Coast-To-Coast: No. 1 For Promotional Exposure – analysis of promotional headwear market
Byline: ERIC PETERSON
FROM THEIR PROMOTIONAL BEGINNINGS IN agriculture and the Caterpillar marketing plan, hats have long been an advertising specialty staple. Over the past decade and a half, baseball caps became a fashion accessory popular with the college crowd, the golf market and just about everybody else, earning them a spot in the promotional pantheon alongside T-shirts, pens and key chains.
But there’s tumult in today’s promotional headwear market. The 21st century represents a new era in more ways than one. First off, the generally weak economy has not been a boon to anyone. Secondly, China is now a member of the World Trade Organization, meaning quotas that once kept the supply of Chinese imports in check are history. Prices for low-end promotional caps are on their way down. Finally, the ever-spinning cycle of fashion is at a low point for headwear, with fewer and fewer noggins sporting a sheath on a regular basis.
There is a silver lining to this scenario, however. As corporate buyers coast to coast eye the bottom line with more scrutiny than they did in the boom times of the late 1990s, there is a growing opportunity for inexpensive items that offer more exposures per dollar. This alone makes headwear a more enticing advertising medium than it has been in a decade. And the downward pressure on pricing could very well cause this scenario to pick up more steam in the coming year.
FOR NOW, HOWEVER, THE INTRODUCTION of new headwear products has slowed, as suppliers opt for a wait-and-see approach in lieu of growing at all costs. Aside from the lifting of the quotas on China-made product, the fact that many large wholesalers are scaling back their catalogs has catalyzed a more pronounced focus on the basics, especially when compared to the previous expansion-happy decade.
“To tell the truth, the headwear business itself has been fairly flat,” says Ron Adams, chairman of Adams Headwear in Santa Rosa Beach, Fla. “I’m not going to tell anyone we had a banner year. The last four or five months have been great for us, but prior to that it really flattened out.”
Add this horizontal trend to the fact that many large wholesalers of promotional goods are now the property of investment groups and other players from the world of finance (e.g. the buyout of Broder Brothers by Bain Capital) and you’ve got a considerably different landscape than in years past. “These companies are forcing the major wholesalers to really consolidate their lines,” Adams notes.
In Adams’ mind, the low price and improved quality of imports define the 2002 market more than anything else. The lifting of Chinese quotas “opens the floodgates for a lot of small headwear manufacturers in China who are just beating up everybody up with pricing,” he says.
The deluge of Chinese product has led many suppliers to differentiate their product from the commodity-priced onslaught – not many domestic manufacturers and importers want to get into a price war and watch their margins become thinner than they already are. Thus, while the thrust of the new catalogs for 2002 and 2003 is on the basics, not many new introductions are in the category of low-priced commodities. The 99-cent cap is a loss leader, a product that rounds out a supplier’s catalog while mid-priced and premium caps remain the sales and marketing focus.
“Pricing on hats, it’s totally bizarre,” says Adams. “Some hats are falling into the category of white T-shirts. Nobody’s making any money on them.” Regardless, says Adams, “There’s a lot of tonnage business out there for volume.”
In response, Adams Headwear is launching an Essentials line in 2003 with “prices more in line with customers who have a price point to meet.” The line includes six styles in four to five basic colors, without many of the premium features (i.e. leather straps, breathable linings) that have emerged in recent years.
Bucking the trend of wholesalers slashing SKUs left and right, the Sportsman Cap Network has tenaciously expanded its catalog. “We’ve added 180 styles from last year to this year,” says Dave Porter, general manager of the Lenexa, Kan.-based company. For 2003, the catalog will jump by another 96 SKUs, bringing the grand total to 542. “We’re probably the most aggressive supplier of caps in the United States today,” touts Porter.
“We know the market is going to rebound,” he explains. “We are spending money to be the market leader at that time. All of the new additions are in segments that were unfilled. We’re not duplicating anything.”
The niches in which Sportsman is boosting its offerings include knit caps, visors, straw hats and value-priced headwear. Porter also cites several hot niches in the market: youth sizes, NASCAR-themed hats (with racing-style embroidery on the sides and a corporate logo up front), camouflage caps, and fitted caps.
