We are in business and in good shape

Giftco's closing will not affect our ability to provide strong fundraising programs for our client groups. Our two fall shoppers had a few Giftco-sourced items that will be replaced by other items. The "Snowflake Surprises" and "MacKenzie Collection" brochures continue to be very strong in their sell-through "at the door." The wrapping paper is partly from American Greetings and partly from Sullivan (supplier to "Sally") so the quality is excellent.

Our frozen food programs continue to excel. We have a new selection of baked goods, and continue to offer first-rate Wisconsin Cheeses, Sausages, and Chocolates. We still have strong flower bulb, jewelry, and candle programs.

As a company we are debt free and have a strong cash position. You can be assured of delivery of your products if you deal with us in the fall of 2009.

Major Supplier Giftco goes out of business

Giftco has closed.  With Scott's stopping imports, that leaves the entire fundraising industry without a supply of "stock" shopper catalogs.  Each regional or national company will now have to develop their own catalogs and find their own sources of goods.  The immediate result will likely be that at least a third of the local fundraising companies in the US will go out of business as the entire industry continues to contract.  

Here is a statement from a regional Giftco representative to his fundraising company customers:

Sadly and unfortunately Giftco has run into an obstacle that we cannot overcome.

As you are aware the banking climate in America today is at its worst in our lifetimes. We have been working toward refinancing the company with a new bank for many months. During that period of time we were convinced that an agreeable transaction was in the works. As in all of life no deal is done until it is finalized.  Over the last two days, in the final hours of negotiations stipulations were changed or added which made it impossible for Giftco to go forward.

As you are aware we had severely tightened our belts over the last 12 months and made many internal changes. The owners invested sizable additional funds into Giftco. Our outside partners were lined up to do so also. However, with the banks' new additional requirements, we are not in a position to continue.

The result of this is that Giftco will discontinue operations. This will be done through an orderly liquidation of assets and dissolution of the company.

We will make every effort to work with our customers to provide you with goods to service your schools. We have existing inventory to build kits of "In School Shoppe" merchandise. We have existing prize inventory. We have sizable inventories on many excellent "evergreen" products. These goods will be made available for purchase and immediate shipment over the next couple of weeks. We will be in contact with you to offer these opportunities.

We are both exasperated and devastated over this turn of events. We did not foresee this outcome as being a realistic possibility until the last few days. Over the last few days we have exhausted all known possibilities for the required funding. In any other banking climate Giftco would be viewed as a good client; in the current climate that is simply not the case.

 Regrettably we can only apologize that we will not be around to work with you in the future. 

Gift item availability questionable for fall 2009

The trend in fundraising is toward food, but wrapping paper is still
strong. As of today, the word "on the street" is that the major
importer of fundraising gift items has closed its doors--another
casualty of the current economic downturn and the banking crisis. The
other major importer announced several weeks ago that they would be
stopping their import business and concentrate on food items that they
product domestically.

Our fall shoppers are secure. We have 24 items to re-source from the
importer that closed its doors today, and that's already in the
works. This same importer was a major player in the holiday shop
market, but we use the "other" importer that is still going strong.
Our wrapping paper is all domestic--made by American Greetings and by
Sullivan. Our food items are all domestic.

So if you have been using someone else for your holiday shop or fall
fundraiser, call us instead. We've been in business for 22 years and
are debt free. We choose which schools and organizations we work with
based on their willingness to follow our plan for success. For us,
failure is not an option.

Our food programs continue to do well. They are all sourced on the
east coast, so that pricing buys more product quality and less in
transportation. Prices are locked in for several months, and our
retail prices are lower than those of most other companies.

The current economic situation is likely to put another several
hundred fundraising companies out of business. We are still here and
stand ready to help you with your fundraising needs for fall 2009.

Fundraising needs increase as recession deepens

One of our associates in Pennsylvania writes: 

Contrary to the current economic trends we have found that in the first 2 months of 2009 schools sold more than for the same 2 month period in 2008 ( $13,920 vs $10,339) a 35%  increase. Here are a few examples.

