An Update on the Asian Market and its Effect on the Promotional Industry

While the promotional industry was hopeful that the outlook for the Asian market in 2011 would brighten with the beginning of the year, it has been disappointing to find that there have been little improvements. While negotiations are still taking place, the overall cost situation seems to have actually become more difficult in a number of ways. Here are the highlights for the three most critical issues.

Labor Costs: Many had been hopeful that the issue of labor peace would be resolved with the wage increases granted to workers throughout Asia during the fourth quarter of 2010. Unfortunately this was not the case. Instead, increasingly militant groups of employees have been leading vocal protests daily both in Cambodia and Bangladesh. What should have been a resolution will now inevitably lead to further wage rate negotiations between the employees and the factories, resulting in higher production costs.

Production & Raw Materials: The dramatic shortage of production capacity has been further impacted with the unbelievable rate of factory closures in Asia. The basic concepts of supply and demand have made it a "producers market" as far as establishing garment pricing. In addition to the production/supply issues, the industry is faced with unrelenting cost increases on raw materials. Cotton prices remain at all time highs with additional increases sure to come. No relief is in sight on this matter until at least 2012. The switch to polyester as an alternative price sensitive fabric was short lived and has now been dramatically impacted as well, leaving no choice but to watch raw material costs soar.

Prices of Oil: This is a serious issue for all of us in regards to overall costs. The current increase in oil prices will impact the shipping costs negatively for all importers, especially when combined with the continued shortage in vessel capacity. Higher oil prices also affect the cost of synthetic fabric production on outerwear, polos and even basic layering pieces.

These issues with products and raw materials being manufactured overseas are expected to increase the costs of finished decorated goods up to 27%. Due to varying levels of preparations, the price increases will hit different suppliers to the promotional industry at different times. Some suppliers were able to increase their stock levels prior to the cost boost on raw materials taking effect, hopefully resulting in a delay to the inevitable price surge, while many new products may start at seemingly high price points. Regardless, you can expect to see constantly fluctuating prices on promotional goods throughout 2011.

So where does all this leave you? We recommend openly discussing these issues with your distributor when purchasing any branded products, and using them as a resource. It will be more important than ever to give as many details about your promotions as possible, as well as your goals for each. Keeping in mind what you hope to accomplish, your distributor will be able to shop around and give you product options that will not only help you accomplish your objectives, but that will provide you with the biggest bang for your buck at any given time within the constantly changing market.