally, right? We're talking about what percentage of distributors have e-commerce business, right? It created, it's done equally. But when you start looking at things like number, you know, revenue of products sold or revenues by industry, then we actually have a proprietary system where we weight the data so that the distributors who are the biggest ones have a little bit more say, a little bit more pull in those numbers. So we're really trying to present as comprehensive a view of what the industry actually looks like as is possible.

Yeah, when I was a distributor, the SOI was my favorite issue. I read it cover to cover. I used it as a way to benchmark progress, to compare against competitors. I used it as a bellwether for trends. I would review the top 40, especially distributors, and I would hop onto every single one of their websites and compare and contrast our messaging and branding? And how else do you see distributors and suppliers using this info that we'll talk about today?

Okay, well, I wish all of them did exactly what you do because that is a very smart and strategic way to use the data. I think, you know, in my experience talking to people, that they really are looking mainly at products, markets, and any sort of issue that's bubbling up because they want to know how their competitors are reacting to it. So, you know, I know we're going to get into this, Bobby, but for this year in particular, a lot of it has to do with order accuracy and on-time delivery. So I think they're looking at, at that for trend modeling. You know, is that going to continue? What is that going to look like for the rest of the year and into '23? But, but really what they're looking at is, I believe, you know, what are the healthy markets, which markets are kind of flattening out, what's emerging that they would have not anticipated? Because the nice thing is with all of this historical data, you can go back. I mean, we have— we don't go back online to 1977. But we do go back a significant amount of time online. You can kind of look back and compare and contrast the past couple of years online, and you can kind of chart and see what's going to trend.

Right.

I just threw up the slide for the overall promo industry sales and revenue. Folks can see that. Okay. And Nate, did you want to comment before I move on to my next question about that?

Yeah, just talking about this. So this is, again, this is something that we do every year. Now, we actually do this on a quarterly basis as well, right? So this is not just done once a year. The SOI is primarily done at a fixed point in the year, but we actually look at how the industry is trending throughout the course of the year, at the end of Q1 all the way through the end of Q4, which is our end-of-year wrap-up. And I mean, you know, for the longest time we had a pretty straight line up. It was going at a, you know, 4, 5, 6% increase. And then, you know, now that was basically from 2009 all the way through 2020 with very few in, um, variations from that. That was in 2020, it drops 20%, you know, that's just— that's— but by the way, it could have— Michelle and I have talked about this before— it could have been certainly worse than that.

Um, the fact, right, if not for PPE.

Yeah, yeah.

And let's get into that. Yeah, let's get into that, because when we saw the dip in 2008, 2009, I think it was significantly worse percentage-wise. The industry reached an all-time high in 2019 with nearly $26 billion in sales. We all know what happened in 2020. Now with a 12% increase, we're bouncing back. Did anything surprise you about these numbers? Was the increase even more significant given maybe lighter PPE sales?

Michelle, I was surprised by it. You know, I shouldn't be because this industry is nothing if not resilient. I mean, honestly, right? You know, so maybe I shouldn't have been surprised, but I was only because the deficit was so great to make up. And I knew we could tell that a lot of companies weren't selling as much PPE. What I didn't anticipate is that, you know, events started to come back more quickly than, than people thought they would, and, and there came the spend along with So I think what you see there are certainly other factors that they can address. But, you know, I think events came back faster than we thought they would. Maybe not size and the scope, but, you know, concerts, not just events like trade shows, you know, concerts, charity runs, things like that started to come back.

Yeah.

You know, what about you? Go ahead. It's funny, I don't think anything surprised me because I've been doing my job, as you put it so eloquently, 25 years, which seems like a really, really long time at this point. That I'm not, I don't go into these with any preconceived notions because I just know, I know I don't know. Right. What I think I saw was though, that some industries are bouncing back faster than others. And that's really what I think is driving this. Michelle mentioned trade shows and events. That's certainly one. So much of our industry is driven by those two specific things. And I mean, some of the challenges we're going to talk about later on, those, those are directly impacted that this industry is facing. But it was really just that I was surprised by the number in this respect. We had approximately $5 billion in PPE sales in 2020 in our industry. Right. That dried up pretty significantly for the better part of '21. So I think that when you see a 12% increase, it's a little bit misleading. Right. Because, yeah, you saw a 12% industry increase in sales. But if you take out the PPE sales, it was significantly greater than that.

Yeah, that's a great point.

It would have been down to 15 15 and change billion in 2020, if not for PPE. 2021, the vast majority of that $23.2 is promo and apparel. That's what that is. So it was, it was a really stark reversal.

Yeah, that's amazing. Let's talk a little bit about averages. Order averages are increasing back to healthier numbers, just order averages in general, which to me, order average was always a really good resource to know as a distributor for operating costs. So how much of our team is, is, is committed to order by order size. But 2019 was an all-time high for margins at 36%. What, what were your thoughts, uh, Nate, as you look at these, these numbers coming back?

My thoughts are that the industry is recovering, it's recovering healthy, and I have absolutely no idea what these numbers are going to look like after 2022. So, um, right, it's You know, a trend— one year doesn't make a trend. I always, I say that to all of my colleagues in editorial. One year is not a trend. Two years is barely a trend. So what I think you saw was when 2020 dropped so significantly, and like, this is even— I think that this kind of undersold how rough the industry was in 2020. You know, people were able to maintain, they were able to maintain their business. You didn't see a large amount of businesses in the promo industry going, going under, thank God. Right.

Yeah.

So they were able to maintain, albeit with, with lower margins and lower sales. But what I think you see here is it rebounded and it rebounded fairly significantly. But looking forward to 2022's numbers with everything that's going on, I don't necessarily know that— what do I think this trend is going to continue to go up and continue to improve? But I don't really know. Yeah.

