The decorated apparel industry is evolving. Innovations like direct-to-film (DTF) and AI are changing the way that decorators print onto garments. Evolving consumer demands and international relations are affecting the actual import and sale of apparel products themselves.

All of these changes on the horizon and more were discussed in a session at ThreadX from MADE Laboratories in Sundance, UT, with Jeremy Lott, president/CEO of Counselor Top 40 supplier SanMar (asi/84863) and a member of the Counselor Power 50 list, and fellow Power 50 member Carleen Gray, CEO of Stahls’ (asi/88984). The two fielded questions from the audience of decorators, equipment manufacturers and brokers, apparel distributors and related professionals.

How is the industry different than you thought it was going to be five or 10 years ago?

Gray noted that some of her predictions about the industry were correct, such as the growth in heat printing. She’s not surprised that DTF has become a popular decoration method, but didn’t quite expect the reputation it has garnered as a “magic bullet” rather than the useful tool that it is.

“It’s surprising in that it’s being lauded as a ‘one-size-fits-all, it’ll-do-anything’ decoration technology,” she said. “Our best customers have always been screen printers and embroiderers. So when the technology comes along, which is exciting, it removes all barriers to entry and anybody can get into it. But it ends up taking over in some categories that it maybe isn’t the best application for – but it’s being sold as the best application for.”

She’s also surprised that, while DTF is impressive, people believed it could completely take over direct-to-garment (DTG) printing.

“It is absolutely, for sure, the fastest adoption of any decorating technology that I’ve seen in the 30-plus years that I have been in this industry,” she said. “As DTF ramped up, you heard about the demise of DTG: ‘It’s going to go away, it will not survive.’ Absolutely not.”

Gray said that in her view, a rising tide lifts all ships, and that the industry benefits most from numerous healthy decoration techniques with cutting-edge technologies and communities supporting them.

Lott, who joked that five years ago he was in his house sanitizing groceries rather than theorizing what the industry could look like down the road, said he’s a bit surprised by the scale of the industry overall.

“I’m not sure that I thought it would be as large as this,” he said. “The expansion of different types of businesses that buy apparel and decorate them on-demand has really grown dramatically. And so, the entire pie that SanMar can sell has grown.”

Lott also touched on consolidation within the industry – most notably the presence of private equity – and on the negative side, addressed that he thought the way companies in apparel and promo interact would be different. Specifically, he said he believed that certain “friction” in the transaction process would be alleviated, as has happened in other industries.

“I think there’s been work on technology standards that allow us to build, but it’s still not there,” he continued. “I think there’s a reluctance to change: ‘I’ve been doing this this way for a long time.’ So even though there are some technologies there, people just want to do things the way they always have. I maybe thought that would be further along compared to other industries.”

What trend could most significantly impact the growth or even the contraction of this industry over the next decade?

Gray expanded on Lott’s last point, that adhering to the status quo is one of the biggest threats for industry growth.

“But what we do see that could be a positive is opening up to technology adoption and understanding print-on-demand, which is a positive for the industry, and understanding that, yes, you can profit from a quantity of one,” Gray said. “And adopting and changing to that, I think, is a positive for the industry.”

“As DTF ramped up, you heard about the demise of DTG: “It’s going to go away, it will not survive.’ Absolutely not.”Carleen Gray, Stahls’ (asi/88984)

Gray cautioned, however, that she’s seen plenty of businesses open themselves up to innovation and find success from it, but go down the path of thinking that they must invest in more equipment rather than technology to streamline the process.

“Adding more equipment does not equate to being more efficient, and it does not always equate to more capacity,” she said. “It really is a case where, if you adopt technology and innovate, that can give you greater depth and greater output in your business.”

Lott said simply that he is “bullish” on the future of apparel and promo. He cited going to any sporting event with his kids and seeing how excited they get over a free T-shirt, indicating that there’s still “magic” in these products and demand for them.

“What we do in selling branded merch I think is more valuable today than it was a few years ago,” he said. “I thought we proved that during COVID in a lot of ways. I think the buyers of our product continue to see value in it.”

Gray added that it’s now the challenge for the industry to meet the demand that exists.

Lott said he believes AI and automation will continue to be major trend-drivers in the way that apparel, print and promotional products do business in the next five years. He spotlighted SanMar’s new automated distribution center in Virginia, which only has about 250 employees compared to its traditional distribution center in Ohio, which has 1,000.

“Over the near term as an industry, I think that at least from the supplier and manufacturer’s standpoint, investing to make our business more efficient is a huge piece of what we’re doing as a company right now,” he said.

For Stahls’, Gray said that it’s a matter of using technology to make the process more efficient, like print-on-demand software.

“We freely pivoted in terms of using Fulfill Engine for flexing to our decorator networks so that we can bring manufacturing closer to where the customer is,” she said. “It’s all about the automation and making sure that we are much more efficient.”

Are tariffs and trade unpredictability pushing production closer to home? And are apparel manufacturers adjusting pricing or absorbing that cost?

Lott said that “Liberation Day,” the name used by the Trump administration as the day the tariffs would take effect, was not a happy day at SanMar. But, he added, it wasn’t a total shock, and they set themselves up as best they could. Even still, things were difficult.

“If anyone watched the presidential campaign, you knew there were tariffs coming,” he said. “We basically moved out of China ahead of that. We’re in 24 countries today where we manufacture, so we thought we were ready for tariffs. The degree and the breadth of them was quite a surprise to us.”

Lott drew on the fact that apparel and footwear is still a heavily tariffed industry in the U.S., and that items like polyester T-shirts from Vietnam can carry a tariff as high as 32%.