“We are positioning ourselves to be the one stop-shop,” says Porter. “The distributors are trying to be everything for everybody. We want to be the one-stop source for hats.”
Of the brands in Sportsman’s catalog, Houston-based Kati Sportcap, is one of the movers and shakers in the camouflage and racing-style niches. The company plans to expand the number of camouflage styles under its Mossy Oak license from three to six in its 2003 catalog. “Camouflage is very big in the corporate world,” says Vice President Gary Mosley. “On top of being a fashion item, hunting is very popular.”
Kati is debuting a few other products in its 2003 catalog: a new fabric called pique mesh (“It’s almost like what a basketball uniform is made of,” describes Mosley) and a Jagged Edge Visor, a crown-less version of its trademarked Jagged Edge Cap – so named for its jagged embroidery around the edge.
ANOTHER SUPPLIER THAT IS AGGRESSIVELY moving forward is Pennsauken, N.J.-based Philadelphia Rapid Transit. “Right now, we’re getting geared up for next summer,” says CEO Peter Goldman. “As hot as it is this summer, it’s going to be hotter next summer.” As a result, Philadelphia Rapid Transit is expanding its selection of canvas sun-blocking headwear in 2003.
Beyond sun-blockers, the company has stuck to its niche of “unusual hats,” says Goldman, releasing a Polarfleece football “helmet” and a line of hats with zoo and aquarium motifs for 2002.
Goldman is quick to note that China joining the World Trade Organization “is helping everything” in terms of pricing and reliability. On the flip side, “People are getting burnt already,” he adds, citing a competitor who put down a $50,000 deposit only to end up with a shipment of hats that “won’t even fit your dog.”
The absence of quotas should be a wakeup call to the industry, Goldman adds. “You can’t compete,” he says. “We’re selling hats for 99 cents. How much money can you make on that? It’s a loss leader. That’s why you’ve got to keep coming up with new ideas. If you sit and do the same hats, you’re going to die.”
THIS IS A VIEWPOINT SHARED by Brian Jewell, an advertising representative for another Lenexa, Kan.-based headwear company, Dog Daze. “It’s almost a self-fulfilling prophecy,” he says. “If you don’t provide newness out there, you don’t provide people a reason. If you don’t perpetuate the newness, you perpetuate the slowness.” Distributors “need to go in and be excited” about the products they are selling.
In response, Dog Daze is launching a Pro Mesh Cap and Visor that is in the same family as Kati’s pique mesh. “It comes out of the fashion-sport retail business,” says Jewell. The material is in the vein of “the traditional mesh basketball short,” says Jewell. “It’s a great athletic, sporty type of look. It’s not about wild colors – it will really be the excitement of the fabrication.”
Fashion colors do come into play on another 2003 Dog Daze product: a chino twill cap. “We’re taking something tried and true and doing something new with it,” says Jewell, labeling Columbia blue the current color du jour at retail, with gold, orange and pink close behind.
The last year for Dog Daze has been somewhat sobering, but Jewell still sees the market as viable and on the upswing. “Has it been a challenge? Absolutely,” he says. “But sales are still healthy. They are just growing less than they have in the past.”
As far as the influx of Chinese imports, Jewell sees a market that has not yet absorbed the price reductions and is thus very hard to predict. “It’s going to heat up dramatically in January when the new catalogs come out,” he says, projecting an upcoming price war. “It’ll take a while for the market to decide where it goes from there.”
IN THIS UNCERTAIN ENVIRONMENT, FLEXIBLE customization has become the backbone of many suppliers. One such company is Orange City, Iowa’s Legend Headwear, which has been manufacturing caps and hats in the heart of the nation’s breadbasket for 50 years.
“What Legend brings to the market is that I won’t tell you what you like,” says General Manager Gary Eade. “We build everything from scratch with 48-piece minimums.” For Mexican- and Asian-made products, the minimums are higher – 144 and 504 or 1008, respectively – but the prices are correspondingly lower.
The dissolution of Chinese quotas has reshaped Legends’ strategy. “We have had to go out and offer a price point we have never offered before.” Other products, such as electronics and premium pens, have “slipped a notch” in price, forcing the price issue further. “Nobody wants a $10 to $15 hat. They want a $5 hat. The whole industry has slid down, good or bad.”