Michelle, on the average margin, I don't want to go back too far because it's irrelevant, but we have seen that margin fluctuate, dropping down. And then am I wrong? Correct me if I am, that we might be seeing margins aside from last 2020, we might be seeing margins increase possibly.

Yeah, I think, I think that that's exactly right. I think that people have gotten smarter about how they, how they sell their promo. And I think being more strategic in their pricing for sure.

Yeah.

You know, one thing that I think is really interesting when I look at the top 40 numbers, right. So the top 40 distributors, Bobby, You know, they, they, their 2021 sales were up 8.8%. But they were also up over '19, 2.4%. So at this point, they're beating '19's numbers, which were phenomenal. So I think that that's a wonderful bellwether for the resilience of the industry.

Was there anything that surprised you about the top 40 compared to the overall industry growth?

You know, look, some of the companies that had the biggest growth the previous year because of PPE, you know, you saw them kind of level back to where they normally are. I think, I think that some of the smartest ones pivoted in really creative ways. So look, Polyconcept, for example, had a very large drop in 2020. They went down $315 million because they did not lean into PPE. Yet they rebounded. Last year because they went into other areas. They leaned in heavily to sustainability, which was a really interesting trend, a really interesting decision, I think, where to spend their, their cash and their resources in an area where other people are kind of pulling back. And it's paying off for them, I think. And, you know, they've leaned into a lot of big brands. And, you know, where people kind of shook their head and said, wow, that was a miss on their part to not go into PPE, I think they made some good choices last year.

Yeah, agreed. Nate, any surprises for you in the top 40 numbers?

No, not particularly. I mean, that I got to admit, that is straight up Michelle's wheelhouse. She knows, she knows the industry from that perspective as well as anybody I could ever imagine. What I will say, though, is when you look at it, it's, you know, there's, there's going to continue to be seen growth in the top 40. There's going to, you know, we've seen over the last 5 years more mergers within top 40 companies.

Yeah.

And, you know, I don't know what the changing financial aspects of that go with cash getting much more expensive. But that'll be an interesting thing because bigger companies tend to, tend to keep getting bigger.

Right. We'll talk about that in just a minute. I want to remind everyone listening too, if you have a question, please throw it in the chat. We'd love to ask Nate and Michelle any of your questions, any comments, please share them with us as well. Let's talk about this next section, Nate. What were the biggest changes in— were there any significant changes in categories sold?

Yeah, PPE, right? Like, seriously, because what happens— this is based on a pie chart, right? Pie chart adds up to 100%. That's one of the, uh, you know, rules of pie charts, right? Um, in 2020—

you're such a nerd, right?

All right, he was gentle on us with that one though. Go ahead, Nate.

Um, it's—

that's the— that's not one of the worst things Michelle ever calls me. Um, for— to be clear, so, but in 2020, PPE accounted for quarter of that pie. 25-point-some percent of that was in PPE. So what you saw was almost all of these other numbers here declined in 2020 simply because it was being sold into masks, it was being sold into hand sanitizer, it was being sold into other types of PPE. That's just where the money was flowing in unprecedented numbers last year. Yeah. So when you look at '21, what you saw was a rebounding a lot of these. And what You know, there's a lot of categories here where you see growth. T-shirts is almost always the number one category. It is the— right, I, you know, when you look at this, and here's another data point which I'm sure Michelle will laugh at me at, but every percent here that you see is equal to about $230 billion— $230 million. So when you start looking at these numbers, t-shirts are accounting for well north of $3 billion a year in sales. So you're looking at a really, really, really large part of this industry with a lot of dollars behind it.

Other—

one of the categories that we see a lot of growth that was— and this has been consistent for the last few years— is drinkware. Drinkware is one of the categories where you've seen a lot of growth, and I think that's a lot due to, um, a new premium segment. You know, it used to be you get plastic water bottles, you get throwaway cups. Now you're talking about fairly high-end gear with much higher price points. And I think that that's something we're going to continue to see. And there's been movement even in the last week looking at that, that ASI reported on.

Yeah.

Nate, is this data simply from the research reports that you send out to folks that are participating, or is this also from your ESP data that you serve up?

So this is, this is primarily, this is almost exclusively from the research. This is looking at— okay, what we do is we ask those 1,000+ distributors that answer the data, that answer the survey, to break out their their sales for the year into category spend. Yeah. And then what we do is we, we weight that. This, this is some of that data that is weighted so that we know we can estimate that.

Okay. Before I move on, Michelle, anything else on categories?

You know, well, first of all, Nate, Bobby, as you know, is dead on about drinkware. I mean, think about the things over the past 3 years. You know, people were interested in their health. They're interested in sustainability. They want to stay hydrated. They wanted to be outside in the fresh air. All of that ties into drinkware. There's also the cachet of the retail brands that have come in. There's two other categories and they don't get a lot of attention, but I wanted to bring, bring attention to them because, you know, I think that they were kind of the unsung heroes of the past two years, which is desk and office accessories. With more people working from home, you saw a lot of people kind of stocking up their home, their home office area. So in the industry, some of those items started to bubble up as popular things that got put in kits, you know. And the other thing is houseware. You know, people again spending time at home cooking, doing their own do-it-yourself fixing of things. So these are directly tied to the way we all changed our lives and the way we changed living during COVID So they're very typically smaller categories, but I think they got a lot more attention and a lot more kind of robust sales put, put their way since COVID Yeah, even when you're looking at an industry, you know, a category that might be 3.5%, right?

That's like $800 million. Like, that's right. That's significant, right? Right. It's a big amount of cash.

Yeah.

I'm glad—

really glad you pointed out that distinction. Let's talk a little bit about the industries, because this is actually one of the reports that I would look at the most, because I would look at— take my top 10 client list, my top 10 client— 20 client list, and I would compare it against what industries are being sold on average in the industry and see where we're missing. We might have been heavy in energy or we might have been heavy in finance, but we weren't selling any educational clients. Whatsoever. Were there surprises or any changes in the, in the top industries, Nate?

