Happy New Year, Be Bold readers, one and all! 2019 promises to be another action-packed year in which our promotional products industry continues metamorphosing into something bigger, tighter and more varied than we’ve ever been in the past.
These are certainly interesting and confusing times we live and work in. Possibly the most concerning issue we face is the continuing challenge of addressing, explaining and living with the tariffs that have been imposed on import orders – for many of us our big bread and butter custom orders – but also effecting ALL incoming product that our thousands of suppliers brand for us.
At the end of 2018, I went on a sales call with one of my San Fernando Valley based HALO account managers to a national restaurant chain, presenting our company as their ideal promotional partner and fully prepared to address the prickly issue of the tariffs. I’d like to claim that the approach to presenting this to our client was my idea… but it wasn’t. My salesperson Laurie Amigo crafted this approach and I wanted to share it with the readers of this column.
First, some background.
This past Summer, President Trump shook up the foundations of global trade by slapping a variety of tariffs on billions of dollars of goods coming into the US from several key overseas countries including China. This has created a ‘trade war’ situation in which we are taxing their incoming product and they are taxing our outgoing product. As the prices of imported product become more expensive, the theory is that this will motivate buyers to buy American, helping the economy. But our fears are that the increased prices will result in clients reducing the size of their orders… or passing entirely on pricey branded merch from overseas sources.
Some of the tariffs, such as the whopping 25% tariff on steel coming into the US, are debilitating. But the tariffs that will affect our industry most are the ones imposed on the hard goods and apparel that we sell to our largest clients. Some are just 3% or 5% and others are a full 10%, depending on the products. Adding to the confusion are various waves of tariff amounts that take effect at different times and for different percentages. More tariffs can be introduced any time and implemented at the President’s discretion. Promotional products could also see a jump from the 10% level to the full 25% level in 2019.
This means our suppliers WILL raise prices this year, anywhere from 10% to 20%. Our clients will understand why this is happening (it’s in all the papers) but they won’t like it. What will result is a decline in margin and some sticker shock, especially on reorders. And the whole situation is volatile in that everything may change in two months or in six months, making annual print catalogs outdated before the ink is dry.
So, the way Laurie positioned this with our new client was to face it head on, to explain that we are in this TOGETHER and that we will be presenting pricing in two columns… in prices with the tariffs included and pricing WITHOUT the tariffs. This way, they can see what it would be before we were placed in this challenging situation and they can also see that we aren’t taking advantage of it… that the increased pricing we are passing along is the tariff and ONLY the tariff.
The client liked and appreciated this approach. The information will help them in deciding what quantities to order and what budgets may need to be adjusted. We didn’t wait for THEM to bring it up, WE brought it up and gave them our solution… and everyone in the room nodded their heads in appreciation.
You may have noticed that this wasn’t the usual RG Be Bold fun and jokey approach – because there really isn’t anything humorous about any of this. It’s a BIG issue that will challenge all of us all year long. I suggest understanding what is happening, devising your approach to explain it to your customers and showing them how you are handling it in regards to their pricing on their promos. Tackle it up front and openly, encourage discussion and have alternatives at the ready.
Have a wonderful new year and next month I’ll cover something a little less… intense. Promise!
Rick Greene, MAS, is the Western Regional Vice President for Halo Branded Solutions, a Past President of SAAC, on the PPB Editorial Advisory Board and the author of two fantasy novels entitled “Boofalo!” and “Shroom!” available at www.amazon.com. His third book is a non-fiction biography of movie character actor Henry Brandon called “Henry Brandon King Of The Bogeymen” published by BearManor Media and available everywhere fine books are sold.