Legend’s focus on customization has emerged to fit the needs of an ever-changing end user. “The typical hat wearer has changed. You’re not going to wear the hat your father wore,” Eade says. “Now everything is sloppy, floppy, and you can stick it in your back pocket.”
While sloppy and floppy is definitely still hot, there is little in the way of emerging styles, says Eade. “The trends are colorations again,” he notes, citing colors like Dijon, plum, and maroon. “It’s not the earth tones. It’s not the pastels. It’s that middle ground.”
STEPHANIE IVES, ADVERTISING MANAGER FOR Atlanta’s Alternative Apparel, echoes Eade’s sentiment that new colorations are the dominant trend, and the company’s 2003 catalog will reflect this inclination. Alternative’s AH70, a low-profile ballcap with a pre-curved bill, is the company’s most popular product. “It’s been such a great seller for us, we’re adding a bunch of new colors,” says Ives, mentioning Tennessee orange as a prominent example. “Right now, we offer it in 22 colors. In 2003, we’ll offer it in 35 colors, all in stock.”
Because Alternative dramatically expanded its headwear offerings in 2001, the new colors will be the most prominent product change for its 2003 catalog. We’re just taking it a little slower this year,” says Ives. The catalog itself, however, will be markedly different in format. Billed as the “Alternative Apparel Fashion Magazine,” it will include 132 pages in all, with editorial content surrounding the meat and potatoes of the catalog.
LIKE LEGEND, CHICAGO-BASED WOLFMARK Neckwear is also basing its headwear strategy on custom work. While Wolfmark carries 12 styles for its in-stock program, “I think we offer the widest selection of made-to-order caps,” says Director of Marketing Becci Hethcoat.
Wolfmark debuted a new in-stock product earlier this year: a head wrap with an elastic strap to tuck the tail into. “It looks very similar to a bandana,” says Hethcoat. “The younger crowd, they really like it.” Beyond in-stock fabrics, Wolfmark can make these head wraps from custom fabrics loaded with corporate logos.
In 2003, the company will debut a pair of new styles: a “puffy” Gatsby cap and a Billy cap that snaps in front, both urban styles that have only recently made any headway into the promotional market.
Hethcoat says that headwear has been more resilient during the economic downturn than has neckwear. “To be honest, our baseball cap business has been least affected,” she notes. “I find the numbers have remained relatively stable over the past year whereas neckwear orders have fluctuated.”
ENGLEWOOD, COLO.-BASED SNOWCAP USA is another company that has staked its business on custom orders. “Everything we do is custom and we’re always changing,” says Jeff Carlson, the company’s president. “That’s how we’ve been able to grow in the cap business when a lot of people have gone out of business or are going backward.”
Carlson notes that the number of domestic hat manufacturers has dwindled from 400 in 1992 to 40 in 2002. Regardless, he adds, “We’re up. Sales are up.”
Not every supplier paints such an optimistic picture. “The gamut for baseball caps has been played,” says Howard Seegar, president of Head To Toe Apparel in Murietta, Calif. Because China joined the WTO, “Prices are coming down… from 20 to 50 percent,” he adds. “I’m passing on the savings.”
Head To Toe is positioning itself to be in the thick of the escalating headwear price war with its new-for-2002 Price Slasher, a basic ballcap for 99 cents. “It’s a very good quality cap for the money,” says Seegar. “In the past, we could not do that.”
However, Seegar has yet to see lower prices spur demand. “It should, but it hasn’t,” he says. “It’s killed the market. Most cap companies are crying the blues, because if you have lower prices, you have to sell more caps.”
BECAUSE OF THIS, MONTREAL-BASED Fersten (whose U.S. headquarters are in New York) is pushing a merchandising strategy for its customers. “It’s not just, ‘What cap can I buy?'” says Marketing Director Atie Waxman. “It’s, ‘What else can I match with this cap and sell as a program?'”
To this end, Fersten launched a brushed polynosic cap (style number FP442) earlier this year that is designed to match with several similar shirts. It also debuted two other fabrications in 2002: a heavyweight brushed cotton style (FP490) and a washed chino twill cap (FP475).
