There is a large industry in the US that decorates various articles
(hats, pens, watches, shirts, etc.) with logos and messages for
business customers.

These products are usually offered through distributors, who do not
manufacture the products.  My question is not about the distributors
but about the businesses that supply them.  Regarding these suppliers,
what sources are there to learn about their margins?  How much margin
do these suppiers make when selling to/through distributors?  How much
of that margin is a mark up on the article itself?  How much is a
charge for applying the logo and/or message to the article?  Does the
margin vary much based either on the type of article or by the means
used to apply the decoration (silk screen, embriodery, etc.?)

Brandbuilder,

Thanks for the question. Actually, this is a much more complicated
question than you might first suspect. I've been involved as a
provider of websites to promotional products distributor as well as
suppliers for several years, and the pricing structure is really
rather complicated.

As you may know, suppliers provide catalogs for use by a distributors.
These catalogs have a pricing system using the letters A, B, C, etc.
Each letter stands for the distributor's margin at that price. So if
the distributor sells at at say $4, B pricing, he will receive 60%
margin.

Margi-ga's comments below are quite accurate and should be helpful.
Let me see if I can clarify your other questions.

"Regarding these suppliers, what sources are there to learn about
their margins?"
There are two primary and competing industry organizations to which
both distributors and suppliers belong. By far the largest, and the
current frontrunner is:

Advertising Speciality Institute (ASI)
http://www.asicentral.com
If you decide to join, they can provide supplier and wholesale pricing
standards.

Propotional Products Association International (PPAI)
http://www.ppai.org

There is a wealth of sites on the web about the distributor end of the
business, but there is no publicly available information on the
Internet about supplier or wholesaler margins for obvious reasons. You
would need to join an industry group for this information. But I'll
impart what I know.

"How much margin do these suppiers make when selling to/through
distributors?"

Margi's answer below is very good. The ultimate answer is really
impossible to quantify, and will vary tremendously from product to
product. The percentage manufacturer's incremental profit on a plastic
standard key fob, for example, averages close to 100%. Incremental
profit on a knit cap may range from 15% to 40% depending on whether
it's manufactured overseas or domestically. The bottom line is that
manufacturing costs are going to be all over the board. On average,
however, the final price at which the manufacturer sells his product
usually constitutes 25 to 50% of the final retail price.

"How much margin do these suppiers make when selling to/through
distributors?  How much of that margin is a mark up on the article
itself?"

As mentioned, the manufacturer's costs can vary tremendously, but make
up an average of 25% to 50% of the retail price. If a wholesaler is
involved, which is really not that common in this industry, he will
generally double the price, although this can vary widely. Most
manufacturers/suppliers sell direct to distributors. These
distributors mark up anywhere from a rock bottom low of 25 to 30% to a
high of 60%. However longtime customers are often charged a 70% or
even higher markup. Ah, the value of sales people!

"How much is a charge for applying the logo and/or message to the
article? Does the margin vary much based either on the type of article
or by the means
used to apply the decoration (silk screen, embriodery, etc.?)"

In a typical distribution pattern, the manufacturer will sell directly
to a distributor. For non-wearables, the logo is often screenprinted
(or applied through other means) onto the item by the manufacturer.
Since most items are not sold without logos by these manufacturers,
the cost of the screenprinting is buried in the cost of the item and
not broken out. It would be almost impossible to break out these costs
to the manufacturer since these screenprinting shops are all inhouse.
Costs would depend on labor costs, how new the machinery is, overhead
rates, etc. Lets just say the actual costs are pretty negligible as a
component of the finished good.
For wearables, almost exclusively, the items are drop-shipped to the
distributor's chosen screenprinter or embroiderer where the logos are
applied. The items are then either drop-shipped directly to the
customer or to the distributor for inventorying. Every major city has
several wholesale embroiderers and screenprinters who work with this
industry. The actual cost of the screenprinting /embroidery varies
greatly based on the typie of application and the material to which it
is applied.
I just called a friend of mine who has worked for both a screenprinter
and a distribor, and she confirms the following. For volumes less than
250 items, the cost to the distributor of screenprinting a coffee mug
may be $75 setup charge plus 20 to 30 cents each ("run charge"). The
distributor will resell with a 30 to 40% markup over these figures.
Screenprinting costs will generally include a setup charge in the $75
to $125 range, plus run charges of 20 cents to $1, depending on the
item. A good average run charge for a t-shirt would be around $1 cost
to the distributor for a multi-color job. He would mark it up 30 to
40%. Embroidery is a good bit higher and can go from a low end of 50
cents to $3. To embroider a cap with an average logo may be $95 setup
charge plus $1.50 run charge each. Distributor markups are usually
folded into the cost of the cap to the retail consumer, and can be
much more than the standard 35%.
These are prices for a medium sized market in the Southeast USA. Other
markets will vary, possibly significantly. Foreign prices are much
less.