Yeah, I mean, so last year was the first year that we've been doing the study in probably 6 or 7 years that education was not number 1 in 2020. 2021, it bounced up. Education is a monster in this industry. I mean, the top 2, education and healthcare, make up almost a quarter of the industry. So you're talking about a very, very large percentage. But what you see here is, you know, The other ones that are somewhat surprising, I don't know if construction is all that surprising. Construction is one that has been growing and it's been very, very strong. I'm always surprised when I see manufacturing that high though. And that's not because of any knowledge I have or don't have about the industry. It's the general narrative in America is that manufacturing is dead, that much manufacturing business, not that much manufacturing goes on. There actually is. America is still still one of the largest manufacturers of goods in the world. And that's sort of played out in here when you start looking at 8% of the overall industry sales or $200 and over $2 billion, I guess, of the industry is sold directly into manufacturing. Huge, huge category. And that continues to grow.

We'll talk about Made in USA in just a minute. Michelle, any other thoughts on that before we move on?

No, I would just— Nate, if you could explain, because I always used to ask Nate, like, why don't we see trade shows and events on here as a specific piece of the pie. And when Nate explains it, I think it's really interesting the way he kind of breaks it out. But Nate, if you can kind of walk them through that.

Sure. It's not— I mean, bluntly, like, it's this little— it's this closet industry that literally goes across all of these, right? That's really what it is. So when I used to work in education, I used to go to education trade shows, right? When I worked out, you know, at finance, you know, at MetLife, I used to go to finance trade shows, right? So that's really what it is. So all of these, those, so, you know, how would you categorize those? Well, I would categorize those sales as being used within those industries. They're not being used in a trade show industry. That's part of the education industry. It's part of the finance industry. So that's why you see that, because yeah, when events went away in, you know, Q2 of '20, then all of a sudden that, that's why you had that, that, that shrinking of the overall pie, right? But the overall, the segments and where they're being used, that's why you don't see that in here, because that's not an industry. Those are means and those are things that each of these industries participates in.

I have a random question with no slide to support this, so we'll just have to tackle this on our own. And I'm going to stop sharing for just a second.

What is e-commerce?

Typically in the past, I have seen e-commerce be a really prominent part part of the SOI report, and it's still in there, still an important part. Is it just me? Are we not seeing a substantial increase in e-commerce business in our industry, or am I wrong? Nate, what do you— what is your take?

I was hoping you were going to go to Michelle just because I love Michelle's response. The answer to this, um, no, you don't. Like, you haven't seen a lot of growth. Um, you know, while the rest of the world and a lot of the, you know, consumer activity in America is flowing heavily into e-commerce, whether it's Amazon or other sites out there. Our industry hasn't. You haven't seen a large amount of growth absent a few very large companies moving into the e-commerce space, you know. And I think there's still a misconception about what e-commerce actually is.

Yeah, true.

And I'm going to turn that one over to Michelle because—

Yeah, and Michelle, and Michelle, we also— there was a time where when the SII was reported, many of us thought, oh no, here comes the takeover of e-commerce in the industry. And we just haven't seen that. What are your thoughts on this? You've watched this for a while.

I think what people, what a lot of people in the industry said is true. I think that this industry is so sticky in its details. You know, it's, unless you're an entity, a larger entity, or an entity, an entity like a Swag.com who kind of figured it out, right, that it's very hard to do with all the back and forth. And especially now with with staffing shortages and things like that. It's not easy to do in this industry. So we don't mean to imply that this industry has kind of, to use one of Mark Graham's favorite words, that this industry is full of Luddites or that they're slacking off. It's not that. It's this industry has its own peculiarities and nuances that makes it very difficult to do e-commerce. That said, Nate and I kind of look at the numbers every year and kind of wish that this industry would start to, to get better just to make their own lives easier, you know, and yeah, kind of devote time and resources to that.

Yeah, we are seeing an increase in our numbers in Shops usage, and I think that's where, that's where there's a distinction probably between the retail e-commerce like 4imprints versus the Shops, the experiences that many people are creating. So I think we're seeing like two primary categories there. Nate, any plans of like breaking that out at some point?

Yeah, no, I would love— I mean, there very well might be, and that might be something like throughout the year we do only field one OSRI, but we also do, do field some supplemental research, and that's a good idea. I haven't thought about it like that, but that's definitely something we can look at.

Yeah, um, let's talk a little bit about distributors and their growth. Now, you mentioned something really insightful to me, Michelle. You said that this, this report is the tale of two industries. What did you mean?

So, and, and here's where I'm going to talk to, you know, Nate has all this wonderful wonderful data, and sometimes what I'm able to bring is the anecdotal stuff, right? Because I spend every day, all day, taking calls from people in the industry, which is great. You know, that's, that's why I'm here. But they're a— they share things with me. And, you know, a few months ago, Bobby— so as Nate said, the data that we're looking at is by and large based on 2021. But, you know, because I talk to people in real time, I started hearing a couple months ago, you know, from some of the top 40, by the way, saying we're starting starting to see some things slow down. We're starting to see some of our biggest clients scale down their orders, less expensive product, smaller order quantity. And I thought, that's interesting. So I asked Sarah Lavendusky, who's on the editorial team, to talk to people in the industry, to put out a query and see, you know, what's happening in the industry right now, because we know what happened last year, but right now— but I asked her not to speak to anybody on the top 40. I've got those people. I know what they say, you know, right? I'm all the time. So So she came back to me and she said, I hate to tell you this, but everybody's having like the best year they've ever had.

Right?