 

	Jan 1 - Feb 26, 09		Jan 1 - Feb 26, 08
Eaton Middle School	5,454.30		4,863.00
Reading High School	2,262.97		1,284.73
Edison High School	2,197.97		1,575.60
Warren County Technical School	1,578.60		1,500.30
Mahanoy Area High School	1,008.00		853.13

 

 

This just confirms the fact that the American People have a heart no matter what the economic condition. Contributing to a worthy cause is as American as apple pie. Fundraising is recession proof. We can't ignore the facts. It is easier for people to pool their resources to get something that is needed than for one person to pay for the whole thing. A young single mom want to see her son play ice hockey, but the cost is $500. How does she get the funds? She fund raises along with the rest of the moms. She and her son, like the rest of the hockey team, reach out to family, friends and co workers and sell food and dry goods to earn money to help defray the cost of hockey. People helping people is an old concept that still works well. The present economic condition lends itself to an increase need for fund raisers. People need help and we can show them a viable way to get the help they need.

 

Do not get caught up in the hysteria of Wall Street. We are here to help the people on Main Street.

 

Another analysis to prove this point is that we have sold to over 45 ($62,704) new accounts in the past 2 months as compared to same 2 month period as in 2008. Listed are a few examples

 

	Jan 1 - Feb 26, 09		Jan 1 - Feb 26, 08
North Middle School	5,835.90		0.00
Towamensing Elementary School	4,255.29		0.00
Andrew Lewis Middle School	3,930.60		0.00
Northwest Area High School	3,724.62		0.00
Edward Gideon Elementary	3,152.03		0.00
North Schuylkill High School	2,647.45		0.00
Carolyn Stokes Day Nursery	2,471.53		0.00
Warwick Senior High School	2,104.40		0.00
Chester County Technical College	2,067.21		0.00
Thomas Jefferson Elementary School	2,057.62		0.00

 

Organizations recognize the need to fund raise.  If this is the case with your organization, then go to www.fundraisingcentral.net to see what we offer, contact us, and let's get started.  

Bailouts.... hardly!

Headlines everywhere are talking about school budget cuts. Reductions
in force will happen in many localities as well as wage freezes for
teachers, administrators, and support staff. Where is the bailout
coming from and when will it get here? PARENTS will have to bail out
the schools and will have to start NOW.

Some school principals will just say "no" to everything and if that is
the case in your school, neither I nor any other fundraising company
can help you. Your kids will just be deprived of many things you want
them to experience. Other principals will roll up their sleeves and
get to work on building community support and raising money for the
school. If this is your school, I can help and will be glad to do so
by providing a quality fundraiser with outstanding motivation for
students and parents alike.

It will take two main ingredients to make it work:
1. A product that people will buy at the price at which it is offered.
2. Enthusiasm on the part of everyone at the school... so much so that
parents become enthusiastic enough to take action and sell.

The first of these is up to me. The second is up to you. Getting the
kids really excited is pretty easy. Keeping them and the parents
excited for two weeks requires effort.

Our Fall 2009 offerings are about ready. There have been some changes
in product on our web site with more to follow. For the local service
area where we actually visit schools there will be a mailing that
includes our product line and service information. If you are serious
about raising a large sum, we are here to help.

You do not have to wait until fall. You can do a Spring "fill up the
treasury" fundraiser or one for a specific purpose. Last May we had a
sale with a school of around 600 students on our frozen food line
"Food Court" and they sold over $19,000 in frozen food. The prize
program was very simple... sell 1 items and you're in the draw for a
cash prize of $50. Sell 15 items and choose any free food item on the
brochure, and if you win in the drawing, the cash prize doubles. The
parents believed in the cause and the teachers got excited. It worked.

If you read previous posts on this blog, you will see that the world
financial crisis has affected the fundraising industry just like it
has many other industries. So far we are doing just fine financially
as are our major suppliers. We anticipate good product flow and
excellent services for our clients this Spring and through the year.

