P-O-P Producers Trend Report 2005

P-O-P producers interviewed during the last quarter of 2003 reported that, following a sharp downturn in the economy during 2002, business began to pick up during 2003. They expected even more improvement in 2004. In the story that follows, many report that their expectations for 2004 were largely realized, and they expect 2005 to be even better."Tight budgets remain a significant factor," says David McBride, executive vice president of Taurus Display Corp., Moorestown, N.J. "However, we did see them loosen a bit during 2004 and, although we don't expect any quantum increases for 2005, we do expect it to be a pretty good year."Louis Hsiao, president of Concept Designs Inc., Palo Alto, Calif., also expects business to increase during 2005. "One of our major clients markets consumer electronics through specialty retail stores," he notes. "Not only is this one of the hottest areas of the economy, but competition is fierce and in-store displays play a major role in helping consumers make up their minds which brand to purchase."Dean Rinicella, president of Darko Inc. of Twinsburg, Ohio, agrees. "We saw some budget increases during 2004 and expect this trend to continue into 2005," he says. "Our primary focus is permanent and semipermanent displays and fixtures, and as both brand marketers and retailers continue to fight for increased market share in the face of increased mass media 'clutter,' in-store displays are becoming an increasingly important part of their overall marketing strategy."Paul Pinkus, national director, In-Store Marketing and Store Design Industry Group with American Express Tax & Business Services, Chicago, cites this as one of the reasons for his prediction that expenditures for P-O-P during 2005 will experience a healthy increase over 2004. "For one thing, there is a strong resurgence in retail in general," he explains. "Many retailers are reporting dramatically improved earnings and strong increases in same-store sales. At the same time, there is an increased awareness on the part of both retailers and brand marketers of the impact of in-store marketing on consumer purchasing decisions. This has been, and will continue to be, an ongoing evolution."A major reason for this evolution, according to Pinkus, is the overwhelming amount of clutter in the mass media. "There is a definite tendency on the part of major brand marketers to shift promotion dollars away from television and into the store," he explains. "This is driven largely by the proliferation of channels currently available. Not only does the brand marketer have to decide on which channels the commercials should appear, but viewers now have the ability, because of TIVO, to eliminate TV commercials entirely."A Double-Edged SwordAt the same time that increasing clutter in the mass media is driving promotion dollars into the stores, however, it is also creating new challenges for P-O-P producers attempting to compete for increasingly valuable floor and shelf space. "The battle for the attention of the consumer has become much more intense," says Lisa Boyd, director of marketing for Graphic Converting Inc. of Niles, Ill. "As a result, we have gotten much more involved with enhanced packaging, offering our clients techniques such as foil stamping, embossing and window patching. These processes provide attention-getting effects that are essential in the fight against retail clutter."Taurus Display's McBride agrees that in-store clutter can be a problem. "We are producing packages that hold multiple products," he explains. "We make them out of clear PVC so all of the products inside are visible."But brand marketers are finding that they are not always competing with other brand marketers for in-store promotional space. In many cases, the retailers themselves are using P-O-P displays for their own purposes. "We produce quite a bit of signage for specific retail accounts that use it to highlight a sale, holiday promotion or event that they are having," says Graphic Converting's Boyd. "This signage is, of course, unique to the individual retailer and appears throughout their stores, often in highly visible locations, making it even more difficult to compete for the consumer's attention."Brand marketers, however, are beginning to view retailer's efforts to differentiate themselves from their competitors not as an obstacle but as an opportunity for account-specific promotions. "During 2004, a number of our brand marketer clients asked us to design and produce account-specific P-O-P," says Michael Draver, president of Wetzel Brothers, Cudahy, Wis. "We fully expect this trend to continue throughout 2005 as promotions become more and more tightly targeted."Hsiao of Concept Designs says that his company is becoming increasingly involved in account-specific promotions. "One of our major clients markets through electronic specialty chains like Best Buy, Circuit City, Radio Shack and others," he explains. "Quite often, there are rollouts of P-O-P specific to a particular chain. This can take the form of account-specific graphics or accommodations for specific requirements such as security cables, for example. We have also done projects for other clients who require the P-O-P to be specific for one of their key accounts, which may be requesting, for