Off the Cuff: Crisis vs. Opportunity, Part 1

You already know that the general state of the economy's not good, but the reality for apparel decorators may not be as bad as for other businesses.
March 31, 2008

By Mark L. Venit, MBA

[The Chinese character for crisis, wýýi jýý (Figure A), in Mandarin, looks similar to the Chinese character for opportunity, or jýý huay (Figure B). This similarity, in addition to other factors I'll leave to the linguistic experts to argue over, has led to the mistaken notion that in Chinese culture, a crisis is regarded not merely as a danger but also as an opportunity.

John F. Kennedy, Richard M. Nixon and, most recently, Condoleezza Rice and Al Gore number among those who have misused what Victor H. Mair, Professor of Chinese Language and Literature, University of Pennsylvania, describes as a "grossly inaccurate formulation." Even Homer Simpson once joined in the game, coining the word "cris-atunity."


Figure A. Crisis



 
Figure B. Opportunity
 



Whether the interpretation is correct or not, those of us who like to look on the bright side of things, who believe that "every cloud has a silver lining" or view the glass as "half full" rather than "half empty," will acknowledge that the context of crisis vs. opportunity certainly bears great relevance in dealing with today's uncertain economy — and what's likely in store for apparel decorators in the months ahead.]

The Year That Is
Many companies in our industry will doubtless face tough going, and some are already feeling the pain. The second quarter is historically the strongest for those of us in the custom decorating sector of our trade, but the sailing this spring could be bumpy. In addition, other factors are likely to exacerbate the softness in the general economy. These include:
 
•    the continuing drought in parts of the nation,
•    the lingering effects of Hurricanes Katrina and Rita along the Gulf Coast and across the South Central region,
•    the staggering impact of a decline in U.S. auto manufacturing in Michigan and nearby
states,
•    and the troubles in the general housing and construction markets.

If you own a screen printing business in southeastern Michigan or northern Ohio, many of your customers own businesses that are experiencing dramatic losses. The unemployment rate in the region is the worst in the nation, engendering a precipitous further decline in sales and unit volume for decorators and promotional products distributors.

If your region is suffering from unprecedented drought, orders from just about every firm in landscaping and related industries have shrunk dramatically.

If your account base includes a lot of small construction companies, you're also feeling the hurt.

Moreover, economic activity in other businesses in these diverse "food chains" also is undergoing strain and dislocation.

Equipment manufacturers and vendors of ink, thread and other consumables are feeling the pinch, too.

So much for the news you already knew, and the "buzz" in the trade that things are not looking good.
 
The Year That Could Be
The reality, however, is somewhat different from the perception, and the possible outcome considerably brighter. Here are some facts you should know to put the conventional wisdom and the downer syndrome in perspective.

1.    Historically, our industry has proven remarkably resilient to economic downturns in the U.S. economy. For those of you who have only recently joined the decorated apparel industry, it may help to take a stroll down memory lane:
a.    During the recession that occurred late in the Carter presidency, the industry experienced undiminished huge growth, occasioned by the mushrooming of the T-shirt phenomenon.
b.    During the Reagan recession — when the prime interest rate eclipsed 20%, precipitating one of the largest tax cuts in history – decorated apparel sales volume and unit increases still grew by 1% to 3% annually in all categories.
c.    During the 1990-91 recession that plagued the presidency of the elder George Bush, we continued to add dollars and volume.
d.    During the late Clinton-era recession, the industry experienced a slight dip in overall dollar volume but not in unit sales.
e.    Except for the two quarters immediately following 9-11, we've continued to weather whatever storms, actual or economic, blew across America and Canada.
f.    During the past six years, as the economy has continued to grow, our industry's sales and units have steadily grown as well, even slightly ahead of most economic indicators.

Though the case that our industry is recession-proof cannot be advanced, especially now with some heavy braking underway, by any standard, we've certainly demonstrated that sales of decorated apparel are indeed recession-resistant.

