Can Decorated Apparel Deal with the Downturn?

Impressions survey shows industry focused on growth and expansion despite the spate of bad economic news.
July 1, 2008

By Richard Lebovitz, Editorial Director

Despite the dark clouds looming over the U.S. economy at the start of the year, apparel decorators and promotional consultants responding to the 2008 Impressions Decorated Apparel Universe Study were largely upbeat and focused on the strategies required to sustain and grow their companies.

To what extent their businesses, like many others, will feel the effect of the falling housing market, tighter credit or soaring fuel costs remains to be seen. Nonetheless, the responses we gathered at the end of the first quarter from a comprehensive poll including Impressions subscribers, Promotional Products Association Intl. (PPAI) and Specialty Graphics Imaging Association (SGIA) members indicated that many had already committed to a substantial investment in capital equipment and that many more planned to do so before the end of the year.

Capital Investments
While there are many indicators that reflect the general health of an industry, perhaps the most telling for the decorated apparel industry is the investment in capital equipment, including software. Hiring is an indicator, but with so many owner-operated businesses, it alone cannot tell the full story. Likewise, relocation shows part of the picture, as a very high percentage of decorated apparel businesses are home-based. No matter how large or small a company is, however, it needs periodic equipment and software upgrades, and those that are growing or diversifying need new equipment to meet customer demand for more product and different decoration processes.

Nearly one-third (31%) of respondents indicated they planned to make major purchases of decorated apparel equipment in 2008, and another 11% reported that they already had made purchases. Only 32% said they had no plans to buy. That's the same percentage that said in the 2007 Impressions Decorated Apparel Universe Study that they didn't invest in equipment in 2006. Of course, there's always going to be a variation between saying you're planning to buy something and saying you actually bought something, but as a forward-looking indicator, in a struggling economy, this response seems to us a positive sign.

In addition, the survey respondents' equipment and software investment choices also compare favorably to past surveys. For example, in the 2005 Impressions Decorated Apparel Universe Study, when we asked the same forecast question, 21% indicated they planned to buy embroidery equipment, compared to a total of 45% in this year's survey. Also, in the previous study, 16% indicated they planned to buy screen printing presses compared to 30% now. Likewise, 12% indicated they planned to buy heat presses vs. 23% now.

Three years ago, digital direct-to-garment printing was in its infancy, and only 4% of respondents indicated plans to buy such equipment. Today, that figure is 27%. Vinyl cutting is another growth area in today's decorated apparel industry. In 2005, 5% of respondents indicated plans to buy vinyl cutters. Today, that figure is 21%.

Notably, digital direct-to-garment printers, small (2- to 8-head) embroidery machines and heat transfer presses top the list of equipment purchases. Graphics software, a must-have in today's diversified digital shop, heads the list of software purchases.

Growth Markets & Strategies
In terms of markets, the top five customer groups forecast for growth in Impressions' 2008 study are the same as in our 2005 study: local businesses, athletic teams, education, not-for-profits and retail (Note: Construction was not included in the 2005 study). Because businesses still have to advertise, teams require uniforms and schools need fund-raisers, these three perennial top markets are key to the decorated apparel industry's ability to weather economic downturns.

Given that institutions, in general, are noted to be recession-resistant if not recession-proof, it's surprising that such small percentages of the respondents expected health care and government to contribute to their business growth in 2008. However, these are not easy industries to serve either. Currently, government, health care and education are the only industries showing employment growth.

As for growth strategies, the top two in 2005 were finding new customers and increasing business with current customers, and they are once again the top two for 2008. In addition, respondents say they are planning to try new advertising and marketing methods to reach customers, which is somewhat of a departure for an industry that relies heavily on word-of-mouth advertising. The apparel decorators and promotional consultants surveyed also indicate plans to enter new markets and add new products.

Though there has been no let-up in the rise of gas prices or decline in the housing market since we conducted this survey, and the talk of inflation has now replaced talk of recession, the respondents give every indication that they are keeping their business plans on track and not letting the state of the economy get them down.

Methodology: The 2008 Impressions Decorated Apparel Universe Study is based on an e-mail survey delivered from March 12 to June 11, 2008, to 22,530 Impressions subscribers and Special Graphics Imaging Association and Promotional Products Association Intl. members. A total of 2,616 complete questionnaires were received for an effective response rate of 11.6%. Based on an estimated population of 55,922 decorated apparel companies, the overall survey has a confidence factor of 95% with a margin of error of +/-2%.

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