February 2008

Who’s Decorating What

Some suppliers offer decoration services; most don’t. We surveyed top apparel suppliers to find out which offer embellishment services and which don’t – and why.

By Betsy Cummings

It only makes sense that a distributor who needs 250 T-shirts decorated for a client should rely on his supplier to order and decorate those shirts, right? Perhaps.

But toss that idea over to Mike Little, president of Team Mates Inc. (asi/90674), a decorator, and you’ll get quite a different answer. Suppliers that offer in-house decorating services, he says, “put themselves directly in competition with every independent decorator in the country, many of whom were once customers” of those very suppliers. What’s more, suppliers that offer decorating services upset the balance of an industry that relies on, or at least encourages, distributors to place orders (and share business) with both suppliers and decorators.

Some suppliers seem to agree. In fact, suppliers themselves are perhaps the most hesitant to make the decorating leap. A recent survey conducted by Wearables of the industry’s top 16 apparel suppliers revealed that only a quarter offer in-house decorating services. Most said they thought offering decorating capabilities would either not be profitable for their company or not be part of their business focus, which, for most companies, zeroed in on blank distribution only. Other suppliers, however, said they feared that offering decorating services would interfere with existing relationships they have with independent decorators – relationships they say are too valuable to risk losing.

A perceived threat
While some feel that in-house decorating makes sense, because it simplifies distributor ordering processes, plenty of suppliers and decorators are alarmed at the notion of combining such services in companies with a history of only selling blanks.

'Suppliers that offer in-house decorating services ‘put themselves directly in competition with every independent decorator in the country, many of whom were once customers’ of those very suppliers.'

Mike Little, Team Mates Inc. (asi/90674)

Part of the issue, Little says, is that suppliers, which already have a commodity to offer, cause “confusion in pricing in their attempts to establish themselves and provide business for their equipment,” much of which comes with sizeable debt. To manage that debt, suppliers might offer free digitizing of designs or free freight if distributors place embroidery orders with them. That’s not something companies such as Team Mates can (or desires) to compete with, Little says.

But it’s not just decorators who are leery of supplier decorating services. Some suppliers fear a backlash from decorators or distributors who perhaps see suppliers that offer embroidery, screen-printing or appliqué services as too aggressive in the market.

Exclusive Wearables Survey To better understand decoration options in the supplier landscape, Wearables conducted a survey of top apparel suppliers. We wanted to know which suppliers offer embellishment services and which don’t – and why. Here are the highlights from our survey: • Twenty-five percent of the suppliers we surveyed offer in-house decorating capabilities. Of those 25%, half offered embroidery only; a quarter offered embroidery and sparkles and studs; and another quarter offered embroidery, screen printing, garment printing, digital printing, laser etching and laser appliqué. • Of the 75% of suppliers that don’t offer in-house decorating capabilities, several said they didn’t feel it would be profitable for their company and that their focus was on supplying blanks. Others said that they had decorators as clients and didn’t want to become their competitors. • Sixty-three percent of suppliers that don’t offer decorating services do work with contract embroiderers who receive the blanks, embroider them and then ship them to their final destination. • Nearly 20% of all suppliers we surveyed said they recommend decorators they’ve worked with to distributors who ask.

“I think distributors feel as a whole that they’ll be knocked out of the picture if a supplier is printing also,” says Robert Bizzell, sales manager for Eye-Dye (asi/53448), a supplier that also offers decorating services.

In fact, suppliers worry so much about the perception of increased competition they’ll bring to the market if they offer decorating services that at least one has gone to great lengths to make sure it’s not seen as overly aggressive, even setting up multiple companies under one corporation to obscure the fact that it offers both ordering and decorating services to the industry. “The distributors that have in-house decorating ­– their perception could easily be that we’re competing with them, but we’re not because we’re really competing with the contract decorator,” says Rick Mouty, CEO of ProFill Holdings, (asi/300152), a company with two brands, TSC Apparel (asi/90518) and WearMagic (asi/45180), which fulfill blank orders and provide embroidery and screen-printing services, respectively.Suppliers That Decorate
Here are decorating and design services offered by some of the suppliers who participated in Wearables’ survey:
• Ashworth (asi/37128): Embroidery; design and digitizing
• Dunbrooke (asi/50930): Embroidery; embossing and debossing; screen printing; appliqué; design and digitizing
• Eye-Dye (asi/53448): Appliqué and laser appliqué; screen printing; garment printing; sequins, sparkles and studs; design and digitizing
• Headwear USA (asi/60282): Embroidery and 3-D embroidery; pewter appliqué; plastisol printing; sonic welding; liquid metal; embossed buckles and fabrics; woven labels/ woven label appliqué; custom fabric color dying; rubberized PVC badges; printed seam tapes and sweat bands; custom labeling; digitizing and virtual mockups.
• Vantage Apparel (asi/93390): Embroidery, 3-D puff embroidery and sequin embroidery; appliqué; laser etching; laser appliqué; screen printing; water-based digital printing; heat transfers; sewn-on patches; logoed buttons, zipper pulls and neck labels; custom logo design and digitizing, and a stock namedrop program. Multimedia designs available upon request.