One important point is that there will be a fixed supply of brochures
available. Once they are sold out, they are gone forever without a
reprint. Product is already ordered for August delivery on our
catalog shoppers. We can only have as many catalogs as we have
product to support them and the ordering deadline is now for wrapping
paper, gift items, kitchen gadgets, and other non-food items. So, we
guess on how much to order and hope, just like we have in past years.
Now, however, the option of air freighting in product from the Orient
is not available, because of the cost. We have ordered boldly, and
have means of disposing of unsold inventory, so things should move
along smoothly. On the other hand, schools and leagues that put off
deciding on a fall fundraiser may be out of luck with us and with just
about every other fundraising company in the nation. The time to
decide is during the time period from March 1 through April 30. After
that brochures will be sold out quickly.

Another important thing to consider is the participation of the
Principal and Teachers in your school or the Coaches in your league.
Strong and effective leadership, and the building of excitement is
going to be essential if you are to have a successful fundraiser.
Because of fixed costs, we are going to expect that at least 40% of
your enrollment will turn in orders on any Spring or Fall fundraiser.
There will be a "less than minimum participation surcharge" of 3% of
retail for groups that fail to meet that level. This is necessary to
the financial survival of ANY fundraising company in today's economy.
BUT getting 40-60% of your enrollment to sell isn't "rocket
science." We know how to do this and can teach you how.

On a school-wide sale your Principal MUST endorse the project and
build excitement in it. Some sort of "stunt" will probably be the
best way to do this. There are many that have been done.... top
sellers get to duct tape the principal to the wall; principal kisses
a pig or cow or whatever; principal spends the night on the roof;
principal goes through a "carless car wash"; let your creativity soar
and your profits will soar too. There are some excellent suggestions
on the PTO Today web site.

Your Teachers MUST endorse the project and build excitement in it.
One tried and true way to encourage this is to allocate a specific
percentage of sales profits to each classroom, based on that
particular class's sales performance, toward classroom supplies.
Having the teachers each write a note to parents in their own
handwriting is a strong method of getting parents to support the
project. Daily promotions that involve the teacher's participation
also help immensely. We can teach you how to do this.

Finally, it is going to be necessary for the school to join with the
fundraising company in providing a strong prize and motivational
program. Daily PA announcements about the sale are a must, as are
send-home letters 3 days after the sale starts encouraging parents to
participate and again 2 days before the end of the sale reminding them
that "there is little time left".

So watch our web site, look for our packet in the mail (or request
one) and then decide early. Then reap the rewards.

Bidding, Beijing, Banks, and Backorders

What in the world do Bidding, Beijing, Banks, and Backorders have in
common? More than you would think. This is complicated and will take
quite a few words. Be aware, however, that if you are a fundraising
project sponsor in a school or sports league and are selling something
other than food items, you will probably have backorders. This is
true no matter what salesperson you deal with or what company you will
pay for your product. The problem is industry-wide and is significant.

Before we get to that, we need to describe the nature of the product
fundraising industry. The salesperson that visits your school or
league is likely either an independent businessperson using the
services of a pack/ship facility or an employee of a salesforce
company. (The third option is that he/she owns a pack/ship facility
and also works with client groups, but this is becoming increasingly
rare.) The pack/ship or salesforce company buys product from mid-
level or source-level suppliers. Mid-level suppliers purchase
product, arrange it into catalogs, publish catalogs, and sell the
products and catalogs to pack/ship or salesforce companies. Larger
pack/ship or salesforce companies my develop their own catalogs and go
directly to manufacturers or high-level suppliers. Finally there are
manufacturing facilities that make "house brand" goods upon demand, as
designed by their own creative staff, or on designs supplied by the
companies that buy from them. All of these companies are
interdependent, and also depend on banks for their financing for their
inventory, payroll, buildings, and equipment.

Now back to Bidding. What has this got to do with fundraising?

