In the years leading up to 2019, there was a lot of speculation about a pending recession. The stock market has its ebbs and flows, and 2019 was expected, by some, to be one of those years of contraction.
Still, that scenario was hard to imagine as the U.S. was experiencing its lowest unemployment in 50 years along with strong GDP growth, but by mid-2019, the country was inevitably at the tail-end of an unusually long economic expansion. Promotional products industry sales, which had been trending upward for the past decade, began to weaken (see The Tipping Point Realized) along with declining home sales, the latter a common indicator of the onset of a recession.
History has taught us that what goes up must come down. Still, January 2020, the dawn of a new year and a new decade, was bright with promise. No one expected that a virus would cause the economy to nose-dive just two months later. The coronavirus recession, also known as the Great Lockdown or Great Shutdown, has upended entire industries and shaken most businesses to their core.
To survive, many promo distributors refocused their sales efforts from products that promote companies to products (personal protective equipment—PPE) that safeguard them and their workers.
PPB spoke with the principals of 12 industry distributors to find out how their businesses have been affected by this Great Lockdown, what they are doing to restart their companies as states allow businesses to reopen and what effect this pandemic and its aftermath will have on their business.
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How have your sales and business been affected by the pandemic? Promo sales are a fraction of what they were last year. Fortunately, we have made a pivot to PPE and back-to-work kits, etc.
When do you foresee your sales returning to pre-lockdown levels? Keep in mind that I don’t have a crystal ball, but typically I do have a perspective. And speaking specifically for “promo sales,” I expect it may be up to a couple of years before we see all sectors back to our old normal. This would include trade events, travel-related spend, retail and restaurants.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? Promo sales recovery will be a slow “U”—so this would be a gradual recovery. In addition, PPE sales will be an inverted U and eventually revert to the large medical supply providers. I expect these lines will cross in the fall; that is the point when those who benefited from PPE sales will need to have their business in a position to manage profitability primarily with promo sales again. Although the SBA Paycheck Protection Program will help many of us, I believe expense management will be critical throughout the remainder of this year and into next year.
What actions are you taking now to restart your business? Investing in growth, training, marketing and re-invention. In growth, we are looking for new rock-star sales team members, likely from outside of the industry. Our focus will be on cultural fit and ability to leverage relationships. We are also looking for acquisition or merger opportunities. In training, we are offering all of our team members the opportunity to spend time right now to take the CAS/MAS courses through PPAI. We’ve accelerated our mentoring program within our organization; we’ve assigned mentors to our most recently-added sales team members to grow them quickly in preparation for a quick start as the restrictions lift. We’ve never invested so much in marketing. I learned a long time ago that those who invest in solid marketing during an economic downturn accelerate the quickest on the upside. In re-invention, something new for us has been formalizing a plan to re-invent ourselves. We’ve created a diverse taskforce to brainstorm new and different business models, which can have a powerful impact on our future. Ideally, we would leverage our existing assets (customers, processes, team members) to provide complementary services or offerings to existing or prospective clients. We are two weeks into this process and already seeing benefits to our program.
What are your revenue expectations for year-end? Although the make-up of revenue will most certainly be different than last year, we expect to finish the year consistent with last year or perhaps a little better.
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How have your sales and business been affected by the pandemic? Top-line sales have been negatively impacted by COVID, however, it has been very customer-specific. Our technology and health-care customers are doing pretty well, but those related to retail or travel have been devastated. We have also seen our webstores hold their own during this downturn—it is almost as if our webstore customers don’t consider a webstore purchase in the same light that they view a special-order purchase. In addition, we have done a decent job of pivoting into selling PPE. We did have strong PPE sales in April. The other business implication of the COVID situation was that we laid off 30 percent of our staff on March 30. Very difficult times.
When do you foresee your sales returning to pre-lockdown levels? I think we won’t see pre-lockdown sales levels until the second quarter of 2021. I do want to be optimistic but there are just too many headwinds pushing against the promo industry. Having said that, I do believe that we will continue to see some big winners throughout COVID—like technology companies. Our challenge will be to constantly pivot to where there is money being spent and not wasting resources where there will not be a payback.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? I really don’t think you can paint the entire economy’s recovery with the same brush. We have entire industries that might never come back to pre-COVID levels, like airlines and travel. You also have industries like technology and health care and medical devices that will far exceed pre-COVID levels of business. Overall, I think the economic recovery will resemble a “lazy” V—but within that V will be some dramatic stories.
