Printwear has been a business success story for decades now. Anyone with grey hair can doubtless remember where the industry has come from, long-term, and it's come a long way. But as with financial services, so with business "past performance is no guarantee of future success".

So where is the business sector headed? Where are the threats, the opportunities, the strengths and weaknesses? What external factors over which we have no control will impact (for good or ill) on the industry most heavily?

Demand is strong

The overall view from the business is that, yes, the growth of the recent past is expected to continue. Tony Whitmore of Your Embroidery Service (YES) is typically bullish. He characterises the embroidery sector as being highly resilient: "It has the reputation of being a survivor and continually reinvents itself to match the demand.”

Whitmore says that corporate and club demand is staying strong and he expects that to continue through 2008. Fruit of the Loom has a similar take. Demand for its products in the UK remains strong and the company’s expectation is for another successful year. Perhaps one of the most important developments is that some of the fashion work is coming back to the UK. If that trend continues and ideally becomes consistent throughout printwear, 2008 would indeed be a positive year.

In contrast, Emma Beeson of sourcing specialist Tomato Source foresees a slowing of the growth rate but adds that "the expected financial squeeze will mean companies will be even more keen to differentiate and promote themselves to retain market share".

Threat from China

Mariusz Stochaj at Continental Clothing has a bigger world view of where the industry finds itself. He says: "The industry has the ability to grow, but only if we embrace the new technologies and the new opportunities that arise simultaneously. The pitfall for a business is to become complacent, while others develop around you and leave you behind. We need to worry about where we will be in 10 years, not one year, especially with the emergence of China. China has only just opened its borders to its own people – we will increasingly see them come into our markets to compete. First they will try the USA and then move to Europe." You have been warned!

Sales growth is all very well but it's not worth a hap'orth of cold gin if margin and profitability don't follow suit. Competition is definitely keeping downward pressure on prices and hence margins, although some overheads, both capital costs and raw materials, have reduced over the years. At the same time business rates and power costs have risen and nobody expects them to fall in the coming year. Transportation costs, too, are rising and having an increasing impact on profitability. Memo to chancellor: power prices might be beyond your control, but business rates aren't. Do something, please.

Pressure pitfalls

Tomato Source makes the point that constant pressure for price cuts is leading to non-experts going direct to manufacturers and falling foul of timescales and rules and regulations they were unaware of. Even when their chestnuts can be pulled from the fire, this serves no benefit to the industry as a whole and is likely to create a "once bitten, twice shy" reaction.

One of the woes for next year definitely relates to the non-participation in Euro 2008 of all the home nations, with England's absence hitting hardest. The unexpected success of England's rugby team has gone a little way to balancing this, but it's clear that a big sales opportunity has been lost and it isn't just those in Umbro's supply chain who will suffer.

Marketing budgets overall tend to rise year-onyear, but the marketing manager you're sitting in front of never seems to have any more money. Odd, that. This is a big consideration, but the general view is that estimating how much and where budget growth will be seen requires not a crystal ball but a hotline to God.

The product story that consistently has people enthused is the whole green sector. Mariusz Stochaj says that carbon neutral T-shirts are the big story: "Basically, anything seen as green or ethical will undoubtedly grow - it's now an unstoppable wave which will not cease growing until it hits its peak, and there is no way to tell when that will be at this point." That's a view echoed by Emma Beeson, who sees growth in "any textile made from a fair trade, sustainable source". Since these products are seen as having a premium price position, their growth may, in the next year or so, have a beneficial effect on overall margins.

Womenswear

Katie Stewart at Henbury sees the ladieswear products as continuing to be most significant. She says that this is one of the biggest improvements in the whole printwear business's offering over recent years. Customers are increasingly demanding on style, quality and durability. They're also becoming somewhat more adventurous. All of those trends she sees continuing, which is good news because better quality typically means better margins. Stewart also finds customers getting more realistic about the long-term benefits of buying quality. The industry could do worse than have "buy cheap and you buy twice" as a motto for 2008.

Meanwhile, Fruit of the Loom has introduced two new styles targeted specifically at the high volume end of the market. The Screen Stars Original Polo complements the Screen Stars Original Full-Cut T. The polo combines sector value with Fruit of the Loom quality standard. Product extension for a brand of this stature is, in itself, a demonstration of confidence in the 2008 market.

Since most businesses have an overdraft facility which they use at least part of the time, rising interest rates are a serious concern. Latest word from the Bank of England is that 2008 should see two cuts in interest rates, but I wouldn't write them into a business plan just yet.

Exchange rates can also be a problem, but just as they can work against you they can equally work in your favour. Anyone who is serious about import and export buys and sells forward in the currency markets to hedge their positions. Commentators don't seem to expect sterling to rise or fall dramatically next year.

What about events in the wider economy? Since the City, the Bank of England and the Treasury don't seem to understand what's happening, why should you or I? A house price crash would impact across all markets but the underlying demand suggests a slide is likelier. In either case some localised heartache is likely. A US recession is possible and it remains true that when America sneezes the rest of the world catches a cold. You may not see this affecting your business, but if UK divisions' profits have to shore up US corporate balance sheets, it certainly will. With $100 per barrel of oil, the Gulf is awash with money. There's a likelihood that the UAE will uncouple the dirham from the dollar. Kuwait has already done this and others may follow, which will make the market more attractive as currencies revalue.

But returning closer to home, overall most people see the printwear business growing in 2008, or at worst static. I'm a great believer in basing predictions on what's actually happening, right now. In summary, I can't do better than quote Mariusz Stochaj: "I expect the business to grow - keep positive! Besides, there is no sign yet of a decline. In fact, I have never known a time when everybody I speak to has been so damn busy!"

Paul Clapham is a marketing consultant with over 25 years’ experience covering a broad range of business sectors and a full spread of marketing disciplines. He has run his own business since 1996, working with small, medium and large companies alike to increase their profitability through marketing.

Tel: 01453 765432

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