But even independent decorators shouldn’t feel threatened, says Mouty, whose company decorates T-shirts and other apparel. “If you think about that supply chain … in promotional products [regarding] the promotional products distributor that has in-house decorating and then the promotional products distributor that doesn’t, the one that has in-house decorating is just going to buy a blank,” he says.

“The one that doesn’t can either buy a one-stop, blank and decorating purchase from WearMagic, or do a multi-vendor order where they buy a blank, drop ship it to a contract decorator and then have it shipped to their customer,” Mouty says.

The problem lies in the perception that a company such as WearMagic would sell directly to end-users, bypassing the distributor altogether, a practice Mouty says his company doesn’t do. “It’s really a perceived threat, not a real threat for distributors because our companies are set up to serve distributors better and not to go around them,” he says.

In fact, Mouty says, one of the reasons his company created WearMagic was to gain a market advantage, for his company as well as distributors, both supplying and decorating apparel so distributors could spend more time working with clients rather than managing orders through multiple vendors. About 75% of WearMagic orders are placed through TSC Apparel, Mouty says, with the rest through outside suppliers.

The decorating dilemma
Not sure why your supplier doesn’t offer in-house decorating? Below, we take a look at the arguments for both sides.

• One-stop shopping. Suppliers that offer decorating services argue that they’re the ultimate resource for distributors looking for complete order fulfillment. But others, certainly independent decorators, say that suppliers that offer decorating services encroach too much on their businesses and offer an unfair competitive advantage.

• Proper decorating management. An embroidery machine can cost upward of $200,000. Suppliers that buy them and then venture into the decorating side of the business often don’t understand how to properly maintain profit margins on decorating orders and can’t always offer a sustainable business model, some say.

• Business competition. For independent decorators who rely on suppliers to place decorating orders with them, suddenly seeing that business dry up after suppliers start decorating themselves is not only bad for business, but a poor business practice, some decorators say. Suppliers counter that they still steer plenty of business to decorators.

The good, the bad and the ugly The real danger, some decorators say, is the huge expense, training and production management roles suppliers take on when they become decorators. Many think providing such a service will boost their profit margins when really it can send them reeling. While margins on decorating versus supplying blanks alone do tend to be higher, the overhead that comes with decorating products can offset those initial margins. “The startup is really expensive,” says Barbara Azcuy, vice president of World Signature, Inc., a division of World Emblem International Inc. (asi/98264), a decorator with more than 200 20-head machines and a near 24-hour production schedule. “These machines can cost from $60,000 to $200,000. It’s a big barrier to entry. If you’re not experienced, you can damage garments and that increases the cost on items you’re producing.” More to the point, suppliers that deal in blanks only have an easier business model under which to operate, industry experts say. “If I’m an importer, which most suppliers are, selling blanks makes it really easy” to conduct business, says Tony Karlicek, CEO of Headwear USA (asi/60282), a supplier and decorator that produces headwear. “A huge warehouse and a couple of sales and marketing folks and I’m open and ready to do business,” says Karlicek, whose international parent company is 34 years old and has been operating in the United States for four years. “But if you want to decorate, now you have a couple hundred thousand invested in embroidery equipment, operators you have to pay and digitizing. You have to keep artwork on file, manage the orders, approvals and have product liability. Once you start offering decoration, it immediately complicates your business.” Still, those complications don’t outweigh the market advantages, which Karlicek says, include a stronger supplier-distributor relationship. “With us they can send in the order and artwork, deal with one person,” he says. “It’s all streamlined so that energy can be placed into beating on more doors and discussing more projects with end-users, instead of spending 10 minutes to do our order and 10 minutes to spend with a decorator. And, maybe they’re not even doing the logo, so the distributor has to go somewhere else for the artwork.” Suddenly three vendors are involved and the project just got exponentially more complicated, he says. “To me, it’s like the reason grocery stores have grown so big, as opposed to going to a butcher, then say a farmer’s market to get vegetables, then The Home Depot to get cleaning supplies,” Karlicek says. “You go to one place and get it all done in one stop.” Distributors say their costs can be lessened by one-stop shops as well. Tack on shipping from suppliers to decorators to end-users and suddenly a $3 T-shirt goes up another $1.50 a shirt, says Beth Wharton, owner of distributorship Promotivators (asi/301431). Wharton, who works with Headwear USA at times, says the company is the exception among suppliers, with as many as 70% of the suppliers she works with not offering decorating services. Still, plenty of suppliers are moving in that direction, looking for new ways to enhance relationships with distributors and bring more to the marketplace.

BETSY CUMMINGS is a senior writer for Wearables.