Promo Leaders Explain Industry’s Record Year
It was another bounce-back year for the promo industry, and likely the best year ever in terms of revenue, but why was 2022 so strong for promotional products?
The answer, as usual, is made up of myriad factors, but preliminary results from PPAI’s Sales Volume Estimate, an annual survey of the industry collected by third-party research firm Relevant Insights on behalf of PPAI, currently places the size of the U.S. market for promotional products at over $25 billion in 2022.
This would not only equate to a 13% increase over 2021 and a full rebound from the difficult first year of the pandemic, but it is expected to be the largest sales performance the industry has ever seen.
PPAI Media discussed these positive findings with several key industry leaders and asked them why 2022 was such a great year.
A ‘Delayed Recovery’
While inflation and job growth were constant (and related) topics, the 2022’s economy was vastly improved, especially compared to 2020 and the first stage of the pandemic.
“Many businesses thrived through the pandemic, but generally speaking, that was not the case with promotional products,” says Kevin Walsh, president of Showdown Displays and PPAI Board Chair.
- This accounts for what Walsh refers to as a “delayed recovery.”
According to CJ Schmidt, CEO of Hit Promotional Products, many companies’ marketing budgets were among the first things to be put on pause during the onset of the pandemic, and it wasn’t until a few months into 2022 that many brands went full throttle back into their marketing plans, likely with some amount of surplus budget carried over.
“I believe most corporations had a larger budget piling up from the previous two years, which increased their promotional spending,” Schmidt says.
- To the degree that companies did spend on promo during the pandemic, many saw positive results and are continuing or doubling down on that path.
“Distributors and end-buyers are increasingly incorporating promotional products as part of their integrated marketing strategy, resulting in a higher share of their budgets being devoted to promo,” says Nancy Schmidt, CEO of AIA Corporation.
The Return Of In-Person Events
A degree of normalcy in the world is required for much of promo to thrive, and for so many promo companies and products, in-person events are a huge component of sales.
- By Q2 of 2022, COVID-19 vaccines and boosters were largely available for most Americans and gathering together was considered much safer than it had been since the onset of the pandemic, making in-person events much less logistically difficult.
- Walsh referred to concerts, sporting events, conferences, sales meetings, trade shows and other events as “significant contributors to 2022’s growth.”
- Additionally, Nancy Schmidt suggests that the events also have a ripple effect that can generate additional business.
“We returned to events in full force, recapturing the annual energy of promo for the first time since the pandemic began,” Nancy Schmidt says.
Supply Chain Recovery
Supply chain complications were a major talking point in Q1 of 2022. Fortunately, there were dramatic improvements in that regard as the year continued for promo, especially when compared to the previous two years.
“Having the goods available for sale at the industry’s peak season was a major contributing factor,” Walsh says of 2023.
As China contends with its first major wave of COVID-19, complications may still arise going forward, but in general, CJ Schmidt agrees that inventory levels “started to creep their way back to a level or normalcy towards the latter half of 2022.”
Quality Over Quantity
Nancy Schmidt points out a growing trend in promo that may be overlooked when discussing growing sales numbers: a shift from a focus on high volume to product quality. With a decent sample size, this shift has proven to be sustainable and often produces higher sales numbers.
“Eco-friendly, renewable products and products with social impact tend to carry a higher price point to match the higher perceived (and real) value,” Nancy Schmidt says.
The Inflation Caveat
These high sales numbers are a positive for the promo industry full-stop. However, there is one rather large caveat when it comes to that impressive $25 billion number.
- Inflation was the word of the year when discussing the economy in 2022. Inflated prices also mean inflated sales numbers, to some degree.
“It’s conceivable that while we may have experienced record top-line numbers for the industry, we may not yet have eclipsed the same ‘unit sales’ as the industry experienced in 2019, all due to higher prices for similar items,” Walsh says.
- Promo companies were forced to sell products at a higher price because they were paying higher prices for nearly everything that went into their promo business.
- Nancy Schmidt agrees that “inflationary prices drove higher total revenues” in 2022.
Even still, inflation began to show signs of letting up in the latter half of the year, and promo companies, like many businesses, no longer had to constantly react to inflation’s whims.
“Price fluctuation amongst various commodities started to level out, which thus made it easier to stabilize pricing for a longer period of time,” CJ Schmidt says.
Regardless of this caveat, it is important not to lose perspective that during the first stages of 2022, the world was reacting to the Omicron variant of COVID-19, which threatened to continue hampering the general economy and hurting the promo industry. Considering that much of promo’s turnaround arguably did not fully begin until Q2, it makes these numbers even more impressive.