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The School of Paul

03/27/2009

Don’t say I didn’t warn you! I consider myself to be a normally long winded writer but this post is going to be XXLong! However, you will be doing yourself a major favor by taking 3 minutes to read this, please.

I really hope that all of you who are reading this are doing so as a recap because, if not, you missed an AWESOME event on Wednesday, in Austin!

 When you ask most people what they think the CEO of a multi-million dollar company would be like, the answer would probably be run the gamut of “unapproachable, corporate suit, mouthpiece”…you get the picture! Paul Lage, CEO of Norwood Promotional Products, is the complete opposite of that stigma. He is a down to earth guy who loves this industry and is great to work with according to his employees. He started out in this business imprinting rulers with his dad and from there worked at Gill & BICand has been at Norwood since June of 2006. In 2002-2003 he served as Chairman of the PPAI board, in 2007 was recognized as #1 on ASI’s list of “The 50 Most Powerful People in the Promotional Products Industry” and was named Counselor “Person of the Year in 2007.” It’s definitely safe to say that Paul knows promotional products!!

Paul came to the CAPPA event to talk to us about what’s going on in the industry and economy from a supplier standpoint. He made so many good points and predictions that I want to share so you’re “in the know.”

He started by talking about companies that are acting on irrational behavior right now. These are the companies that are offering insane specials that in no way can they be profitable but they have to do something just to keep cash coming in and the doors open. Consider the companies that reprinted catalogs mid-year last year with price increases. Can you image how much that endeavor costs??

According to Paul the economy is going through a period of stagflation right now like we have not seen since the 1980’s. (Definition: Stagflation= rising costs, rising regulation, rising prices but lower demand) He is part of a group of top 20 suppliers that exchange information and based on their estimations the industry, as a whole, is currently down by 25% and they predict things will stay the same for at least the rest of 2009. People have a lot of pinned up optimism right now but it is not translating into reality and in order for things to get better consumer confidence is going to have to rise considerably.

It’s a nasty fact but some suppliers (& probably distributors) will be casualties of this recession. Unlike BIC and Gill who do not borrow money to run there business, most suppliers need revolving capital to stay afloat.  Paul said that one of the key elements to ending the recession is credit and specifically the ability of companies to borrow money to run the business. Lots of money has been pumped into the economy and banks into the last few months but business lending is not back on track. He points out that you’re also going to see suppliers that sell out to other suppliers.

Distributors, beware of inventory shortages especially in the 3rdqtr!! Due to slow sales and lack of cash suppliers are not investing in inventory, they are making payroll and keeping the lights on. Because 80%+ of all products come from China and the lead time to get them here is around 90 days there will be inventory issues. One way Norwood and other suppliers work around this is by not selling all of one product to any one distributor. For example, if I call RCC and get quote on 50,000 royal blue Koozies, I would naturally check stock. If they only have 51,000 in stock then they will probably (depending on the item) not sell me the qty. I need. Barb Bascham, Halo, asked Paul why and he said “we would rather make one distributor mad than two-hundred.”

The next issue Paul touched on was regulation and the financial impact it is having on the industry. Prop 65 and the new CPSIA laws have costs suppliers millions of dollars. Norwood alone will spend $1.5 million this year on product safety. This is very costly enterprise for suppliers and especially the small guys. Note: if you’re a distributor, you need to educate yourself about this topic. Cheryl Landman, PSIncentives Inc., said that PPAI is hosting webinars about this topic and for more information go to: www.ppai.org

So what is the silver lining is all this? Survival!  The fundamentals, of the industry, are extremely solid and those who adapt to change and evolve will be around for the comeback. Paul jokes about when Norwood first starting accepting orders via fax “I thought that the Post Office was going to have to raise postage rates when we starting accepting orders via fax instead of snail mail!” Relationships are the key right now. We all need to band together and help each other.

Finally he warned again about irrational behavior and said that making good business decisions right now is “your ability to navigate through the noise.”

CAPPA would like to extend our sincerest thanks to Paul for being a guest speaker at our lunch & learn!

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One Comment leave one →
  1. 04/18/2009 11:08 pm

    Some companies are also giving promotional products to schools also. s

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