Searching for an item that will boost your sales? Well, look no further than this country, because import regulations and increased demands for innovation are making the Far East less of a viable opti

To the child with a dinosaur in his pocket or a Monster Munch decoration on her bike, the country of origin of a premium is of little interest. But to the marketer relying on that item to boost sales, and to the suppliers responsible for sourcing it, locating reliable, competitively-priced items is a daily concern.

Despite the apparent surplus of specialist companies offering everything from pens to luggage sets to branded goods, finding the right item has probably never been harder. Promoters’ demands for novelty, innovation or branded merchandise have massively extended the range of products a consumer might be offered. In addition, import regulations, in particular the quota system, are making it harder to plan a secure supply.

Both of these pressures have forced promoters, agencies and sourcing houses to look at alternatives closer to home. With the easing of restrictions on the movement of goods within Europe, the possibilities of local sourcing have grown. At the same time, companies on both the user and supplier side have been making concerted efforts to pull business back into the UK.

David Louis, account director at sales promotion consultancy Branch Lines, says: “It is so much easier to move products within Europe and to communicate, since other European countries operate on similar time zones to our own, unlike the Far East where time differences are substantial and can therefore make the communications process more lengthy. And of course, if you do feel the need to go and supervise your products in production, this is quicker and simpler to do within Europe than the Far East.”

This growing focus on manufacturers on the doorstep is a considerable change for the premium-sourcing industry. The Far East has dominated the sector for years, providing a ready supply of the kind of items promoters want in high volumes at low prices. Although it will be a long time, if ever, before that position is seriously challenged, growing political pressures could force the pace.

The US trade war with China could spill over into Europe. Already, import quotas are making sourcing less certain than it has been for years. “Quota is worrying, so we look for alternative sources,” says Melanie Bull, sales and marketing director for sourcing house Innovative Marketing International.

Some product quotas cause more problems than others: limits on imports of soft toys, for example, are hard to deal with because they are a popular premium which is hard to source cost-effectively elsewhere. Other items such as ceramics may not present the same problems. What does cause difficulties is the way the quota system is administered: each country sets its total and importers then apply for a tranche of the whole.

“They ask what you have done in the previous year. That’s a bit stupid because you might have done a test, then want to go to bulk in the following year, so basing it on historical figures is silly. Fortunately, we have had a client doing soft toys each year,” says Bull.

Ian Madeley, managing director of sales promotion agency Logistix, sources extensively for the child and youth market on behalf of clients that include Kellogg and Jacobs. It is the sort of cereal box promotions his agency runs which are being hardest hit by quotas.

“It is still virtually impossible to plan, with the lead times we need for kids’ promotions. We don’t know now what quotas we will be able to get in nine to 12 months’ time. Customs & Excise seems able to change it at a whim,” says Madeley.

As with any market where there is a demand that is being frustrated by regulation of the supply, alternative ways of getting past the barriers are being found. One method is to buy quota from another company which has not used its full allowance. This is similar to the way UK farmers get round the milk quotas which were set by the European Commission for each farm in 1983 and which have not been changed to reflect herd growth or retirements.

This is a very British solution which is not legal in France, however.

Another loophole is the description applied to the items. If there is a quota applied to plastic toy animals, for example, and the sourcing house wants to bring in a farmyard model, it may be possible to describe the items as human figures (because they include a male and female farmer as well as the animals) or as a set, which would get maybe a dozen items listed as just one.

Madeley says: “Because of the quota problems, it is beholden on our company to fully investigate what will be done in the UK.” Substituting British products for Oriental ones is possible in certain categories.

Madeley adds that simple plastic injection mouldings with little detail can be viably sourced domestically, but adds that, “if you want more detailed items or finishing, because of the cost of labour, it can no longer be found here.”

One UK manufacturer that has been actively selling its services to the sales promotion industry is Invicta Plastics. Best known to the consumer for its Mastermind game and dinosaur models, it also manufactures the red noses for Comic Relief, as well as dayglo bicycle decorations for Monster Munch crisps, Ribena man-shaped pencil holders for SmithKline Beecham and items for PepsiCo’s “Discos” campaign.

