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SOI 2021: E-Commerce Pays Off Big

The pandemic accelerated many companies’ digital plans. For them, there’s no going back.

When Cathy Verhage started Minnesota-based Casta Marketing Group (asi/490056) in 2002, e-commerce wasn’t much of a thought.

“Back then,” Verhage reminds, “there wasn’t this Amazon, get-it-to-me-now world.”

Today, though, Verhage acknowledges times have changed, supercharged by a global health pandemic that ushered in the latest episode of the digital revolution.

As the COVID-19 pandemic infiltrated American life in the spring of 2020, the typical cadence in the promotional products industry ceased. With most offices closed, sales reps couldn’t visit clients. Instead of the centralized distribution of products, items now needed to be delivered to employees and customers moored in their residences.

For many, e-commerce emerged as an effective solution. It exploded in retail; according to Digital Commerce 360, e-commerce sales in 2020 grew 44% year over year, after a decade of never eclipsing 20%. E-commerce now accounts for over 21% of all retail sales.

Surprisingly, those gains weren’t seen in the promo industry. Nearly half of distributors (49%) derive a portion of their business from e-commerce – a figure basically unchanged from 2019 (48%). Similar trends played out on the supplier side (37% in 2020 vs. 38% in 2019).

No Big Leap

Even with a surge of digital buying in retail, e-commerce sites for promo companies did not measurably increase in 2020. But those levels did maintain, preserving a jump in e-commerce that occurred in 2019.

E-Commerce-Enabled Website

But for the ones who did adapt, e-commerce proved to be an incredible lifeline during a difficult year. Casta, for instance, created online stores for many of its clients, stocked those virtual stores with the requisite goods and then handled fulfillment.

“The presence of e-commerce was booming and changing lives anyway,” Verhage says. “The pandemic just forced adaptation quickly and with a lot more intent.”

Meeting Demand

For many promotional products distributors, a reliable e-commerce offering is as much about playing offense – serving existing customers and attracting new ones in an evolving consumer climate – as it is defensive strategy amid shifting consumer habits and rising competition with the Amazons of the world.

Over the last year, distributors like Brandito (asi/325944) have found success by offering e-commerce solutions to their customers in the form of company stores, pop-up shops and inventory management systems.

“During the pandemic, we saw a major increase in demand for fulfillment and utilized our pop-up stores to facilitate these projects,” says Lauren Radow, enterprise program manager at Brandito.

Cathy Verhage “The presence of e-commerce was booming and changing lives anyway. The pandemic just forced adaptation quick and with a lot more intent.”Cathy Verhage, Casta Marketing Group

In some cases, Brandito didn’t create a full-fledged company store for clients, but instead supplied customers with “an inventory management system and a place to store their goods,” Radow says. She adds that the ability to offer distinct digital solutions allowed Brandito to serve different needs and to operate in the customer’s best interest. “We expect that offices and remote workforces will be changed forever post-pandemic,” she says, “so there will continue to be a need to centralize marketing efforts and branded product under one roof.”

At Casta, Verhage and her team found success in leveraging the online stores they created to collect sizes and spur fulfillment. Casta would place selected products in a virtual store, provide a redemption code for end-customers to use, then drop-ship items to individuals rather than the company. “This was a valuable tool that made everybody’s lives easier during the shift to remote work,” she says. “Companies didn’t have to get 500 items and send them out separately because we did it for them.”

Moving Forward

At New York City-based EmpirePromos (asi/187780), which planted its flag in e-commerce way back in 2004, company president Carol Mayer says she didn’t see much change in customers’ expectations and demands during the pandemic, save a pivot to more useful, COVID-related gifts. The pandemic did, however, force many people to conduct business online, which she predicts will only accelerate e-commerce sales of promotional products and shift the industry’s traditional ways of conducting business.

“As more people permanently work from home on a full- or part-time basis, the in-person sales call will continue to become a rarity,” Mayer predicts.

And that’s not necessarily a bad thing, contends Mayer. She considers Empire’s website a “well-organized online ‘showroom’” – a more efficient way of presenting the multitude of options available compared to the standard in-office presentation of a few samples. Using the site as a lead generator, she says EmpirePromos has been successful in developing online relationships with its suppliers and clients, which positions the company to capitalize on growing comfort with e-commerce.

Bracing for Bezos

The promo industry has harbored a pronounced fear that Amazon will enter and disrupt the industry. But an interesting shift occurred in 2020. While distributor concerns about Amazon slightly increased, suppliers became increasingly unconcerned. Suppliers were also less fearful of online sellers (39% seeing them as a significant threat in 2020, compared to 46% the year prior).

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“Our view of e-commerce is that it’s a lot more than point and click,” Mayer says, adding that even with its prominent SEO and e-commerce presence, 75% of its business comes from existing clients. “Most of the orders we do are the result of consultation and interaction with our clients. We help find the appropriate product solutions for their image, business, logo, budget and time constraints.”

At Brandito, Radow suspects many customers will continue to embrace e-commerce given the conveniences it delivers. She cites one client who managed their promo inventory from an office storage closet and shipped everything themselves. With their office closed, that client leaned on Brandito to oversee product inventory and communicated with Brandito reps via the distributor’s e-commerce platform. “Now that we have those processes set up, I don’t see them wanting to change anytime soon,” Radow says.

For many distributors, in-person sales calls will return as the pandemic retreats. Still, Verhage foresees e-commerce playing an increasingly strong and relevant role. Clients, for example, can ditch internal spreadsheets and surveys and instead use online stores to capture sizes and color choices. “This will stick and keep growing,” she predicts.

And though Verhage remains hopeful that the traditional in-house sales calls do return – “I’ve always been a bit of a traveling road show and hope touching and feeling items doesn’t go away,” she admits – she understands the value of e-commerce solutions as a way to offer clients a more efficient, cost-effective and strategic way of doing business.

“You’re not going to succeed with the times if you’re not prepared to offer customers e-commerce solutions,” Verhage says. “And not just one solution, but multiple e-commerce plans, because not every client has the same needs."