First of all, a LOT of fundraising "hard goods" such as wrapping
paper, tags, ribbons, bows, candles, giftware, and home decor items
come from China. Over the past fifteen years it has been cost
effective to design this type of goods in the US and then go to China
to find a factory to make the goods, because of the relationship
between US and Chinese currencies. Even with the cost of ocean
shipping, it was very cost effective. The push for lower cost on
goods came as more and more salespersons attended what in the industry
is known as "cattle calls" where PTA's and Sports Leagues had a
meeting where companies were invited to come and pitch their wares.
Salespersons, encouraged by their companies, started bidding up the
profit percentage in order to win the business, and to continue to be
profitable without raising retails to the "choke point" had to look
for lower cost of goods, and China was there willing and able to
provide he goods. That was about fifteen years ago when the balance
of trade and exchange rate between US and Chinese currency was
favorable to US companies buying product from China. Even WalMart
changed from domestic to imported goods about that time.

After the competition in the industry had maxed out the possible
profit margin for schools and leagues, the fundraising industry
"created its own monster" by increasing the number and variety of free
services, such as kickoff assemblies, pack per seller, complete
fulfillment of orders with no backordered items, increasingly
comprehensive prize programs, and ever-larger catalogs. The schools
and leagues came to see these services as the norm, so any company not
offering them lost business. To pay for these "free" services, just
about every company increased prices a little each year. In 1986,
there were $2 and $3 items on most brochures. Now the lowest price is
$5 or higher. All of this depended on cheap goods from China.

Things went smoothly until inflation increased and the dollar fell.
This did not have a great impact at first, but as the dollar grew even
weaker and the Chinese economy grew in strength, suddenly the retail
pricing of goods went past the "choke point" and schools/leagues
changed from post-pay to pre-pay sales because of increasing numbers
of uncollected sales. These events combined to create a level of
frustration on the part of parents that reduced their willingness to
participate in the sales. Where in 1985 70% to 80% of parents were
participating in sales, which were mostly post-pay, by 2005 the
typical participation rate was down to 35% to 40%. Gradually, over
time, sales were cut in half.

So much for the damage caused by bidding. The casualties included
five major suppliers, a number of minor suppliers, about half the
national sales force and half of the distribution companies. Schools
and leagues expected "business as usual" and the casualties mounted.

In 1985 there were as many as eight major suppliers, a dozen national
"sales force" companies, and over 500 small independent companies. By
2007 there were about four major national "sales force" companies,
about 200 small independent companies, and only two major suppliers--
Scott's and Giftco.

Now to Banks. Giftco's bank looked at their uncollected accounts
caused by the bankruptcies of several major pack/ship and sales force
fundraising companies and changed the company's terms for their credit
line at the bank. The ripple went industry-wide. This caused a change
in terms for pack/ship and sales force fundraising companies. Now
companies had to order 70% of anticipated needs in February for the
following fall, guessing on how many of each item to order, with the
assurance of 50% "backup" for a reorder in September. (That's why
product is priced high--so up to half the inventory of any item that
doesn't sell can be sold off to Big Lots or put into the landfill.)
Scott's followed suit as credit tightened in 2008. Where pack/ship
and salesforce companies had relied on supplier financing, with terms
as generous as "buy in February, take delivery in August, pay in
December", now the terms are quite a bit tighter, with payment
required in October or early November. The pack/ship and salesforce
companies had to get their own bank financing, and if that were not
possible, were forced out of business. This means that the pack/ship
companies now have to collect from the independent sales
representatives within 15 days rather than 30 or 45 days, and the
independent sales persons have to collect from schools and leagues
before shipment, or upon delivery. Any "late pay" school or league
has a domino effect all the way up the supply chain. The tightening of
terms is a direct result of the changing ratio of value between the US
and Chinese economies. Generous terms were initially financed by what
was called a "ten time mark" on products from China. In reality the
"mark" was even higher in some instances. The "out the door" price in
China for a $10 retail item may have been from 40 cents to 80 cents
back in the late 1980's. This allowed room for the cost of shipping,
allowed suppliers to sell the $10 product to pack/ship or salesforce
companies for $1.25, which allowed costs of buildings, warehouse
staff, packing, brochures, prizes, and shipping to the school or
league. This allowed the $10 product to be sold to schools/leagues
for $5, allowing a 50% profit (or 100% mark-up) by the school or
league. When the economic balance was changed, this scenario collapsed.