“SanMar’s done a lot to try to manufacture in duty-free countries, so we’ve taken advantage of trade preferences like CAFTA in Central America, AGOA in Africa.”

AGOA, however, expires this September. If it isn’t renewed, products that SanMar manufactures in Africa could become almost a third more expensive the day after it expires. Because of that uncertainty, SanMar is in the process of moving the manufacture of almost 40% of its total styles elsewhere. Lott said the company is looking at the southern hemisphere in countries like Haiti and Mexico, as well as opportunities in Egypt and Jordan, as the two countries have trade ties with Israel that Lott believes would be more durable than AGOA.

“I was in China two weeks ago, and every manufacturer that we met with was just in Egypt or on the way to Egypt,” he added.

Regardless, SanMar is still working with its vendor network to absorb some of the rising costs, in addition to taking some of the hit itself and implementing a price increase, in what Lott called an “a third, a third, a third” pricing model – where a 10% tariff cost is split three ways.

For Stahls’, much of the supply chain discussion has to do with inks and DTF film. Ultimately, Gray said, the company did not want to be as reliant on Asia for ink. As such, its R&D reached a point where it was developing its own inks in North America.

“We’re advocating for ourselves; we want a cleaner product that we’re going to put out, so we invested in that,” Gray said. “In the long run, it’s a better choice for the environment, it’s a better choice for Stahls’, and it fits the print-on-demand model, which is obviously a more sustainable model for us.”

Can the U.S. realistically scale domestic production, and if so, where?

Lott told a story about owning a small factory in rural Tennessee, and used his experience to impart a simple conclusion. “It is exceptionally hard to build apparel capacity and scale in the United States today,” he said. “I don’t see any world where we reshore a significant portion of apparel manufacturing.”

“I was in China two weeks ago, and every manufacturer that we met with was just in Egypt or on the way to Egypt.”Jeremy Lott, SanMar (asi/84863)

Even if variables like labor and environmental costs disappeared, Lott said, it would take a decade or longer to get domestic production up and running. He said there are simply too many factors involved, including manufacturing facilities, cutting and sewing facilities, and spinning facilities.

“To build that here and scale, I just don’t think it’s possible,” he added. “Even if the tariffs were significantly higher, I don’t see a world where we’re reshoring significant apparel capacity.”

Do you see print-on-demand and DTF technology disrupting traditional production and fulfillment models, and is DTG poised for a comeback?

Gray echoed her earlier sentiment that DTF is disruptive only in that it’s being sold as the perfect tool for every job 100% of the time. “That really is a disservice to the customer,” she said. “We were showing a customer designs and prints recently, and they had never seen a screen-print transfer.”

The benefits, she added, are the full color and the ability to do one-offs – but DTF isn’t going to fully replace screen printing or other decoration services, and print-on-demand will not become the only means of selling products.

What innovations in materials, recycling or green tech show real promise?

Gray said that print-on-demand itself can be a more sustainable way to approach demand due to the lack of dead stock, as well as water-based DTF films being an eco-friendlier choice for decoration.

“In the selling process and qualifying your customers, go for an elevated choice and something that has longevity, so that we’re not printing so much and of lower quality,” she advised.

One issue as it pertains to sustainability, though, is changing customer mindset. A supplier or printer can source nothing but environmentally friendly products or use the most sustainable methods possible, but if there isn’t demand for it – or a customer base more understanding of possibly more expensive choices – it doesn’t move the needle.

Print-on-demand is a good place to start, Gray said. “Minimums would sometimes dictate choices that people made. Now they don’t have to buy a certain amount or over what they need. Color choices and color counts and stuff like that were dictating purchase choices.”

This is where Gray said DTF is a valuable tool and worthy of its reputation. Suddenly, the more environmental choice is also the cost-effective choice in certain instances.

“As the industry moves along this line, it just becomes a better way of doing business, a more sustainable way as a whole,” she added.

How are interest rates, inflation and capital costs impacting your approach to inventory and capital investment?

“The answer is, it’s not,” Lott said. “I think some of it is that as a family business, we have the ability to make the right investments in inventory and in capital expenses that we would be almost irrespective of those things today. The way we manage the business from a balance sheet perspective give us the flexibility to do that.”

SanMar, he added, can carry a deep inventory as a cornerstone of its business. When asked about when the industry should tolerate stock-outs, Lott said these should never be tolerated.

“We try really hard not to have them,” he said. “If you take out the post-COVID supply chain challenges and you look back at the 20-year period, and you look at our inventory and stock levels, I think that you would be impressed by our levels. Now, there was that short period where the world was kind of so crazy that it was tough, but one of the things that’s happened in our industry is challenging the level of SKU explosion.”

Lott said that because forecasting can be difficult in apparel, SanMar tries its best to turn stock slowly to always have inventory of any product that could become in-demand.

“By far our biggest investment is in our inventory,” he said.

What’s one under-the-radar trend that no one’s talking about that you believe will define the next five years?

Gray answered with something that she sees as a potential negative for the industry going forward. (Not all trends are good, after all.)

“I think there’s this business-model change – the Uberization,” she called it, referring to “any old printer working in their garage.” She feels this trend can damage the integrity of the printing process.

On the positive side, Gray pointed to the emergence of 3-D printing coming into the decorating industry.

Lott, too, heralded the positives of the gap between the retail world and the promo world of apparel. “I’m always inspired by our design and merchandising teams – what they’re able to create,” he said. “I just think it’s a great time in branded apparel and merchandising. The product is the greatest it’s ever been, and I think that’s going to continue.”