What is happening that, you know, I've got the top 40s saying— and I truly believe in, you know, we shared with you, we have newer up-to-date data that we can certainly delve into. But I think, I think that the top 40, because of the sheer size of their clients, they see things in the beginning of the, the tail that sometimes takes a while to whip through the industry. And I think they're seeing indicators first before the rest of the industry right now. Having been in Chicago 2 weeks ago, everybody I talked to, best quarter they've ever had. Q2, you know, I mean, it was phenomenal. Yet I talked to people in the top 40 and they're like, yeah, let me tell you 5 things that we're seeing. And it's like very different.

Yeah.

Nate, anything else we want to add before we move on?

No, it's just concern, right? I think that, I think that you can, you can have a great quarter and you can have, you know, a solid first half of the year and still have concerns. And, you know, we actually have some new data that we can actually talk about that has actually not even been released yet, I don't think. Right, Michelle?

Yeah, yeah, yeah. Let's talk about that right now, just since you brought it up. Year to date, what numbers have you reported since you report on this quarterly? Let's talk about what's happened in Q1 and especially here just in Q2 and also your counselor confidence index report, what all that means. So where are we at year to date?

Yeah. So I'll take it. I mean, what we, what we see is that the first half of the first quarter, right, was up just north of like, you know, between 5% and 6%. That's really where we saw that year over year. We're talking Q1 '21 versus Q1 '22. What we, what we saw though in the second half, the second quarter of the year rather, you saw sales up just under 15% for the industry.

For distributors.

Yeah, right. That's a big number. That is, you know, if I would— if that— if you're talking pre-COVID and industry going up by 15%, there's something wrong with the data, just to be completely honest.

That's how big that is.

Well, what is— what's interesting, and you don't always see this here, we have something called the Counselor Confidence— Counselor Confidence Index, right? The CCI. And what that does is that measures how distributors are feeling about the overall promotional products industry, right? If you think about it, normally sales go up in a quarter, especially this big, that index would move up as well. It's like an industry goes down, well, sales will go down, confidence goes down. You didn't see that. What you saw was sales increased by this huge amount year over year in Q2, and the index dipped a little bit. I've never seen that before as long as I've been working at ASI. What that tells me, just to be blunt, is Everybody sells. Everybody had a really strong Q2, and we saw this in Chicago, right? It was a really strong— everybody was enthusiastic as hell. But what that tells me is there's, there's concerns out there, and the concerns out there are such that I haven't really seen in the past. And let's be clear, there are new concerns within our industry that up until recently we haven't had to worry about. So I think that that's just something to keep an eye on as we look forward to the second half.

Yeah. Michelle, aside from some of the concerns we're getting into about supplier challenges and things like that, what, what does that Consumer Confidence Index mean to you?

So some things very specifically, Bobby. I mean, what it tells me is that people are looking at worrisome economic indicators. They're looking at rising prices, they're looking at inflation, they're looking at are we in a recession, are we not in a recession? But mainly, I don't know if you saw the Wall Street Journal article from yesterday where they talked about CEOs of certain companies, you know, pulling the reins back in on promo spend specifically. This ties directly to what I was hearing from the top 40 guys, because what they were telling me was, we're seeing clients pull back on things like employee hiring packages. You know, they're putting out— they're hitting pause on campaigns that have to do with bringing new employees on board. Well, why would they do that? Because they're worried about if they're going to have to kind of tighten their belts going into Q3 and Q4. So that all kind of lines up to me. I said to Nate, the Q2 data is great. It's the Q3 data that I want to see because I think that's going to be very telling about our industry. So, I mean, Bobby, look at everything that we hear every day in the news. You've got monkeypox, you've got elections coming up, you've got Ukraine, all of this stuff. And I think the main thing is the financial aspects. It's the economy, it's the inflation, all of that, right? And I think that, I think that clients are starting to be more judicious and more, um, stingy in how they're— and in their spend.

Yeah. I also want to remind folks, it's a great time to pause and say, with all this report, with all the news that we have to present to you today, your business and its specifics is very important. Like, your industries that you serve, you might have a completely— Michelle, we've seen this through the years where distributors have an amazing year and and some distributors are having a terrible year. So be sure you take what we're saying today in context with what your book of business looks like. The other thing I want to mention, and I don't want to go off on a rant on that WSJ article yesterday, Michelle, because you and I have had some experience working with some of these headlines and titles before, but there are two things that, um, that happens. The companies that roar out of a recession typically spend in two categories: marketing and advertising, and they spend in technology infrastructure investments. That's the according to Harvard Business Review and many research firms out there. So we have to take things like that Wall Street Journal report and take— go back to our clients and present positive information. There's my rant. My rant's over. It's the only time I rant.

It's not a rant. Look, there's proof, Bobby, that the smartest companies, you know, when there's a recession, even in 2008, the companies that did the best spent more on marketing. They leaned into the market, you know?

Right.

That's a fact.

Right, right.

Um, let's talk a little bit about something I, uh, I was curious that it's possible we could see on the distributor side our first billion-dollar distributor in the industry within a few years. Does this present anything to you? Is this a greater divide? Is there— does one group have a distinct advantage over the others? Are they serving different markets? Michelle, start with you and we'll move to Nate.

You know, the, the billion-dollar threshold doesn't bother me as much as the, the contraction of the industry with the mergers and acquisitions. You know, I think, yeah, I think more competition is great. You know, and I think that when you get— look, if you look at the top 40 supplier list, I think there's only, you know, 6 that are privately owned. You know, that's a hell of a thing and vastly different than when we started doing that list when I first started in the industry, you know. So it's not the billion-dollar mark that bothers me so much. I am more concerned about the prevalence of mergers and acquisitions.

Right, Nate, let me—

let's—

so we can move on, let me ask you a different question about what the report is revealing in terms of sustainability items and then made in USA. Did we see— are we seeing a significant increase in either of those categories that the numbers are revealing?