Field sales manager Martin Gwilliam says his company has scored because it is one of the few to provide turnkey solutions, using CAD/CAM to take designs and prototypes through to tool design. “What makes what we do so rare is the facilities from designing the concept through to all stages of manufacturing, all controlled in-house,” he says.

“Today, we had a sales promotion agency here talking directly to the designer. That is something we’re placing high emphasis on – close contact with the customer, rather than sales guys on your doorsteps,” he says. While keen to recoup its ú3m investment in new, state-of-the-art moulding systems, Invicta is also aware that price is what usually swings the deal with sourcing agents.

Gwilliam points out that having a manufacturer on hand, with high-tech design capabilities, gives promoters better premiums at cost-effective prices. “In the first year of Comic Relief, they were taken by surprise when demand outstripped supply. They didn’t have a Comic Relief-designed red nose, so they bought them from anywhere and some people took advantage of that on price. The second time around, they sourced in the UK and we secretly developed a red nose that was available in high volume. It is a huge amount of money for the charity, so we have to be extremely competitive. It is a good example of what we do,” he says.

While some manufacturers have tooled up specifically to respond to the diverse demands of promoters for premiums, others are finding that the products they already make are valued for their unique quality. The UK still has some industries, such as ceramics and textiles, which can not be replicated elsewhere.

At textile printer Things Ltd, sales and marketing manager Pino Grillo says: “Clothing is generally sourced in the UK, particularly if it is to be printed with a complex design. The standard of screenprinting on garments in this country is recognised as being among the best in the world – we supply printed garments to companies overseas.”

He adds that buying on price is not always the best choice: “Although cheap labour might make the garments cheaper if sourced in, say, the Far East, you really can’t take chances with screenprinting on textiles. UK clients sourcing locally can supervise the job on site if necessary. This gives them peace of mind.”

It is a sad fact of the business world that premiums have been available so cheaply from Oriental suppliers because of the exploitative conditions in which they are produced. UK manufacturers could never reach the same cost base or operate in the same way. “If you saw the state of factories in China, you wouldn’t want to work in them. It is a completely different market,” says Bull. “A lot of companies buying promotional items from the Far East can’t begin to understand. They try to get the same deals in the UK, but it is not the same process.”

And others suggest that these different business practices sometimes work in favour of the sales promotion industry. At Branch Lines, Louis notes that payment methods such as letters of credit “probably encourage an even better service than one might get from a manufacturer who is on your doorstep”.

Madeley adds that, even taking into account the 20 to 25 days which imported goods spend on the high seas, delivery times may still be shorter from the Far East than from a UK supplier which has longer tooling-up times.

Bob Morgan, sales director at Sales Link Promotions & Incentives, which sells Dutch electrical giant Philips’ products to the promotions market, says that what matters to consumers is the brand or perceived value of the items they are offered. “People aren’t bothered about the UK as the origin, they want the brand,” he says. “If you are using something for a promotion, you want something people would go and buy.”

Morgan notes that a brand like Philips has been able to build a business in promotional merchandise because it supplies to the retail trade, too. This gives any promotion using it a high perceived value. As an example, he quotes the Esso catalogue. As the first petrol retailer to move away from giving free glasses to customers eight years ago, its first new premium was a Philips audio tape. It gave away 26 million of them. In its current, 100-item catalogue, Philips’ products account for one-quarter of the offers, but Morgan claims they account for 65 per cent of redemptions.

But UK manufacturers are determined to try and increase their share of the valuable premiums market. At the same time, clients are considering UK suppliers in greater numbers for the combination of quality, control and innovation they offer. This may even lead to a revival of some industrial sectors that have been completely edged out by overseas rivals.

Madeley says his company is working with a number of UK plastics manufacturers to explore ways in which that industry might gear up to supply the promotions industry. The incentive for suppliers is clear, he says. “There is huge potential for anybody prepared to make the investment in injection-moulded premiums.”

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