Amidst persistent rumours that Merch by Amazon is headed to the UK, Mark A Coudray discusses what the growth of this service means to the decorated garments industry
In January 2017, the merch division of Amazon announced the purchase of multiple Kornit Avalanche 1000 DTG printers in a deal that could amount to US$150 million over five years. In addition, Kornit entered into a purchase agreement granting Amazon stock warrants to buy up to 2,932,176 shares of Kornit common stock at US$13.03 per share.
This was big news for the garment decoration industry and certainly raised a few eyebrows.
But let’s start at the beginning. Merch by Amazon is the evolution of Shirt.woot. com. It became a subsidiary of Amazon when the company bought Woot. com for US$110 million in 2010. Woot. com was a discount deal-of-the-day platform. Every day they would offer a deal beginning at midnight and sell it until it was gone.
There were some incredible bargains, mostly in the consumer electronics realm, but Woot soon diversified into Wine.woot, Home.woot, Kids.woot, Deals.woot and many more. Shirt.woot was the decorated apparel version of the parent company.
Originally, Shirt.woot followed a crowd-sourcing model where designers competed to have their designs printed. Their work was voted on by online viewers and then put into production for a single day. They would sell as much as they could in one day and then produce the orders with traditional screen printing. This was a very similar model to Threadless, another popular crowdsourced apparel platform.
In September 2015, Amazon rebranded Shirt.woot as Merch by Amazon. In doing so it opened a new creative platform based on print on demand (POD), similar to CreateSpace for POD books. Amazon has considerable experience with POD and it was only a matter of time before it would apply its market strength to a new opportunity: printed apparel.
But this isn’t just about buying a bunch of high-end digital printers; it has to do with how the platform is designed and what it means to the legacy decorated apparel industry.
The effect on the market
Amazon wasn’t first to market with a POD platform. Zazzle and CafePress have been doing it for years. What is news about Merch is the affiliation with Amazon and all that that entails.
In 2014 and 2015 we saw considerable venture capital being invested in CustomInk and Teespring. Those deals were worth US$50 million and US$55 million, respectively. These, plus the Amazon/Kornit deal, mark a sea change in the decorated apparel industry; we are seeing new players operating with new rules in a new game. The question is, can traditional legacy screen printers and DTG operations compete in this new landscape?
To understand what’s happening, let’s look at what these new players bring to the market. Right up front, it’s not the technology. They use the same technology available to anyone in the market today — the same screen and digital presses, the same design platform and the same workflow (mostly). The main differences are the marketing and distribution practices. When you combine these with their almost unlimited capital, you have a formidable new set of competitors who are not only looking to displace the existing business, they’re looking to migrate it to an entirely new model.
Data and disruption
When venture capital enters a marketplace, it’s all about disruption. It’s about migrating market share from a mature competitor to a new platform with new rules that the legacy competitors don’t understand. It’s as if you owned Manchester United Football Club and one day, the players all show up at Old Trafford to play only to find it’s been reconfigured for baseball and they’re expected to compete. The old rules and old ways no longer apply.
In our case, the new rules are about what I call the ‘fourth disruption’ in our industry: digital marketing. The first was desktop publishing, the second digital pre-press, and the third digital printing. Digital marketing is all about datadriven, analytically measured marketing versus an expensive guessing game.
Today, it’s all about using data and measuring everything. You are able to work backwards from your spend and calculate your exact return from any channel or media you choose. Platforms like Google, Facebook and LinkedIn make it incredibly easy to access precise demographic and interest-based data. Once you know what your returns are, it’s simply a matter of turning up the volume. If one dollar spend generates three dollars of return, you know exactly how fast you can grow and how much money you can make.
This ability to precisely target and market to specific market segments has opened up great potential for anyone who wants to sell decorated apparel. T-shirts have always been the media of personal expression, but the frontend cost of design, pre-press, set-ups and minimum quantities limited those who could create and bring designs to market — but not anymore.
Gone are the front-end expenses and the minimum quantities. The maturing of DTG quality, combined with marketing access, is creating a new wave of interest and enablement. These new platforms are making it possible for anyone to have a real shot at being successful. The Teespring platform has made more than a dozen such entrepreneurs millionaires in just a few short months, and Merch is doing the same thing, even more so.
This works on the B2C level as well as B2B. It doesn’t matter if you are a big corporation or a one-man shop, the principles are the same. All you need to do is make sure the market is big enough for you. The bigger the shop, the bigger the potential market.
Being owned by Amazon, products created on Merch are advertised, promoted, sold and fulfilled with Amazon. It’s incredibly efficient, trusted and familiar. It’s a great opportunity for new players and a safe environment for buyers.
By now you might be asking yourself: “How am I going to complete with that?”
A different perspective
The answer lies in rethinking your business. Toomany decorators still think their job is putting ink on cotton. While that may have been true in the high-volume world of industrialised printing, we’ve known for years that the order size is dropping. In a digital economy the trend is towards a unit of one. It’s time you started to accept it — there will always be larger orders; there will just be fewer of them.