2.    Historically, the sales of teamwear evince little, if any decline in tough times. Folks still play their favorite sports, leagues continue to operate year after year, and young boys and girls keep growing bigger and taller. Athletic garments are among the safest bets come what may in the general economy.

3.    Casual workwear will still be mandated and accepted wherever it already is today, and the trend toward more comfortable workplace apparel will continue, albeit considerably slower in acceleration given that decorated workwear in the workplace is approaching saturation levels. Yes, any increase in unemployment will likely cause a concomitant decline in unit sales, but even in the worst of times during the past three decades, the unemployment rate rarely went much beyond 6%, and it has been only 4-5% during the past six years.

Whether we're about to experience a recession — defined as two consecutive quarters of negative GDP (Gross Domestic Product), and we haven't had even one yet — is a matter for conjecture. Whatever lies ahead for the North American economy, apparel decorators will weather it largely intact, and those who can use it to their advantage will weather it rather well!

We'll discuss how to do just that in Part 2, which will appear in the April 15 edition of the Impressions Newsletter.

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He is also the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. He will be teaching a new all-day workshop, "Getting to the Next Level: Surviving and Thriving in Good Times and Bad," at the upcoming shows. You can reach him at markvenit@cs.com.

Off the Cuff: Confidentiality Agreements
Confidentiality agreements protect more than your assets. Just as importantly, they protect your customers.
Some of you might recall a column I published last November that addressed how to keep contract customers out of your production area in order to protect your work. This week's column looks at the other side of the same coin -- employee confidentiality agreements. These are legal agreements that are intended to keep your employees from talking about who's placing orders, for what quantities and dollars, what's being produced and who the end-user might.
September 15, 2008

Off the Cuff: How to Charge for Rush Service
Charging for rush service is justifiable, but be sure to outline  policies upfront and inform your customers.
The issues of whether and what to charge for rush service are common in the decorated apparel industry and there are valid arguments on all sides. Most companies feel they’re entitled to some degree of additional compensation for going our of their way to accommodate a rush order, for bumping other customers a notch or two back in the production line and for having to deal with the potential hazards of doing something faster than necessary. Oh, and the more sanguine reason: you can, if you choose, stick it to ’em when they’re on the ropes.
August 29, 2008

How to Profit from the Tax Write-Off for Conventions and Trade Shows
Thanks to Uncle Sam, you can deduct certain trade show and conference expenses from your income tax filing. Learn what’s deductible — and what’s not.
Imagine an enjoyable — and educational — vacation with Uncle Sam picking up part of the tab. That's right, every decorated apparel business, the owner and employees of that business (even someone who is a shareholder/employee), can legitimately claim an income tax deduction for the expenses paid or incurred in attending trade shows, conventions and meetings.
August 18, 2008

Tax Breaks for Education — What Every Decorated Apparel Business Owner Needs to Know
Embroiderers, screen printers and promotional products distributors can profit from breaks in the tax code to educate their employees and themselves.
Finding, hiring, training and retaining “smart” workers have long been key factors in the success of small businesses, including decorated apparel companies. Lawmakers have also recognized the importance of a smarter workforce and created a number of educational and training-related tax breaks and incentives. Those tax benefits allow every commercial embroidery, screen printing and promotional products business, large or small, to offer training and education as a “fringe benefit.”
August 04, 2008

Economic Stimulus Package Offers Tax Break for Equipment Buying
Decorators interested in expanding their business or replacing old equipment can rejoice in the new round of government incentives designed to help small business owners.
Earlier this year, Congress passed, and the President signed, the Economic Stimulus Package of 2008, a $168 billion economic “rescue” package that included rebates for taxpayers and tax breaks for businesses. In addition to those tax rebates, the heart of the package, there also were tax breaks for businesses such as decorated apparel operations — breaks retroactive to the beginning of 2008!
July 21, 2008