example, pegboard interface."New Players In The GameStill another indication of the increasing importance of P-O-P is the fact that some brand marketers who have not previously made use of aggressive in-store displays are now beginning to do so. One example is Tom's of Maine, which has a 30-plus-year heritage but had never before utilized a permanent full-line merchandiser. "The company markets a full line of all-natural products, but consumers had low awareness of it and retailers often did not give it prominent on-shelf positioning," says Joe Berzok, senior vice president of sales for Diam International of Woodside, N.Y. "We developed a Natural Care Center as the first permanent off-shelf merchandiser in the brand's history. Initially designed for placement in health food stores, it displays the full line and, because it has modular trays, it can easily be converted to merchandise trial sizes and category-specific products."Because the display was so successful and generated significant incremental sales, Tom's of Maine requested a similar solution for key drug chains such as Walgreens and Bartell's. "For these retail locations, we needed to adapt the basic look to a more compact endcap yet still keep it consistent with the freestanding unit," explains Berzok. "We developed it as a universal fixture to hold either spring-fed full size products or dump bins for trial sizes with shelves that can be adjusted in countless configurations to accommodate various product loads."In anticipation of increased business during 2005, many P-O-P producers are expanding and upgrading both their design and their manufacturing capabilities. "This has been a year of significant investments," says Jean-Andre Rougeot, CEO of Diam International. "In October, we announced the opening of our new state-of-the-art facility in Yonkers. We have also invested in new injection-molding machines and other equipment needed to expand our production capabilities." Wetzel Brothers has also made significant investments in new hardware and software, according to president Michael Draver. "We installed a new printing press with UV-curing capabilities," he notes, "as well as new mounting, die-cutting and miscellaneous finishing equipment. We have also added Artios CAD seats and Mac G-5's, and upgraded our Illustrator and Photoshop software."Other P-O-P producers are also investing in new facilities. "We put in an additional cutting table with upgraded software," reports Taurus Display's McBride. "We are also currently in the process of adding a prototyping department for permanent displays.""We are constantly updating our design hardware and software," says Darko Inc.'s Rinicella. "We recently purchased new computers, both PC- and Mac-based systems, to accommodate our industrial designers and engineers. We also purchased a new Encad large-format printer, as well as additional software Iron CAD and ProE programs." Concept Designs has also made significant investments during the past year, according to President Louis Hsiao. "We added G-4 and G-5 Powermacs, cinema screen displays, a vinyl lettering system, an 11 by 17 HP color laser printer and an Apple Airport Wireless system," he reports.Putting People In PlaceP-O-P producers are also continuing their recruiting efforts, especially for qualified designers. But they report varying degrees of difficulty in finding good talent. Kathy Socha, president and creative of Phase One Design Services, Atlanta, Ga., for example, finds talented and qualified designers to be in adequate supply. "We recruit directly from design schools, and also find more experienced designers, including freelancers, by networking with people at industry events," she says. "We also offer an internship program for people still in college." Graphic Converting's Boyd, Darko Inc.'s Rinicella and Taurus Display's McBride all agree that designers are in adequate supply.Jimmy Vianu, vice president of Concept Displays/The Pro Design Group, Gardena, Calif., disagrees. "Talented designers are tough to find," he says. "We do a lot of networking at industry events to locate both potential full-time employees and freelancers, which we use when we face tight deadlines or have a lot of projects going on at the same time." Both Draver of Wetzel Brothers and Hsaio of Concept Designs also find qualified designers in short supply. Both companies, however, prefer to rely on full-time employees and are building for the future by recruiting directly from design schools and offering internships to designers still in college.Mike McMenimen, president of McMenimen & Associates Inc., a recruiter specializing in the P-O-P industry, however, sees no significant increase in total industry hiring from 2004 to 2005. "A general trend we have seen in 2004 has been the demise of weaker companies and a natural strengthening of well-managed ones," he says. "In fact, although our search activity was up 20% to 30% in 2004 compared with 2003, most of this activity did not involve new industry positions, but rather shifting of strong individual performers from weaker companies to stronger ones. We expect this to continue, although at a more modest pace, throughout 2005."Use of freelance talent, on the other hand, is expected to continue to grow. "We use freelancers to help us ride the highs