We’re reaching the crossover point that graphic printers reached in the early 2000s, when digital became more economical than screen printing for wide-format. The prices of the DTG presses haven’t come down yet, but their speed is getting very close to screen without the pre-press and set-up. It’s only a matter of time before the press prices come down as more and more printers make the decision to go digital.
The ability to compete has to come from focusing on the customer experience of doing business with you. The more you know about how your products are going to be used, the better position you’re in to expand your service offerings beyond just printing. My advice is to consider everything your customer has to do ahead of coming in to see you. What do they have to gather? What do they have to organise? What can you do to make that part easier and faster?
Then you have the actual production. Beyond just printing, what kinds of packaging, documentation, ticketing, folding, bagging and so on are needed? Are there distribution, shipping and logistics opportunities for you? You have to think about every aspect of how the order is handled, tracked and processed.
Furthermore, there are opportunities after you’ve delivered the job. What are your post-job services? How do you follow up, and what can you do to add value into the future? In a data-driven world, the more analysis you can provide, the more valuable you will be. When you start to dissect the steps based on this timeline and data frame, you’ll find a multitude of complementary possibilities.
One of the biggest opportunities is time. Everyone has 24 hours in the day, and it’s never enough. How can you cut the time involved in doing business with you? How can you make it easier? And you don’t only want to make it easy, you want to make it a very pleasurable experience. How you do that will be unique to you, your products and your markets.
Another way to compete is by offering different processes and styles than are available on the other platforms. This is the approach Zazzle has taken. They’re decorating all kinds of unusual items that are only available from them – things like decorated table-tennis bats and custom chocolate. They want to be the ‘unique’ printer.
That might seem a little weird, but it hasn’t hurt their estimated US$250 million in annual revenues. They’re still privately held, but have about US$50 million in venture capital invested. They are currently growing at 25% annually and are anticipating increasing that rate to 35% in the coming years. That is some excellent growth for a company of this size.
How fast are you growing? Most traditional printers are flat or declining. That is an indication you have been commoditised or your goods and services are no longer of value and demand in the market.
The biggest challenge for legacy decorators is their perspective and failure to change. The focus is on the price competition and the ‘I win, you lose’ approach to the market. This is a primary indication of an inflexible market reluctant to innovate. It’s a strategy they cannot win, and their only future is a slow, profitless slide to demise. What we have is incredible flexibility and a variety of processes and substrates to work with. It just takes a commitment to innovate.
As crazy as this may sound, you can still compete when you’re at a disadvantage. You can use the CPR Principle: consistency, predictability and repeatability. If you can offer your clients all three of these elements, you can be considerably behind in other areas and still be revered by your customers. It is a simple concept, but it’s not easy to attain. Consistency This means that every piece you produce is identical. You can take samples at the beginning, middle and end of every run and they are interchangeable. Consistency applies to the way you do business, as well. Every job is on time, never late, no excuses. Think about it. Think of how many things you do that are not consistent, and fix them.
Predictability This is harder, and has to do with expectations. Can you predict that everything you do will meet or exceed your customers’ expectations? Do you even know what those expectations are? How do you measure them? This is where we define the customer experience. You can design and communicate the process to every one of your clients. If you don’t know what they’re expecting, you’re setting yourself up for disappointment and failure, or worse, you’re setting up your client for disappointment and failure.
Repeatability Can you repeat the same experience you just delivered three days, three weeks, three months, three years into the future? Does it have the same consistency and predictability? This is why clients come back. This is why they trust you — they know what they’re going to get. Where printers have a problem is when they improve their quality in the future and the new quality doesn’t match the old, causing big problems.
If you ask all three of these questions and you fail on just one, you have an opportunity. You can immediately fix that problem; otherwise, you run the risk of disappointing the client, potentially losing them to a new competitor. If you get two or three negatives, under no circumstances should you continue until you correct the problems. You are almost certain to fail.
The CPR approach is very powerful and will help you to analyse your competition. Try ordering on one of the online platforms and see how they do. What is the experience like? Can you do better? When new competitors enter the market and stake their ground by changing the rules, they still have to abide by the CPR Principle. If they don’t, they run the risk of disappointing their unforgiving customers.
We are living in challenging times. There is disruption all around us economically, politically, socially, and certainly within our own technological space. Our very survival is based on our attention and awareness. It’s not business as usual any longer. The new players have new rules and lots of money to try and make them stick, and the chances are you don’t. That means you’ll have to use your ingenuity and experience to compete moving ahead. Fortunately, those are two areas where garment decorators excel.
Mark A. Coudray is an industry innovator and strategist. He has been an active member of the Academy of Screen Printing and Digital Technology since 1989 and has been involved in the SGIA for more than 30 years.
This article was reprinted with kind permission of the SGIA.