What you're seeing is that there's strong demand for those categories, but whether or not that demand is actually translating into a strong— an equally strong growth in sales of those categories, I think are two different questions. Like, there's— let's talk about sustainability primarily, right? There is a demand amongst younger consumers, amongst consumers that are in the Gen Z and the, you know, millennial categories, right, that they value the sustainability of products. They also put a higher— you know, as we— one of the other studies we put out every year is the ad impression study. We have data that shows that they put a premium on those products when they receive them. And so end buyers like it, right? And then you have the people who— end users rather like it. Then you look at the end buyers that are talking to distributors. And what I hear is, yes, they're requesting more and more environmentally friendly products and sustainable products from distributors, but they can— but there's still this area where they're balking at the prices. So you always hear that they get asked a lot for these products. But then a much fewer, much, much lesser percentage of them actually turn into sales. I think the same is true with made in the USA as well.

Yeah, I think it's getting better with sustainability though. I think first of all, Bobby, you'll remember it used to be there were very few like sustainable green items in the industry and they were much more pricey. That's not the case anymore. There's, there's now a large slate of eco and sustainable products and, and the prices is much more on parity with, with regular promo. And I think, again, driven, as Nate said, by the younger buyers. One more area to look at is packaging. I mean, packaging just drives younger buyers, any buyers, crazy. I mean, you know, when you get it, when you order, when I order a lipstick and it comes in a huge box from Amazon, it, you know, right, so yeah, yeah, things like that. The market is going to drive that, and suppliers will respond as they have been. You know, you've got the top 40 suppliers, um, being asked in a friendly way by one of their biggest clients, one of the biggest distributors on the top 40 distributor list, in 18 months, just under 2 years, to come up with better ways and more, more sustainable packaging. Now, yeah, I, I love that because that's being driven by one of their biggest clients to the top 40 suppliers. Do better, do better.

Yeah, yep.

Um, Michelle, what was the number one challenge facing most distributors from this report?

Nate would know better than I would.

Nate, go ahead. Which one? What do you, what do you think it was? If, if, if sales have increased and if business is good, where do you think they're seeing their biggest challenge?

I mean, it depends on— I mean, there's, there's one big one, and that's product availability right now. Um, you have— of course, I think it was something like 3/4 of distributors indicated that they had lost sales, active sales, due to the ability to not get product in time. Right, right.

Okay, let—

okay. And in an industry like ours that had, you know, sort of fomented itself as a just-in-time style industry, and we're going to get stuff quick and we're going to order at the last minute and we're going to get this— with all of the issues you have now about getting products in, and then you start to see that being pulled back, I think that from my, from my perspective, that is definitely the biggest challenge.

But it's not inventory-based like it was a year ago. I mean, they're, they're having a hard time getting products. I think, right? I think it's—

well, let's talk about, let's talk about that now because this is probably one of the biggest surprises in the, in the report. And over 2 dozen suppliers posted double-digit, double-digit growth, and many are reporting record years. Some of this was expected as the economy bounced back, but it seems surprising, maybe even shocking, given those supply chain issues that we had. So, um, accuracy and on-time orders. I'm going to share my screen again because, um, This is a really, really tough topic for all of us to tackle, but we must tackle this topic. Um, and let me put this in perspective because this is a big problem. Accuracy problems exist with distributors and suppliers. So let me say this first as a caveat: 66% of all purchase orders today are submitted by distributors to suppliers with missing information or incorrect information. For prospective distributors, let me put it another way: of the 10 orders you'll turn into a supplier today, nearly all of which have critical in-hand dates, 6 of them will be wrong. So let me say that at the beginning so people don't think we're just picking on suppliers, right?

Having said that, Michelle, you pointed out a big danger sign.

And Nate, you saw this, this revealed in the report for our industry, one that we absolutely must not ignore. In fact, Michelle, you said it's the number one problem in our industry. It's no longer about necessarily, uh, inventory. It's the percentage of on-time orders from suppliers is consistently dropping errors are still way too high. Now, most people listening to this won't be shocked at this statistic. Michelle, why do you consider this our industry's biggest threat?

So in, in my time at ASI, 25 years, I've never seen these numbers this low. So you look at the, the percentage of orders delivered without errors, 84%, you know, it sounds not bad. If you look at it in the inverse though, you know, you've got 16% of orders in an industry where things have to be so on point and on on time and, you know, it's, it's event-driven and it's deadline-driven, you know, that's unsustainable. And you can, you can really draw, Bobby, a direct line right back to staffing issues with suppliers. They're having a hard time filling key spots. And it's not the front-end office jobs. It's not the marketing people or the HR people or the accounting people. It's the people who directly have hands-on how, how orders are produced and how quickly. So it's the people in the warehouse who, you know, if you're a supplier, you're competing with the Amazon, you know, warehouse down the street that's paying $25 an hour, by the way, for a worker, and you're trying to get people in your warehouse. It's your art department, it's your customer service team. If you are able to get people in, you then— there's a, there's a lead time to get those people ramped up and trained properly.

Yeah.

So, you know, I often, I feel for suppliers because what they're having to do, I think, made States data shows that on average, suppliers are now paying 17% more to their staff to get people in the door and get them trained. I mean, that's a big—

Wow, that's huge.

—for suppliers to sustain. So again, I think that what you're seeing is people not, you know, filling the jobs. They're not there to fill the jobs. People just being trained or not being trained quickly or properly enough yet because everybody's so stretched thin. You know, the on-time orders, look, you cannot lay that at the feet of suppliers. You know, there's enough blame with FedEx, UPS, and the Postal Service to go around. Right. Not exactly on their game either. So I think, Bobby, what struck me about these two data figures when Nate first gave me the data, I stopped dead in my tracks and my jaw hit the ground because I thought, you know, this is, this is untenable for our type of industry where things need to be again delivered. You know, you need PMS cover colors perfect. You need imprints perfect. You need things on time in hands. And these two numbers are, are big red flags.