and lows of business," says Graphic Converting's Boyd. McMenimen agrees that use of freelancers will remain an important part of the business. "As P-O-P producers continue to look for ways to lower their financial break-even points, we are seeing further utilization of our freelance design network, www.talentpop.com," he says. "We expect the use of temporary professionals in design will continue to grow due to the increasing cost of benefits, continued margin pressures and historical peaks and valleys in demand."While they are willing to spend money on people and equipment, however, producers continue to look for ways to cut costs and pass the savings on to their clients. "We aggressively 'value engineer' every display to confirm that we have eliminated any unnecessary materials and manufacturing steps," says Taurus Display's McBride.Such efforts have become increasingly necessary as P-O-P producers have been hit hard by materials price increases during the past year. "At the beginning of the 2004, steel prices had a major impact, with monthly increases that did not follow a particular pattern," says Darko Inc.'s Rinicella. "Then, about mid-year, the plastic fluctuations began and that made us reevaluate how we designed programs. Fortunately, our ability to combine materials and manufacturing processes allowed us to offer our client options on what they could purchase."P-O-P producers are also seeking ways to increase their value to their clients by providing services such as retail merchandising, for example. "We have the in-house capability to provide retail merchandising to our clients," says Concept Displays/The Pro Design Group's Vianu. "We offer the service to our clients, but outsource it to another company," says Darko Inc.'s Rinicella. "We don't offer retail merchandising on a routine basis, but have done it on contract for specific projects," says Phase One Design's Socha."We see more and more marketers and retailers looking for ways to reduce costs and labor associated with merchandising," says Diam International's Berzok. "Specifically, they want to eliminate warehousing parts in order to reduce inventory costs. They need quick turnaround for new store openings, and they don't have the time to deal with issues that erupt at retail." He says Diam has the ability to provide a turnkey solution. "As a vertically integrated supplier, we can respond quickly to retail requests so our clients do not need to inventory any parts. We offer a toll-free number so local stores can call us when, for example, a planogram changes."What's Hot, What's Not?P-O-P producers used a number of different materials during 2004, and no single material seemed to emerge as "hot." Instead, most named combinations of materials such as composites and laminates as heavily in demand. "All colors of foil, as well as holographic foil board, were popular during 2004," says Graphic Converting's Boyd. "We also saw strong demand for irregularly shaped packages, clear packaging and hybrid packaging such as board and plastic combined to create a product that is visible yet well protected from the consumer."Laminates seemed to be very much in demand during the past year. "Exotic wood laminates, as well as natural wood and brushed aluminum," said Concept Displays/The Pro Design Group's Vianu. "Film laminates and plastics, especially PVC and edge lit acrylic," said Taurus Display's McBride. "Foils seemed to have a strong impact in the toy industry," says Darko Inc.'s Rinicella. "Silver metallic was popular with various wood laminated finishes." For the coming year, Phase One Design's Socha sees a revival of interest in '60's retro. "Mondrian squares, strong bright colors and simple graphics," she says. "Specialty plastics and powdercoated wood," predicts Rinicella. "More of what we saw during 2004," says McBride. "Too soon to tell," says Vianu.Boyd agrees. "What will be popular during 2005 is hard to know yet," she says. "We continue to show our clients new foil effects such as see-through foils and unique patterns. All kinds of plastics from clear to tinted are very popular as well."A couple of trends that everyone agreed on are increasing use of motion and sound components and the growing popularity of touchscreen technology. "We incorporated quite a bit of audio and motion in many programs, along with electrical interactivity, including kiosks," says Rinicella.Use of technology, however, apparently does not extend to RFID in most cases. With the exception of Graphic Converting, most respondents said that they are not actively exploring or experimenting with RFID yet. "We are researching and reviewing to determine the best equipment and technology available for application during the early phases of its introduction to retail," says Boyd. "We need to be prepared to apply RFID to packaging and displays that will be shipped to mass retailers since this is where the requirement will begin."A trend toward increasing use of Requests for Quotation, or RFQ's, although not necessarily welcomed, was widely agreed on by most respondents. Reverse auctions, on the other hand, seem to be largely a thing of the past. Not one respondent reported having participated in one during the past year.

P-O-P Producers Trend Report 2005

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