What actions are you taking now to restart your business? We never really slowed our business down. While we did lay off 30 percent of our staff, we quickly reallocated our resources to our most productive customers. In fact, we have a formal process to review our sales resource allocation every week. We want to be very sharp about where we spend our time right now. We do have customers in the portfolio who are still growing, and they must be resourced. In addition, we have a very large warehouse operation in Atlanta, which has not been impacted at all during COVID. We also have a strategic relationship with a major procurement software company that continues to provide us leads for new business. I really hope to be in a position to re-hire some of our laid-off employees later this year.
In general terms, what are your revenue expectations for year-end? I am guessing we will be down 15 to 20 percent for the entire year.
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How have your sales and business been affected by the pandemic? This pandemic is having a dramatic impact on many industries. A few industries are seeing opportunity, but the vast majority are experiencing a very adverse effect. While HALO serves several industries that are largely in a business-as-usual mode, there are several sectors (health care, governmental units and delivery services) whose needs have grown dramatically. However, the decline in most industries appears, in the early going, to be resulting in lower overall revenue for HALO.
When do you foresee your sales returning to pre-lockdown levels? The timing of a complete recovery seems impossible to predict. That said, I would be surprised if the economy (and therefore our own sales recovery) returns to pre-pandemic levels before the fourth quarter of 2021. I say that because the scientists seem to be predicting no less than 12 months for an effective vaccine, widely disseminated and with more than 60 or 70 percent of the country inoculated. Until a vaccine is widely available, consumer spending seems unlikely to be robust. And then it will take several months for the economy to regain meaningful traction.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? None of these letters seem to depict what is likely to come. I suspect there will be several false starts and dips over the next year and then modest but growing improvement that will continue on for a long time.
What actions are you taking now to restart your business? HALO has been able to sustain our full business operation throughout the crisis with the majority of our teams working from home. We are evaluating the reopening of our offices only when local health authorities advise it is safe and when our people are also comfortable to return safely. For our account executives, we have developed new client solutions around safety and employee engagement as offices, retail establishments and educational institutions start to re-open.
In general terms, what are your revenue expectations for year-end? I expect our 2020 revenue to decline from 2019 levels, but it is too difficult to say. We are focused on controlling expenses and preserving liquidity, which gives us a long runway to face the uncertainty.
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How have your sales and business been affected by the pandemic? Sales in Q1 were on track with 2019. Q2 has seen a substantial slump but still steady business. We have also seen a good increase in order count the past two weeks.
When do you foresee your sales returning to pre-lockdown levels? That is a tough question. We have seen some very large orders for PPE, which have kept sales volume stronger. As the health emergence subsides so will the feeding frenzy for PPE, so hopefully normal business will be replacing it as we move forward. Basically, I think we have lost a year at minimum in three months. All the growth of 2019 and a good part of 2018 have been lost.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? There are many factors to consider. Large, well-capitalized businesses continued to advertise and market through all this. They will adjust their message to appreciate from the economic reality of the marketplace. Small and under-capitalized businesses will either close or limit all that they consider non-essential spending. Most will make the mistake of considering marketing non-essential. A very real impediment to recovery is that office sales calls may not return as a standard selling method. If that is, in fact, what happens, online sales will increase, and recovery of our traditional industry will be very slow. Finally, there is growing resistance to goods from China. With so much of what we sell being from China, this further complicates any recovery. I think the overall economy will snap back faster than the promotional products industry.
What actions are you taking now to restart your business? We never shut down. Our headquarters had to close to meet state orders, but our entire staff has been working remotely and not a single employee was laid off or had any hours cut. We are beginning a slow return to our headquarters that will take about a month so as to keep the facility sanitized and people at a distance for a while. We have managed our business and not missed a beat.
In general terms, what are your revenue expectations for year-end? My feeling is a 10- to 15-percent decline from 2019. This is based only on my personal feeling and not on any data. Our CFO might not agree.
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How have your sales and business been affected by the pandemic? Sales have certainly been negatively impacted by the pandemic—all the cancellations of trade shows, sporting events and special meetings have certainly hurt business. While we have tried to retain some of the business, for example, offering to ship the awards for recognition dinners to all the attendees, there is no way to make up for the overall revenue loss. We did begin selling PPE quickly and sold millions of items, but we don’t believe that PPE is a sustainable business and we also don’t want to risk ruining our credibility in the current environment of very high pricing, questionable product quality and unreliable delivery.
