Secrets From The Dip
Updated: Oct 15, 2020
I am about to disclose the absolute, most tightly kept secret in the entire Industry. It is so tightly kept that I’ve been forced to write this “The Dip” piece from an undisclosed, off the grid, secured location. These precautions were necessary, because everyone knows that if you were to act on what I’m about to disclose, then the entire current revenue paradigm of the Promotional Product Industry will crumble!
Here it goes.
If tomorrow every Supplier were to close their doors and cease all operations… YOU, the Distributor, would still be capable of engaging in business with your Buyers.
If tomorrow the entire world were to be taken over by an e-commerce digital marketing super-source… YOU, the Distributor, would continue making sales and moving the Industry forward.
Here’s the biggie: If tomorrow YOU, the Distributor, were to cease operations, end taking any Buyer orders, and close all of your service accounts, the Industry would limp miserably along to its inevitable demise.
Boom goes the dynamite!
With that I’ve spilled the tea and risked “cool kid” alienation because I genuinely believe that this knowledge will empower YOU onward to greater strength, possibilities, and – in my hopes – building a better Promotional Product Industry.
That YOU can do, BUT only by understanding the two reasons WHY you are indispensable.
1) YOUR relationship with The Buyer. Think about it this way: The Buyer is a glacier – a slow moving mass of frozen funds that represent the source of money. The Distributor is the inlet river that captures the money from the source and feeds it into the Industry lake that the entire economic ecosystem then thrives off of. Without YOU capturing those funds, there is no lake. The simple indisputable economic fact is that a vibrant and thriving economic ecosystem relies on having MANY inlets feeding Lake Promo.
Obviously, this isn’t much of a secret. Everyone knows, talks, evangelizes, and carries on about the Buyer relationship because it is both valid and vapid.
You read that right, I said vapid. Going with “relationships” is a shallow and empty sentiment intended to make YOU feel like you have a role to play, while also keeping you insecure and marginalized. We all know that Business Buyers can be influenced, so if all YOU have is a relationship then YOU likely don’t really have that much at all.
So, let’s get into the real message here. While YOU are the source of the initial Buyer relationship, the truth is that YOUR opportunities are earned through sweat equity.
THIS is what leads me to the second reason behind YOU being indispensable…
Let me say that again for the people in the back row…
The truth is that you do a job that the vast majority of people in this world are simply incapable of doing. YOU take on full-level accountability on EVERY facet of EVERY SINGLE ORDER.
Think about that, and list down everything you are accountable for on behalf of your Buyer. Product quality, inventory, artwork, color matching, communication, problem resolution, production process, etc., etc., etc… This list goes on, but one thing is clear: YOU ACTUALLY CONTROL NONE OF WHAT YOU ARE HELD ACCOUNTABLE FOR! More than that, with everything YOU are accountable for, YOU OFTEN DON’T EVEN TOUCH THE FINAL PRODUCT BEFORE THE BUYER DOES!!!!
I could not do your job. There is simply no way. On the autopsy table, the corner would see all the ulcer holes in my stomach and list the cause of death as: 1950’s Style Mob Hit… YET, knowing this basic truth about YOUR ACCOUNTABILITY, drives the way I involve myself in the Industry. YOU already take on too much risk, and I’m sure as hell not going to add to it.
Now, let us examine how this ACCOUNTABILITY makes YOU indispensable…
In the beginning, shifting macro-economic masses established a failsafe foundation….
(Cue the “record scratch”) Okay, my editor said I can’t wax poetic and show off all this origination research I’ve done because in his words: “That’s boring. Besides, the internet changed all of that.” Which is kind of, but not completely true. In actuality, the numbers reported by the Industry’s largest internet-distributorship makes the point of your indispensability better than I can.
The following numbers are sourced directly off the UK “investor” website for the internet-distributor firm:
2016: $558.2M* revenue (divided by) 1,050,000 orders = $531/order
2017: $627.5M* revenue (divided by) 1,185,000 orders = $529/order
2018: $738.4M* revenue (divided by) 1,389,000 orders = $531/order
2019: $861M* revenue (divided by) 1,587,000 orders = $540/order**
By contrast, here is what ASI has to say about distributors:
Average Supplier order size of $800*** (https://www.asicentral.com/news/magazines/counselor/soi-2019/soi-2019-supplier-sentiment/) matched with an Average Distributor profit margin of 36.5% (https://www.asicentral.com/news/magazines/counselor/soi-2020/soi-2020-restarting-sales/) equals an average order size of $1260****
The reason behind the disparity?... ACCOUNTABILITY!
YOU know that even though your Buyer’s name is on the company credit card, it is probably NOT their company.
YOU know as well as I do that the minute a Buyer clicks “Purchase” on the internet-distributor site, all of the accountability that had previously rested on YOUR shoulders is suddenly transferred over onto their shoulders.
YOU also know that $500 is the approximate peak of a corporate “petty cash” purchase. This means most orders being performed on the internet-distributor’s platform are likely done inside of the “petty cash” range.
YOU know that when a Buyer needs a quantity of products that take the item OUT of the “petty cash” range, YOU suddenly get an email requesting YOU to match the price they found on an internet-distributor’s site.
YOU know that NO BUYER is willing to lose their access to the company credit card (or job) over a $2000 misprinted order of tote bags.
The secret is officially out of the bag, and YOU knew it all along… YOU are indispensable because THE BUYER NEEDS YOUR PROTECTION!!!! A job you do BRILLIANTLY, by the way.
Go back to the previous Dip commentary, From the Dip to the Penthouse and check out the section about writing an Elevator Pitch. You were asked to think about the things YOU have done to make sure that an order got to YOUR Buyer on time. THAT is the type of protection you offer and ACCOUNTABILITY YOU take on to do YOUR job. That accountability is the sweat equity that builds the trust necessary for a Buyer to spend their money on this Industry’s products.
So moving forward, as we begin to emerge out of The Dip, just keep in mind that trying to hide the challenges and flaws of this Industry from YOUR Buyer means also devaluing and hiding away the very essence that makes YOU indispensable.
In this digitally efficient world, WE are a perfectly imperfect human Industry that is prone to mistakes, flaws, and amazing acts of selflessness. It is time to embrace the imperfections.
*Every Supplier and Group Program knows that “revenue” includes MORE than actual sales, so their actual order size is likely lower than this math shows.
** Imagine for a second just how much national advertising revenue has been spent to increase the average order size by $9 since 2016… That is just silly.
***Realize that in removing both the dollar and transaction volume of the internet-distributorship would likely mean that the order size for a traditional distributor would be higher than this reported amount.
**** This is an imperfect number. It took multiple data sources, and a mathematical exercise, to simply come up with the number. Still, this approximately matches previous research – which states clearly that the average Distributor order is AT LEAST 2.5x’s HIGHER than the average internet-distributor order size.
Side note to the aforementioned footnote: Imagine for a second just how much national advertising revenue has been spent to NOT equal YOU… That goes beyond silly and becomes insane.
Jeremy Chacon, PromoEQP © 2020