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Insight into the SA Corporate Gift Market by Perkal

The corporate gifting industry
in South Africa is like a
three-tiered wedding cake:
the supplier is the bride, the
reseller the groom and the
brander the best man. To
continue this happily-ever-after analogy,
there is also a guest of honour at this
particular wedding: the end-user who
ultimately buys the combined efforts of the
other three.

For years now, this network has worked
perfectly well for the benefi t of the entire
industry, but now a growing number of
insiders are concerned that the marriage
might be in trouble. In this instance, the
spanner in the works seems to be in the
hands of point-of-origin sellers, who are
now dealing directly with end-users, from
giant corporate entities to small business
operations, all in the name of cutting costs in
a recessionary climate.
What they’re really cutting out, however,
is the middleman, the reseller who has been
the glue of this particular business marriage
from the very beginning.

Little, if any, research has been conducted
into this trend, in SA or overseas, but
a recent article published by the British
Promotional Merchandise Association
(BPMA) provides information that local
resellers would do well to heed.
According to the BPMA article, the
industry is ‘up in arms’ at the growing
number of suppliers selling direct to
end-users. ‘The reason behind their dismay
is clear: suppliers can obviously charge
much lower prices than the distributor.’
‘Distributor’ being the British term for
reseller. When price is a critical factor
in determining who the end-user deals
with, some resellers feel they’re being
‘squeezed out’.

Resellers are the heart of our industry, the
vital organ that keeps the rest functioning
properly and profi tably. They provide the
end-user with an array of cost- and timesaving
services that makes their continued
involvement vital to industry growth and
progress. In brief, resellers are at the
coalface with end-users: they develop
merchandising ideas based on solid
experience and understanding of industry
needs; they source the products to match
end-users’ campaigns; they scour suppliers’
catalogues and attend trade shows to source
merchandise for their clients; they fetch and
deliver samples, branding approvals and
presentations. Most importantly, they deliver
the end-user’s goods in time for any launch
or promotion.

What end-user can afford the time or
the expense to perform any of these vital
reseller functions? Precious few.
BPMA Director Gill Thorpe says, ‘I don’t
think this is happening as much as some
people claim. There have always been
suppliers who sell direct, thinking they can
make a quick buck, but they’re known in the
marketplace, and those who win and grow
are those who work to the reseller channel,
building long-term partnerships and working
to their strengths.’

Evan Lewis is a trade-exclusive supplier.
He says, ‘We are seeing many more
businesses claiming to be independent
suppliers; however, while a business may
be trading as a separate company, it’s
operating from the same office and is run by
the same people who sell to the end-user.’
Lewis believes the credit crunch has led to
an increase of suppliers dealing directly with
end-users: ‘The current climate is making
it harder than ever to produce profi ts, so
organisations are no doubt turning to any
means to maintain their bottom line. Still,
I don’t think hindering the relationship
between supplier and reseller will benefit
suppliers in the long term.’

Many industry players affirm that the
reseller network is a critical part of the
business. Industry expert David Long says,
‘We believe the reseller adds signifi cant
value to the end-user in creative expertise,
sourcing skills and production management.
The reseller saves an end-user valuable
time. To source each product individually
is time consuming and few end-users are
willing or able to do this.’

Supplier Andrew Hill says, ‘We need
a strong reseller network to promote our
products. Resellers are essentially our sales
force. We cannot live in isolation from each
other, and diluting our relationship will cause
friction and hostility.’

This article was published on Wednesday 01 August, 2012.

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