When do you foresee your sales returning to pre-lockdown levels? We don’t think the world will revert to the “way things were.” The unintended consequences of the pandemic, for example, a business trip to shake hands and break bread, might become a fond memory. Even if trade shows return, there will be a paucity of attendance as many travelers will be fearful. I would guesstimate we are in a two-to-three-year sales funk.
What shape of recovery do you think this will be—U, V, W, some combination or other— and why? I think the recovery will be slow and painful. I think those who can communicate well, develop good marketing campaigns and who are diligent enough to carefully vet suppliers, will be able to recover more quickly.
What actions are you taking now to restart your business? Fortunately, we have an amazing team at Barker Specialty Company, all working together to keep our business moving along. We are able to share ideas and provide solutions for the many problems faced by our clients. We certainly are increasing our marketing efforts.
In general terms, what are your revenue expectations for year-end? While I always try to be positive, the only positive spin I can put on this crisis is that it has showed us how many among us are compassionate and caring individuals, and I love seeing the recognition given to so many of the service workers in our country. However, for revenue expectations, I see the industry down 12 to 15 percent—a brutal and steep decline.
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How have your sales and business been affected by the pandemic? Like most companies, our traditional business was negativity impacted. Prior to the national mandatory closures of businesses, we were headed for another record year up over 18 percent. Fortunately, our sales team responded with the help of our marketing team by working harder to open new clients. We have also worked with our supplier partners to open up new product categories.
When do you foresee your sales returning to pre-lockdown levels? We feel we are in a great position to rebound quickly now that the states are loosening the shutdown. We’ve already seen a very positive uptick in both sales and activities that lead to sales. We think the economy will pick back up by the fourth quarter of this year.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? We believe the recovery will be steady over time as more and more states loosen the restrictions, allow companies to reopen and get everyone back to work.
What actions are you taking now to restart your business? We were very fortunate that we never had to shut down our business thanks in a large part to Proforma, which helped us educate and motivate our sales team to remain relevant during this pandemic. We were able to move our core team members to work remotely from home. We invested in our employees making sure their families had full income and benefits. Our people are more motivated now than ever to help our sales team succeed.
In general terms, what are your revenue expectations for year-end? We are working hard and getting creative to maintain our sales and we are looking forward to a strong fourth quarter.
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When do you foresee your sales returning to pre-lockdown levels? Frankly, I don’t see that on the horizon for quite some time, as the entire event industry will have a long recovery timeline.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? I think the Nike Swoosh-shaped model is most realistic.
What actions are you taking now to restart your business? We’re actively working with clients on what a “return-to-work” scenario will look like.
In general terms, what are your revenue expectations for year-end? We’ll be down from 2019 for sure—how much will be determined by what “return to work” looks like.
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How have your sales and business been affected by the pandemic? Our typical promotional product sales are down slightly. We have been replacing those sales with PPE products. We have had several people working remotely. We have not needed to lay anyone off. We are participating in the Paycheck Protection Program. The biggest thing that we have had to deal with is the uncertainty that the pandemic brings. Our sales staff has had to think outside the box by approaching business differently. We are practicing social distancing, disinfecting our offices regularly and using lots of sanitizer. Remote meetings are now regular occurrences. I am so proud of how our team has reacted to this challenging time. They have remained positive, respectful and worked together as a team to continue serving our clients and community.
When do you foresee your sales returning to pre-lockdown levels? I expect sales to remain challenging through the summer. Once fall hits, we will be back to traditional levels or we will have found new product lines to get us there.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? I believe the recovery will come in spurts. There will be a quick jump as soon as we feel it is time to get back to business. I also believe that the funds provided by the government will provide a stimulus. There will be certain industries that will suffer for a long time and perhaps not survive. There will be other industries that will come out of this flourishing. It will be at least a two-year process. Much of the recovery will depend on the government’s treatment of the payback process of dollars given out during the pandemic and future tax policies.
What actions are you taking now to restart or promote your business? Sharing ideas and best business practices with fellow members of The Partnering Group has been a godsend. Open communication with our entire team has made a big difference. We intend to be very entrepreneurial in our efforts. We are currently advertising on TV and radio. We are staying in touch with our clients through email, phone, social media and video conferencing. We have added to our sales team and are fully staffed in support and production. We will be doing more self-promotions and fully intend to have our client appreciation show at the end of September.