Companies cannot produce goods without cash. Companies cannot buy
goods without cash. If accounts receivable cannot be collected in a
timely manner, companies have to borrow money. If banks won't lend,
everything grinds to a halt. That has happened to some extent.

Enter Beijing and the Olympics. There are many factories around the
Beijing area and they are terrible polluters. To get the Olympics,
China had to agree to improve air quality in the areas where outdoor
events would be held. To make these improvements, they had to close a
number of factories temporarily during the late Spring and early
Summer, the exact time when many fundraising products are manufactured
in these factories. When the Olympics were over, it took some time to
get factories back up to speed. They were behind and stayed behind.
Because it takes weeks to months to get products from factories, to
port, across the ocean, unloaded at the port, and trucked to
suppliers' warehouses, the entire supply chain was interrupted for
certain types of products. Right now things like gift tags, ribbons,
and other paper products, along with some gift items are being
affected. Product that was ordered in February by pack/ship and
salesforce companies has not been delivered to their warehouses by
suppliers. It should have arrived in August. but did not. As time
passed and other matters were pressing, warehouse staffs didn't notice
the problem until it was too late. This was universal throughout the
industry. Everyone was blindsided by this.

We hear a lot about "just in time inventory" these days in business
circles. This works well as long as every company in the supply chain
performs as expected. We have had instances where port backups
delayed product, and this is something that is easy to see because
there are many ships on the ocean off the coast at Long Beach or
Galveston. But when the factories just don't produce the product on
schedule and do not inform their customers, and the word doesn't get
passed downline, we hit a crisis point in October when product hasn't
arrived when school and league orders are ready for packing. The
entire industry, in the non-food portion of product, is in that
situation right now.

It is not possible to delay packing until product comes in. Product
fundraising warehouses are seasonal businesses and hire workers to do
data entry and pack product during a fixed season in the fall and
again in the spring. Some of these workers also do seasonal work in
other industries, so their schedules are not all that flexible.
Product deliveries also are constrained by sports seasons or school
holidays. Replacing workers requires training time. There isn't any
time left. Warehouses have limited floor space for packed product on
skids waiting on trucklines to pick up, so the flow has to continue.

Thanks to Bidding, Banks, and Beijing, this creates backorders, and
they will be extensive across the country throughout all fundraising
companies where non-food products are involved.

So what is a fundraising chairperson in a school or league to do?
First, do not panic. (We have heard that quite a bit of late about
the financial situation, but it is true there and also is true in
fundraising.) Communicate to your parents the real reasons for this
unfortunate situation. Rest assured that the product will be shipped
to you when it becomes available. It will be inconvenient for
everyone involved--parents, end consumers, salespersons, company
owners, and bankers. You will get yelled at. It isn't personal, so
just hang in there and wait until the dust settles and the Christmas
Holiday arrives.

Yes there will be casualties. Some parents will become disgusted and
opt out of your next fundraiser. Some companies will go out of
business. Quite a few people working in the industry will be out of
work. It will become more difficult for you to find someone to fill
your fundraising needs in the future.

After the dust settles, you would be wise to switch to an all-food
project. Pizza, cheesecakes, cookie dough, cheese, chocolate bars,
boxed chcocolates, soup mixes, and microwaveable sandwiches are all
domestically-produced, and most are available from regional
manufacturers and suppliers. People buy food products sold in
fundraising from their grocery budgets and will support your sale.

If you have a sales rep or company that has served you well in the
past, stick with them. They are having as much trouble as you are,
and if they survive, will be stronger for it and will be glad to
switch you to an all-food program in the future. If your problem is
very severe, consider switching to $1 chocolate bars for your next
sale and then introducing other food items as time goes on.

Sorry for the bad news, but you deserve to know the truth.

A dose of reality for project sponsors.