Yeah, they're alarming because this number is going down. And Nate, where did this number come from?

Did this come from suppliers?

No, so that, that's from distributors, um, about the number of percentage of on-time orders they're getting. But, you know, here's where it gets interesting. Like earlier, Bob, you brought up the, um, reticence, I guess, of this industry to move to e-commerce, right? Well, what I think that what you're seeing here is that there's a lot, a lot of parts of this industry that are still sort of stuck in the 1980s, 1990s, early 2000s, right before you had all this technology. Like that number that you put out there about the percentage of POs that are sent in incomplete, right? What that does is that has a cascading effect because there's a, there's a, there's a time lag because of communication, right? So if I send in a PO, the supplier is going to have to I have to look at it, it's incomplete. They have to then look at it, get back to me. I have to get back to them with my changes. If that's incomplete, then you have the back and forth. And what that does is that continues to push the timeline further and further and further to the point where you need it. So what the challenge here is, this industry on both sides, right? You're right, this is not only a supplier issue. Distributors have to— there have to be mechanisms and procedures put into place to get things right in as few steps as possible without the need for exchanging of emails, of phone calls, of people who are still faxing orders in, right? You can't— that all of that, all of that is, is contributing to this.

Yeah, you're speaking our language when we get into this. And, and let me play, uh, suggest a caveat here. Um, first let me tell you what Joe Fried said. It's— he was CEO at Cutter Earn Buck, he stated that if this industry is going to get disrupted, that it will come through the technology window. What was surprising is he wasn't referring to the e-commerce window on the front end of the sale. He was talking about technology on the inside that runs our businesses. Now, as the caveat is that both CommsCue and ASI sell technology products. Okay, so that aside, this is a huge problem. We're seeing it right here in the numbers. The problem meaning technology, internal ops technology solves this problem. I think he's right. Tech is the primary way to remove much of this friction that we've been talking about and improve our accuracy. Do you— what are your thoughts on that?

I think he's spot on. I think that's exactly right. I mean, you know, I don't know if the hindrance, Bobby, has been that that's a huge financial, you know, resource for many people to have to spend on that to kind of do a complete overhaul. But I think that that would do so much to see these numbers come up if you take the stickiness out of the process. I mean, look, when we talk to people, you know, the writers on the, and the editorial team, you know, they kept hearing that things are getting bogged down in the art department, the art department, customer service, calling them back. You know, it's those areas where you're seeing things, as Nate said, come to a complete stop. Yeah.

And speaking of that, this is where suppliers are having a hard time finding good help, just to get back to that topic for one more minute. And you both have been analyzing raising these numbers. Talk to us a little bit about what this represents more for suppliers, Nate. And Michelle, you had an interesting insight into how you would advise suppliers to fix or correct this problem as best they can based on what you're seeing from an aggregate. Nate, what are your thoughts about this, what suppliers are reporting?

So when you ask— in the past, we've asked suppliers, and we're talking about large suppliers here, we're talking about those that sell $5 million or more sales. We're talking about big suppliers. What we do is, you know, normally it's price pressures, right? That's what you see. They're trying to remain profitable. They're trying to grow their profit margins. Their one largest challenge, 28, you know, over a quarter of them is hiring and retaining people. And Michelle mentioned that number earlier about how much the prices have gone up, the— that they have to pay to get new employees in the door. Yeah, it's a huge amount. And, you know, that's probably the first time it's actually outpaced inflation in a while, even though inflation's high. Um, when you actually see this though, and you, you start to— that the fact that they can't recruit people, the fact that they're dealing with reduced staff, that the people that they're bringing in have to be trained, as Michelle said, that all contributes to all of the major, all of the major problems that the industry is facing, you know, right, with distributors having to get products in time, on time, and correct. All of that All of that is just feeding into that.

Yeah, Michelle, what I was alluding to a minute ago too was the suggestion where we're seeing some reluctance on the part of some distributors and suppliers to hire outside of traditional bounds. What were your thoughts on that? Like, meaning, are we— are we— need to expand the way we're hiring? Do we need to change the way we're hiring? How do suppliers— can— how can suppliers approach this problem?

I think, I think we need to do both. I think you need to look outside of normal normal pools. I also think, you know, look, if you're competing, if suppliers are competing against people like, you know, an Amazon warehouse or a Walmart where they're, they're, you know, throwing $25, $26 per hour people depending where you're located, you know, lean into the things that we're able to do in this industry that they can't. Flexibility, you know, do your art people need to be in the office? Do your customer service people need to be in the office? Your warehouse people do. I get that. That's kind that's an immovable area. But if you can make flexibility, if you can do perks, this industry, there's nobody better than this industry as far as touting its own story. Talk about, do promotions to the industry, go to colleges, high schools, people who, you guys may roll your eyes in the back of your head at me, but nonviolent offenders. People who deserve a second chance. Look outside of the box at those areas and tout, use your own promotional skills about how great your company is, perks you do, Fridays off during the summer, all of that stuff that these big box stores cannot do because of the nature of their business. Yeah.

Let's talk a little bit about sourcing. One massive trend we're seeing with suppliers is sourcing. And how intense is the search going for products beyond China, Nate? Are you showing anything? Are we seeing any trends move away from this at all? Is it tipping the balance at all?

I mean, this is a long-term thing, right? What was it back 40 years ago, 40, 50 years ago, the US made a decision to put a lot of our production capacity into China and we did. There has to be a movement away. We saw the perils of lack of diversification with one country. And we're still seeing that now. I think we're still experiencing that now. So has there been movement? Yes, there has absolutely been movement into other countries. Michelle can speak to those for sure. But the vast majority of suppliers and distributors who import directly are still importing from China.