Adding the PPE product line to our offerings should provide a new revenue stream. We have to look to those industries that are doing well through this and put our marketing and sales efforts in their direction. It is a time to push ahead not hunker down.
In general terms, what are your revenue expectations for year end? I expect revenue to be up around 10 percent this year. We were originally planning on 15-percent growth.
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When do you foresee your sales returning to pre-lockdown levels? It’s hard to say but hopefully we won’t see much of a tail-off when things open back up. It’s only been six or seven weeks since we have been “working normally,” so hopefully we’re not going to be shut down long enough to see much of an effect in Q3 and Q4.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? I think it will be an escalator (in the up direction!). A lot of it is in our control because it’s a factor of how hard and smart we are working. It’s refreshing to see the way our employees have adapted to working from home and this is what fuels my optimism.
What actions are you taking now to restart your business? We’ve been staying in touch with clients via calls and emails, but a lot of the restart will come from inside our four walls. Although we’ve been socially distancing, we’ve been socializing distantly. We’ve been doing a lot of internal Tic Toc activities using the Slack messaging app and we have one or two fun things a week with our company such as Tic Toc Spirit Week, a Mask-eraders sales contest and, in observance of Cinco de Mayo, a Quarantino de Mayo Zoom happy hour featuring margarita kits and special t-shirts sent to our employees’ homes.
In general terms, what are your revenue expectations for year-end? I’m optimistic because hopefully we are looking at only an eight- to 10-week window of irregular sales activity and it will have minimal impact on the next six to 12 months.
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How have your sales and business been affected by the pandemic? Sales have dropped to about 25 percent of what we expected.
When do you foresee your sales returning to pre-lockdown levels? I don’t see this recovering until fall and that depends if schools, colleges and sports open up again.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? I think it will be a partial recovery.
What actions are you taking now to restart your business? We received a Paycheck Protection program loan, which has helped a great deal. We are setting dates for mini open houses and have brought two new account executives aboard.
In general terms, what are your revenue expectations for year-end? $5 to $6 million as opposed to $10 million last year.
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How have your sales and business been affected by the pandemic? Our sales fell off a cliff the third week in March and that was the case for the next month or so. We have seen an uptick in business in branded PPE and products that will help businesses get open. We have had a week or two that have been good, and our hope is that we can maintain that a bit.
When do you foresee your sales returning to pre-lockdown levels? My best hope is that we start to see [sales] ramp back up during the third quarter sometime.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? I would love to say V, but I have a feeling that it will be more W. I think it’s incumbent upon each of us to ride the wave of need of our clients so we can be there to meet them.
What actions are you taking now to restart your business? We have taken the time off to be intentional about marketing. We have created content nearly every day and have created a five-day marketing course for our customers. We have even worked to redesign our website. In addition, we have ordered masks for our team (and customers).
In general terms, what are your revenue expectations for year-end? My hope is our revenue will be down only around 15 to 20 percent. I hope we are not down that much, but I think that might be realistic.
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When do you foresee your sales returning to pre-lockdown levels? I think the second round of COVID-19 is going to hit hard because we, as humans, are going to want to put this time behind us, thinking we are done. But I don’t think we are. I think there is a second round coming in the fall coupled with flu season. While I hope we are back to pre-lockdown levels in 2020, realistically, I think it won’t happen until early 2021.
What shape of recovery do you think this will be—U, V, W, some combination or other—and why? I think it is going to be a V. In the past four epidemics since 1990, we have had V-shaped recoveries. There is no reason for me to think this pandemic’s recovery will be different.
What actions are you taking now to restart your business? We are working hard to find solutions to the requests we are getting from our current customers and some new customers. We are reaching out to everyone we know to let them know we are here and able to source sanitizer and PPE. We are staying in touch with our customers on a personal level, reaching out to them by phone to make sure they are okay. We are also using this time for the whole team to get their certifications through PPAI. We are taking deep dives into our customer base and planning for the return of the economy and sales. We are having fun and keeping each other engaged. After all, we are in a fun business that brings smiles to people.
In general terms, what are your revenue expectations for year end? So far, we are on track with what we did in 2019 year to date. With the work to gain new customers by providing PPE and sanitizing products, we hope to make up for any loss due to our active customer base not ordering.
Distributors: Share your responses to these questions by adding them to the end of the online story.
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Tina Berres Filipski is editor of PPB.