Times have changed. Everyone is paying too much for gas. Quite a few
families are "upside down" on their mortgages--owing more than their
home is worth in today's market. Many people have way too much credit
card debt. To expect to raise as much money on a single project as
you did in the past is not realistic. To expect fundraising companies
to continue doing business "as usual" is not at all realistic either.
As the economy tightens, more and more groups are chasing fewer and
fewer discretionary dollars in the community. The cost of doing
business for fundraising companies is going up rapidly. It has gotten
to the point that certain client groups are not cost effective for a
company to keep servicing. A large number of fundraising companies
have gone out of business and more are sure to follow as the cost of
doing business eats up the bottom line and company owners can no
longer make a decent living. Those that will survive are those who
made sensible business decisions, such as grouping deliveries,
eliminating non-productive services, and limiting on-site visits to
client schools. This also includes pruning the client list of those
groups that do not make a concerted effort to succeed with their
project. This comes back to the sponsor and the members of the group
being committed to the project's success and taking the steps, no
matter how much effort is involved, to ensure success.

Here's what to expect:
• Fewer families will participate in your fundraiser. They will have
decided not to participate long before you start your sale.

• People will favor the lower priced items in your offering.

• Limitations on replacement of missing and damaged items, with
deadlines.

• More "hands on" work for your volunteers--unloading the truck,
organizing the delivery, handing out products

• Deadlines on turning in your orders beyond which no late orders
will be accepted

• Delivery dates based on economical transportation, including
grouped deliveries on a "route."

• Declining effectiveness of prizes, parties, and other "extrinsic"
motivation in promoting your project

• Increasing importance of getting your members, parents, or
constituents to "buy in" to the reason you are raising money.

• A call from your community for greater accountability in spending
the funds raised.

Here's what to look for:
• A product source (fundraising warehouse point) no more than one
day's delivery time from your location.

• Food products manufactured in your part of the country. Product
value does not come from higher transportation costs.

• A company able to produce a "cover letter" explaining why it is
important to each person reading to support your cause.

• Someone to "teach you how to fish" rather than someone who will
"hand you a fish." The difference is in the details.

• Products with more reasonable retail prices and lower profit
margins for your group. This is what will sell.

Remember--
• The only dollars you are working with are those dollars the person
"at the door" is willing to surrender to buy your products.

• People will only buy if they want to help your group more than they
want to keep their money. Desire for the product is inconsequential.

• The fundraising product does not "give" you profit. You earn it.

• All companies are in business to make a profit for the company and
a living for its employees. If this fails the company closes and
everyone loses.

Decisions, Decisions, Decisions!

Just about everyone in the fundraising industry says the same thing. Most organizations are slow in making decisions about fundraising projects this year. Some organizations are finding it difficult to find volunteers to staff their projects, while others are taking a "wait and see" stance toward the economy. It is likely that gas prices and rising food prices will have an impact on people's attitudes about spending, but we have not seen any real impact on fundraising sales yet. We do see a trend toward frozen foods and $1 chocolate bars. Adding World's Finest Chocolate to our local mix of products has been a very good thing. Most people will have a dollar to spend and will enjoy the quality and taste of the chocolate, especially as it is a larger bar for the money than most retail brands. Our frozen food sales have been increasing also. Our brochure prices were locked in back in November of 2007, and our costs from suppliers were based on futures prices at that time, so now as grocery store prices rise, our frozen food prices are becoming ever more attractive to consumers, and our fundraising client groups are reaping the benefits.

If your organization is thinking about a giftwrap catalog, jewelry, flower bulbs, or any other nonfood take-order program, the time to act is now, as brochures will soon be sold out. Many of the gift and wrap items are imported from the orient and there is a finite supply in warehouses in this country and not enough lead time to bring in more. If you wait past September first, you should probably opt for our frozen food program, domestically produced cheese/sausage/chocolate, or chocolate bars. That way you will be assured of receiving your product in a timely fashion. There were many horror stories in the fall of 2007 about other companies not delivering on time. Fortunately we did not have that problem because we stopped accepting reservations when we saw that available inventories were close to committed.

Decisions, decisions, decisions. The time to decide is right now.