Yeah, it can be done, though. Here's the problem, Bobby, as you well know. Suppliers, it's not feasible for them to rip all their manufacturing out of China. It can't happen. I mean, It still has incredibly inexpensive labor, the size of the factory, the amount of factories. But think about in the 1940s and '50s, the prevalent place to import products wasn't China, it was Japan, right? Japan was where everything came from. And then we got away from that. So it's doable. It just needs to be a concerted effort. And here's the good news. I remember my TED Talk last year with the two of you where I was on my high horse about people needed to get away from importing from China. They have. Suppliers really are making remarkable strides. So that Mexico number right there, that percentage has gone up, you know, and that's one area where I really see some suppliers, if they haven't already kind of opened an outpost there, they're really delving into having factory facilities there, which I think is great. Anything that can get you, as Nate said, away from No smart business person or in sales would put 94% of their business with one client. You just wouldn't do it because it's not smart. Anything that gets us away from the monopoly of importing our products from China, I think, is smart business. And I see suppliers more than I ever have before really making an effort to do that.

Let's talk a little bit about a few topics that may or may not have hit the report, actually. And I don't think many of these have, but did we see— the reason why I'm bringing at these next topics is because they're impacting our industry too, even though they may or may not be reflected in the numbers. One is mergers and acquisitions. Michelle, are you seeing anecdotally, uh, did we see as big an increase as we would have thought through the pandemic with mergers and acquisitions?

You know, I think that people, some people, especially the smaller companies, would have loved to have sold. People got scared, right? So, you know, a lot of people reached out to us and said, hey, who can you recommend to help me? I think I'm going to sell my business and get So did a lot of those come to fruition? No, not as much. What was interesting, you know, I'll give you an example of Craig Nadell. Okay. So Craig Nadell at Jack Nadell used to tell me that he used to get calls, you know, a few calls a week looking from people to buy his company, not industry companies too, private equity. And during COVID that stopped. Nobody was buying anything. Those calls have started to tick up again. And Craig Nadell is not the only one getting those calls. You know? So there is interest in this industry, and I think it's because of its remarkable ability to be resilient and because it's so ubiquitous and effective. So I think that that's the good news and the highlight for this industry. So I think the interest is starting to come back. I think that some of the largest companies in the industry are due to maybe be flipped and be resold, who are owned by private equity. Maybe they're due in the next year or two to be sold again. So that's something I'm keeping an eye on as well as, you know, you and I spoke, Bobby, about, you know, there's kind of a leadership change almost. There's— if you look at the CEOs, let's take the top 40 again, the CEOs of the top 40 distributors and suppliers, a lot of— many of them are at a certain age where they're going to be retiring, they're going to be selling, they're looking to transition to the next generation. So you're going to see a fundamental shift in the, the demographic of this industry and who's leading the biggest companies, which I think is super exciting.

Um, we had someone ask— by the way, there's a few questions in the chat, please throw them in. If I skipped over your question, it's only because we were moving so fast through our topics we didn't have time to get back to that one again. So my apologies. But we did have a question, um, from an attendee about recession. Michelle, you've watched this a lot, you've seen this industry a lot. Nate, I want to see if you can see anything in the numbers. What are your thoughts on potential for recession and how inflation is impacting the industry? I know it's a big question, but what are you seeing right now, especially even anecdotally?

So, Nate, you want to go? I mean, I'll say— I'll start with pricing, right? So on the supplier side, you know, across the board, they really have no choice but to increase prices because you're talking about— you're talking about oil for plastics, you're talking about salaries, you're talking about shipping. So you're going to see that go right through the industry as far as price increases that are unavoidable, as with every other aspect of, you know, the world that prices are going up. You know, the recession, again, when you look at this industry, some parts of it get hit and, you know, you'll see markets drop. And then there's other markets that you see doing incredibly well during that.

Yeah, I love that. Great point.

Me too. And I mean, and it's almost like you never know, like during COVID who could have predicted that, that some markets like the cruise lines, cruise industry took a hit, right? But then bicycles and Peloton, you know, were a huge success. So I love that there's some industries that we probably can't even predict right now, that if we do go into a full bore recession are going to do remarkably well. Yeah.

Yeah. I mean, it's, it's, it's, I've talked about this with Michelle and I have, and I just say this, this industry sometimes, like the economy is so damn perplexing, right? I mean, we kind of, we kind of had a little mini short-lived recession back in 2020. So it's sort of like been a rubber band that's been snapping back and forth. I don't, you know, like, right, right. What you have now is you have, you have You have clients who may have less clients, they may have fewer orders over a year, yet their sales may still be increasing because they have to raise their prices. That's what you're seeing. So yeah, you might be coming into— it's a very, very perplexing time in so much that there's economic indicators widely that you would normally look at with huge warning flags, yet unemployment is still historically low. In some, some industries are still rebounding from what happened in 2020, like hospitality and such. Yet you have prices and revenues for companies that are higher than they've ever been. It's peculiar. Yeah.

Right.

Let's, with our last few minutes here, let's make some suggestions based on your experience, both of your experience in the industry, studying this industry industry for as long as you have. What would you advise— Michelle, start with you— what would you advise distributors to do with this information this year? As I mentioned to you, I would use the SOI as an action report. I would say, all right, we're going to change a few things. Maybe our margin in one year was lower than the industry average. Maybe there were categories we weren't selling. Maybe there were industries we weren't selling. What would you advise distributors to do with this information this year?

