Future Threats Facing Our IndustryPresented by Larry Cohen, Axis PromotionsSeptember, 2017
“Anytime you make something simpler and lower friction, you get more of it”
Jeffrey P. Bezos, CEO Amazon (A Possible Tipping Point In Apparel Retailing, The New York Times, May 2017)
“I’ve never seen the speed of change as it is today. If I could go back 10 years, I might have done some things earlier.”
Mickey Drexler, ex-CEO of J. Crew(J.Crew’s Mickey Drexler Confesses: I Underestimated How Tech Would Upend Retail, WSJ, June 2017)
•Technology is impacting every industry. Those who can adjust, can pick up market share.
•You might be surprised which company has provided the greatest return to their shareholders over the last 7 years
“We are witness to a seismic change in consumer behavior. Any company sitting here today that embraces the status quo as a business proposition … is literally facing a collision course with time.
Howard SchultzCEO Starbucks
Interior Threats
Marketing Myopia
What business are we really in?
Nearsighted focus on selling products and services, rather than seeing the “big
picture” of what consumers really want.
Successful companies focus on customer needs, not their own products and
services, which can—and will—be replaced by competitive alternatives, either ones
they make themselves or those produced by existing or potential competitors.
Disruptions are constantly challenging the stability of industries.
Marketing Myopia
Profit Cannibalization● Compensation Structure - Too many “old school” companies have commission
structures that are unsustainable
● Rising compliance and technology costs - The average SMB spends 6.4% of its
annual revenue on IT expenses.
● Pressure on margin, Rebates, Pre-bates
● Easy to get fragmented
● Where does a business owner put their resources?
Our Clients A Lot Know More
● Buyers come to the table with a lot of knowledge
● Increased knowledge puts pressure on sales teams to be more creative and
solution based
● Are we a distributor who moves product which makes us more like a supplier,
or are we adding value (creativity, compliance, cost savings etc)
● If we don’t add value there will be a gradual erosion of sales
Changing Demographics
Today, the 70%+ of workforce are digital natives
B2B Buyer Demographics
▪ 48% of B2B buyers are aged 18-34 – up from 27% in 2012
▪ Today, the majority of B2B buyers are now digital natives (born in the 1980’s and 90’s with the influence of digital in their daily lives)
Changing B2B Buyer Behavior
▪ 94% of B2B buyers report that they conduct some form of online research before purchasing a business product
▪ 70% of B2B buyers surveyed said they would spend more of their budgets online if their suppliers' websites were easier and more convenient use.
Digital Challenges to Smaller Distributors
● Everyone needs a digital strategy
● Automation, Web, Email, Social
● IT costs favor larger distributors/suppliers
● Companies are digitizing their businesses. At some point, all processes
will be digitized from end to end
Filling Technology Void
Industry of Data & Trends
M&A ActivityPrivate Equity
• Alpha Broder - Prime – Jetline• Hub – Beacon• Cimpress/Vistaprint – National Pen• Deluxe – Inkhead• Brand Addition – Gateway• Gildan – Alstyle• Halo – CSE Newton, Harvey-Daco, etc• BDA – SwervePoint
• AIA• AlphaBroder• BIC/Norwood• DiscountMugs/BelPromo• HALO• Hub Pen/Beacon• PCNA
Recent M&A
Money Can Disrupt & Corrupt
● Private equity impact on supplier distributor relations
● When will a large supplier buy a large distributor?
● Will more distributors feel the need to sell out due to the threat?
● Zazzle & Boundless - little impact since zazzle was morely digital
● What happens when Alpha buys HIT, or Leeds buys Halo?
Industry Fragmentation
40
3,000
889 21,577 40 3,000
Distributor Sales by Size
Market Share of Top 40 Suppliers
Online Sales Growth
+10% +12%
-3% -3%
2010-15 Growth
2016-20 Growth
ONLINE
TRADITIONAL
Online Distributor Sales By Group
Non Supplier Purchase Trends
Distributor Profit Trends
External Threats
New Biz Models Entering the Industry
● Amazon Custom Fast
● China Direct
● Artificial Intelligence
● 3D Printing
Manufacturer WholesalerRetailer/
Distributor
Installer / Service
Provider
End Customer
Resale / Reverse Logistics
Shipping and Delivery
Finance
Technology
Other Value-Chain Services:
Traditional B2B ValueChain:
Amazon Custom Fast
Amazon Custom Fast
Amazon Echo Look
Amazon Custom Fast
Amazon - “5 Day Custom”
● In April Amazon received a patent for on demand apparel manufacturing,
though there is no guarantee that it will pursue the plan.
● “Amazon has developed a camera and scanning software designed to
automatically determine customers’ measurements and upload them to
their accounts….”
A Possible Tipping Point In Apparel Retailing, The New York Times, May 2017
Fast CustomTextiles on Demand - 1 Piece Minimums
China Direct - Small Order
● Current value chain is too long
● Getting faster and getting better
● Tech enables transparency which enables transactions
• Small quantity
orders for lower
prices, delivered
faster!
China Direct - Small Order
• The world is getting smaller through services like “Wish”.
China Direct - Wish
China Direct - Wish“Wish certainly illuminates the
peculiarities of international
shipping, but it casts a much brighter
light on the state of globalized
manufacturing and commerce. In
fact, if offers a somewhat convincing
vision of what they might become in
the near future”.
The Online Marketplace That’s a
Portal to the Future of Capitalism,
The New York Times, May 2017
China Direct - EpackET● EpackET shipping has made buying and shipping products from China a lot
easier
● A fast and affordable shipping option for light packages (the maximum length
of a package is 24”and maximum thickness is 36”)
● Designed for e-commerce
● Undeliverable mail return & end-to-end tracking at no additional cost
Artificial Intelligence Artificial Intelligence Will Change Everything
● It will change how we buy
● Transparency will make things more difficult
● We will know all about Suppliers
● “AI” enabled gifting
Artificial Intelligence ● About half the activities that people are paid to do in the global economy have
the potential to be automated.
● 45.6% of work activities can potentially be automated. 50% of work hours are
in production jobs and 9% in administrative support jobs, which are both
activities with a relatively high automation potential.
● Globally, 1.2 billion full-time equivalents and $14.6 trillion in wages are
associated with activities that are automatable with current technology.
● At the same time, all countries will need to evolve and create policies that help
workers and institutions adapt to the impact on employment.
Artificial Intelligence - Albert
Artificial Intelligence - Alyce
Engagement Commerce
“We should focus on designing a system that allows humans and computers
to easily collaborate together so each partner can build upon the other’s
strengths and counter the other’s weaknesses. Along the way, humans will
rise to the challenge of working with a strong machine partner”.
There Will Always Be Limits to How Creative a Computer Can Be, Harvard Business Review, April 2017
3D Printing● 3D printing: The price of the cheapest 3D printer came down from $18,000 to
$400 within 10 years. In the same time, it became 100 times faster.
● Spare airplane parts
● Space station now has a printer.
● In China, they already 3D printed and built a complete 6-story office building.
● At the end of this year, new smart phones will have 3D scanning possibilities.
3D Printing Shoes
3D Printing Shoes
3D Printing Shoes
3D Printing Homes
E-Commerce Will Go Upstream
● B2B and B2C ecomm companies will start to offer higher end Merch.
E-Commerce Will Go Upstream
Thank You