I understand that some of these answers are not as specific as you
would have wished. However, I can assure you that there is no ultimate
right answer for most of these questions. Prices will vary by
industry, competition, geography, etc. But hopefully, this will give
you some good guidelines to go by.

Brndbuilder, thanks for the question! It's been a pleasure answering a
subject I know well.

Prof

This was told to me by a retail consultant over a year ago. I do not
know this information first hand and I'm not a Google Researcher.
These answers are based on my notes.

Given: Not all imprinters actually imprint all types of products.
Their facilities are set up for their specialty.
Given: Very high volume work may be done overseas (China, Phillipines,
Japan) whereas mid and low-volume work may be done in the U.S.  There
are different costs associated with each.
Given: Different types of base products and imprint processes have
different manufacturing costs.

There are four tiers, not two, to this business model:

- Manufacturer (the ones that manufacture the base item, mugs,
keychains, pens)

- Imprinter (the ones that create the imprint) Sometimes, the
manufacturer and the imprinter are the same company, but usually not.
While some do a huge variety of items, no one imprinter does all
processes on all items. Some specialize in screen printing, some in
laser engraving, etc.

- Wholesaler/Aggregator (The ones that order from multiple imprinters
on behalf of multiple distributors. Many times these are catalog
companies or online merchants, and they may sell directly)

- Distributor (The ones that sell the product to the end-consumer.
Sometimes they do their own catalog with selected items from different
wholesalers, or they sell via a DSO model and/or their own websites,
etc.)

In general, the financial model is such that...

The manufacturing cost plus imprinting generally constitutes 20-25% of
the retail cost. This is because:
The imprinter generally marks up the items by 100% for his margin
The wholesaler marks the product up (again) by 100% so that the price
to the distributor is 2x(manufacturing cost+margin)
The distributor sells the product for another 25% or so.

So, if the (base product plus imprinting) cost of the item is $2, the
imprinter will charge the wholesaler $4. The wholesaler will charge
the distributor $8, and the distributor will sell it to the customer
for about $10 or so. This model would apply to things like mugs, pens,
coasters, keyfobs, etc.

The more expensive the base product means that sometimes imprinters
and wholesalers will accept a smaller per piece margin because
following this model would make the price too expensive for the
end-consumer. This is the case for things like laser engraved lucite,
items engraved on gold or silver, very high-end items that simply need
to be imprinted.

Sometimes, if a company or organization wants to skip the middle-men,
they will buy a product directly from a manufacturer... i.e. nylon
backpacks, golf bags, clocks, electronics... at wholesale, bulk
pricing, --  and pay the imprint company directly to imprint their
logo on it.  Obviously, it would not make fiscal sense to pay the high
margins all the way along with an item that may already be $10, $20,
$30 a piece when the only value the imprinter is adding is the the
imprinting of a logo.  The imprinter will set his price based on the
shape and material (ceramic, brass, cloth) of the item, the image area
of the imprint, the imprint process to be used, the volume, the
artwork that will be supplied, the turn-around time, etc.  Again, they
will probably take their cost (remember, they did not have to purchase
or arrange for the substrate/item to be imprinted) and mark it up 100%
with a minimum that usually covers a set up fee and a minimum volume.

Pricing is a tricky thing. You have to balance costs and margins every
step along the way, while still making it cost-effective for each tier
to participate, and still deliver a quality product to the customer at
a price they are willing to pay...

Although this is not a complete answer, I hope this helps.  Again, I
don't know this first hand except that I ended up being one of those
organizations that purchased the item wholesale and contracted with an
imprinter directly, so take it for what it's worth.