You know, I— one thing leaps to mind, Bobby, and I, I had data pulled ESP searches, right? And I, what I did was I had data pulled from ESP website searches, which is coming from the buyers. You know, I think that this industry, which is so fantastic at making promo and, and marketing messages for other people, sometimes it doesn't do a great job selling itself and, and what it can do. So one of the, one of the search terms that kept popping up from buyers is B Corp. They're searching for things like B Corp. So I understand that that's a very hard metric to hit for a lot of companies. You got to jump through a lot of hoops to be a B Corp. But here's what you can do. Do a better job selling all of the wonderful things about your company, younger buyers in particular, but it's unfair to kind of pigeonhole it to just Gen Z and millennials. They want to buy from people that they respect, that they connect with their ethics, their ethos, their values. Do a better job selling that story. You know, I see stories all the time. The come through to us in editorial about companies who raise $200,000 for a local food bank, who donated product to Ukraine, things like that. Get that story out there to your clients if you're a distributor, because people want to do business with people like that. They're looking, in my opinion, more than ever at companies whose ethics line up with theirs. So I would say if you're looking for a way, you know, where can I find some new clients, really start selling that story. Yeah.

And I think what you're saying too there is that a lot of people are doing this for clients, they're just not doing a really good job of getting the message out for clients.

For sure.

They do a better job for their clients, I think, than they do for themselves.

Yeah, I think you're right. I think you're exactly right. Yeah, that's a great point.

That's a great point.

Nate, how about you? A couple of points of advice for distributors.

I mean, if I had one, I would say focus on the— focus on your quality. And what I mean by that is focus your quality. There has to be ways to streamline your business, right? I, I, you know, when I hear about— I conduct focus groups at all of our trade shows, and I hear about people who keep track of their orders, uh, via Post-it notes, right?

Right.

Like, that, that, that's great if it works for you, but there have to be ways to streamline your business and to make things more accurate and get things done quicker. And that has to be a focus, you know. You know, one of the biggest reasons that people don't want— and I'm talking distributors, but for just about anybody— they don't want to try something new is because it's always— they've always done it that way and it works for them, right? Well, with what's going on right now, with the hiring shortages, with the delays, with the, you know, inability— with the fact that products are not getting to places on time in anywhere near the numbers, you have to make a change. And whatever anybody can do to sort of improve their processes will have positive ramifications on their business moving forward. And because just because it always worked one way for 20 years, 30 years, doesn't mean that it's going to work anymore.

I would also add, Bobby, you know, I know you, you at CommsQ, you have a lot of, um, clients and listeners in Canada. So I would say for both the US and Canada, you know, when things go sideways, we have a tendency, we want to kind of, um, kind of hunker down and support our own, made in the US, made in Canada. We're seeing those search terms go up exponentially. Now, whether that translates to sales, but that's another area that I would really look to lean into because people want to, you know, they want to see our country, they want to see Canada, North America do well and do better. So again, there used to be a huge disparity in the pricing for products that were made in the US versus imported. It's still there, but it's getting better. Same with made in— I specifically looked for made in Canada recently, and I was surprised how many searches there were for that. That term.

Yeah. I would also want to add for distributors that to look at this data that we've presented today in two areas. One is look at it externally at clients and growth and industries, but also there has been a big shift to focusing on your internal ops. As we've talked about this before, I don't know that we've ever had as much conversation about internal ops as we have, and that's both on the supplier side and the distributor side. So that's what I would talk about is like the efficiencies inside will drive your sales eventually because you're doing better business on the outside. Now, how about suppliers? Last word on this, Michelle. How about advice for suppliers? Any final tips that you want to add?

Final tips? Yeah. You know, I would say look at areas where you can make it easier for the people to bring people on staff. You know, any sort of, any sort of way that you can make yourself seem more attractive than somebody who's getting paid $25 and working in a hot factory and picking stuff off shelves for Amazon, you know. And you've got all— suppliers and students have a whole bunch of things at their disposal that they can do because we can work remote, you know. You can, you can use perks. You can give people, you know, 2, 2 weeks off and send them where they— I mean, be creative, I think, is my point. Be creative with the way that you incentivize people. Yeah.

Nate, any final words for suppliers based on this research that you've uncovered? This year?

Yeah, I don't— I don't— and this is based on just— this is based on research that I've done, not in the SOI, but just based on research I've done with distributors. Um, it's communicate. Make sure that your communication—

oh, I'm so glad you said that, right? Make sure—

because right now, that one of the biggest frustrations that distributors are having, and this has been expressed to me very recently, is that they feel like they have to fight to get information. Um, whether or not that's— that's that's completely true, or that's like, you know, just sort of like, I'm not— it's not my fault, that's, that's a different story, right? But whatever you can do to proactively communicate and hit the, and hit the, hit the deadlines, not necessarily for products in hand, right? But hit the deadlines for when you say you're going to get back to somebody to alleviate that stress and to eliminate the constant back and forth. Anything you can do, I think that would be key.

I think that's the customer service, the people working in customer service teams, the deficit of people.

I think that's what Yeah, for sure. Michelle and Nate, I can't tell you how thankful we are that you showed up for it with us to do this webinar. And thanks for, thanks for the wild rodeo ride. We had a lot of topics to cover. This is a huge amount of research every year, and you both have amazing teams that you work with. So on behalf of the community, on behalf of Commonsku, we really appreciate you showing up here today. And I always have fun talking to you guys. So thanks for joining us.

Thanks for having us. You're a great interviewer. Thanks, Bob.

Thanks, Michelle. Thanks, Nate. And folks, thanks for joining us. We welcome you to check us out at commonskew.com/webinars for future webinars that we have. And one final housekeeping note, we just opened registration for skewcon.com. So pre-registration, I should say, pre-registration. So check it out at skewcon.com if you want to join us in Vegas in January. Michelle and Nate, thank you so much, my friends. We'll talk to you soon. Thank you.

Take care.

Bye.

Thanks so much for tuning in to this episode of SKU Cast. Be sure to keep up with our latest content by subscribing to SKU Cast on iTunes or to our blog at community.commsku.com. Until next time, friends, thanks so much for listening.

Mm-hmm.