“End users are looking for help,” Waxman says. “They aren’t looking for one-shot deals. Distributors have to adapt to it and become more than just a pen supplier.”
WHILE THERE IS NO CONSENSUS “NEXT big thing” brimming on the promotional headwear horizon, it’s important to keep in mind that end users, not suppliers, dictate what is hot and not. Retail has been sluggish because of the drab economy, and the vacuum of new styles on the department store racks does not mean the consumer is taking a wait-and-see approach as well.
As proof, Dog Daze’s Jewell points to the recent rise of the sport visor. “That visor was developed by inner-city youths cutting the tops of their caps off,” he says. “Your sports-fashion companies picked it up from there.”
“There are forces in the marketplace that will drive the next trend,” Jewell predicts. “It just hasn’t happened yet.”
Denver-based writer Eric Peterson is a contributing editor to Wearables Business.
FOAM FRONT CAPS SHOWING SIGNS OF RETRO APPEAL
For whatever reason, the hat du jour of the 1970s – the five panel, foam-front, mesh-back cheapie – is seeing a resurgence with today’s youth. Even though the macho Caterpillar caps long since went out of style the first time around, a few suppliers still offer these caps to the Generation X crowd.
The foam-mesh hat “is what started this company,” says Legend Headwear GM Gary Eade. “We started selling them to seed dealers.
“They’re coming back, Eade adds. “It has always been big in agriculture, and now it’s making an insurgence into hip-hop. All these kids want to go retro – it’s the craziest thing I’ve ever seen. It’s kind of like bell bottoms.”
Adds Head To Toe’s Howard Seegar: “It’s funny to see kids wearing them. We call them ‘old man hats.’ It’s a fad.” – Eric Peterson
HAT DECORATION: EMBROIDERY AND THEN SOME
Embroidery is still king, but the options have gotten broader by the year. If the client’s budget allows – which is no sure thing – a PPD can go hog-wild with the decoration, using everything from rubber to rhinestones.
Among the more interesting options out there are pewter logos available through Fersten. “It’s something you haven’t seen a lot of in the States, but it’s extremely popular in Canada,” says Marketing Director Atie Waxman of this patented option. “People have seen embroidery and seen embroidery and they’re looking for something different.”
Logos on interior contrast taping and on a sandwich visor are also popular, he adds. On the former, notes Waxman: “It makes no sense… but it looks cool.”
The distressed, Abercrombie & Fitch look remains hot, says Legend Headwear’s Gary Eade. “We just burn the screen and don’t knock out all of the holes,” he says of the technique.
Wolfmark Neckwear is offering a total sublimation cap as a new option for 2002. “We’ve got some really nice fabric in and are able to sublimate the entire cap,” says Director of Marketing Becci Hethcoat. “It’s a totally different look.” Likewise, Snowcap USA is offering caps with sublimated bills.
Alternative Apparel has “been doing a lot of [felt and twill] applique,” says Advertising Manager Stephanie Ives. “It’s cheaper to do it overseas but the minimums are much higher.”
While aimed at the golf market, Adams Headwear’s Ballmark Cap is an interesting option for the promotional market because the removable crown button that serves as a ballmark “is another place to put the logo, even if it isn’t golf-related,” says Chairman Ron Adams. “It’s just another place to cross-reference something.” – Eric Peterson
SUPPLIERS MENTIONED IN THIS ARTICLE:
Adams Headwear: 800-388-7395 Alternative Apparel: 888-481-4287 American Apparel: 213-488-0226 Ash City: 800-761-6612 Cap America: 800-487-2227 Dog Daze Headwear: 800-255-0406 Fersten Worldwide: 800-565-7462 Head To Toe: 800-846-8468 Legend Headwear: 800-369-5343 Paramount Headwear: 800-255-4287 Philadelphia Rapid Transit: 800-847-1110 Snowcap USA: 800-374-8227 Sportsman Cap Network: 800-221-4744 Wolfmark Neckwear: 800-621-3435
COPYRIGHT 2002 PRIMEDIA Business Magazines & Media Inc. All rights reserved.
COPYRIGHT 2003 Gale Group