The Digital Sales Pitch: Web-based business boosts revenues 12.1 percent.

Many sales representatives for promotional products are leaving the bulky catalogs and cumbersome brochures behind when they go on sales calls. Instead, they tote laptop computers loaded with digital product samples, order forms, and price lists. Suppliers and distributors expect their Web sites to facilitate communication, improve efficiency, and dazzle clients as the Internet provides a hot new opportunity for yet another industry.

After enjoying double-digit sales increases in the past few years, promotional products suppliers have the capital to invest in developing Web sites and electronic sales tools. A robust economy continued to bless corporate America in 1999, leading to a 12.1 percent boost in spending on promotional products to $14.8 billion, according to promo estimates based on interviews with industry sources. New business from the endless number of dot-com start-ups striving to establish brand awareness contributed significantly to the growth. Among leading distributors, Ha-Lo Industries increased sales 10 percent to $650 million. Cyrk, a leading supplier, grew sales 30 percent to $989 million.

With another strong year behind it, the promotional products industry is pushing ahead with Web site development. “It’s smoothing out the process necessary to sell and order,” says Frank Krasovec, chairman and ceo of supplier Norwood Promotional Products, Austin, TX. Norwood launched a Web site in late January. The company’s goal is to “provide all the tools necessary for distributors to prepare a sales presentation and do everything from ordering to electronic billing,” Krasovec says.

Niles, IL-based Ha-Lo Industries also made a major foray into the online marketing arena in January by acquiring Starbelly.com, an Internet start-up that cuts out the middleman by operating online promotional product “stores” for corporate customers.

Ha-Lo executives say they wanted Starbelly.com because customers are increasingly requesting an online option for ordering. But the Internet operation “is not a sales force replacement, it’s a sales force enhancement,” says Michael Linderman, president of Ha-Lo’s Promotional Products Group. Sales reps will have access to product, pricing, and shipping information 24 hours a day; they’ll be able to create virtual spec samples, get real-time quotes, place orders, check order status, and order samples.

Stephen Paradiso, president of the Corporate Promotions Group at Gloucester, MA-based Cyrk, also expects the Web to improve efficiency and reduce costs. But “the need for relationships with sales reps is still critical,” he notes. “Customers are not comfortable going on the Web and doing business today.”

Krasovec expects Internet efficiencies to fuel future sales growth because they will help distributors reach small companies. “There’s a huge untapped demand for promotional products,” he says.

While supplier sites target distributors, not customers, Web sites that market low-priced promotional products directly to customers are cropping up, and potentially could challenge the traditional supplier/distributor model (April promo). “It’s putting pressure on the margins” of traditional distributors, Krasovec observes.

DOT-COMS ARE BRANDS, TOO

The Web has also given suppliers and distributors a new, highly capitalized customer base. “With all the dot-com companies and e-commerce companies racing to create brands, people are looking for better, higher-end products,” Paradiso said. Dot-coms are spending lavishly on promotional products to help their brand names stand out in the minds of consumers. Banner ads don’t have the impact and presence of garments, hats, and laptop cases – which are roving advertisements that build brand awareness, Paradiso says.

WEARING DOWN THE COMPETITION

Another trend in the market is the continued growth of wearables as promotional products.

The category accounted for nearly 28 percent of all distributor sales in ’98 and had another strong year in ’99, according to suppliers and distributors. Linda Goldman, marketing manager of SanMar, Seattle, WA, attributes the growth in part to the move toward business-casual attire in the workplace.

Runaway growth in apparel sales is concerning suppliers that don’t offer apparel. Distributors are devoting more time to wearables and reducing the amount of time they spend selling other types of products, says Mark Gilman, president of Shawnee, KS-based Gill Studios, a supplier of decals, magnets, posters, mousepads and other products. “It poses a challenge for other suppliers to come up with product lines that will compete.”

– Spending on promotional products increased 12.1 percent to $14.8 billion.

– The Internet is heating up as a sales channel, with suppliers and distributors providing sales reps with online tools that enhance customer service.

– Dot-coms are buying promotional products to establish brand awareness, fueling growth in the industry.

– Wearables sales continue to grow, in part because of new designs and business-casual work policies.