4 Reasons Promo Is Going To Have a Strong Fourth Quarter

Things are looking up for Kelly Moore.

The owner and solo operator of Moore Promotions (asi/601617) says much of 2024 has been a sales slog for her Florida-based independent promo distributorship. But as the calendar flipped to September, business began to accelerate.

For several weeks now, sales have been on a decided upswing. It may not be enough to get her total third-quarter revenue above last year’s level, but she believes the rising momentum bodes well for the fourth quarter.

“I have experienced quite an uptick in orders coming in,” Moore tells ASI Media. “I’m now anticipating this year’s Q4 will be better than in 2023. I sense buyers are more comfortable with the economy. They’re not hoarding as much. They’re ready to spend.”

I happen to agree with Moore.

I’m usually loath to break out the crystal ball and make big-ticket predictions.

However, everything from an analysis of marketplace developments to conversations with a variety of super savvy leaders in our industry and beyond has me believing promo is poised for an especially strong fourth quarter – one that will definitely outpace last year’s Q4.

Say something enough and perhaps you can make it true, right? Well, let’s try that. Here’s why I think Q4 could end up being the industry’s strongest quarter of the year – in both overall top line sales and in terms of percentage growth relative to last year.

Business Is Churning

Moore is far from the only distributor to tell me that late August/early September marked the start of a considerable warmup in sales.

Leaders at firms large, small and medium described a similar pattern: Business cooled substantially for part of the summer, especially in July, perhaps as business leaders became nervous about the direction of the presidential election, given everything from the assassination attempt on former President Donald Trump to whether President Joe Biden would remain in the race.

But as the summer fades and fall takes hold, buyers have been coming back to the table, I’ve been told time and again.

“We felt a significant slowdown in the summer, but the last week of August things started to pick back up,” says Sarah Whitaker, owner of Kentucky-based distributorship Williams Advertising (asi/360402). “Some of it has been holiday prep, but most of it is just the return of normal business. It might be too early to say for sure, but it does feel like we’re heading toward a strong end of the year.”

It’s my sense that the ramp up in business Whitaker and others are experiencing isn’t a momentary blip on an otherwise bleak sales landscape. Rather, it’s the clouds breaking and the sun shining through after an extended stretch of muggy drizzle – one in which distributors sales declined 0.9% in the first quarter of 2024 and rose just 1.3% on an annual basis in Q2.

Buyers Still Have Budgets – And They’re Ready To Spend

Rob Watson, the CEO of Counselor Top 40 supplier Vantage Apparel (asi/93390), said something during a recent PromoAlliance webinar that stuck with me. I think it’s emblematic of a phenomenon playing out across promo.

Watson shared how Vantage has been working on a variety of large orders with its distributor partners for their end-clients but that there have been uncharacteristically long sales cycles. Usually, when such opportunities arise, they take three to four weeks or so to bring to fruition, Watson said during the webinar.

Still, for stretches of 2024, the orders were effectively paused, the timeframes stretching to several months. But now, thankfully, the end-buyers are starting to hit the “go” button, so to speak, on orders that have been idling at bay.

“During midsummer, there was a lot of uncertainty, but we’re starting to see reality to some of these large opportunities that we’ve worked really hard for,” Watson says.

To my mind, Watson’s story is telling: Despite inflation’s challenges, the U.S. economy has continued to grow, and many buyers have budget to spend. Given anxiety and uncertainty over the economy, however, they’ve been hesitant to invest in certain things, including merch. But as the year comes to its culmination, it’s time to spend the budget or lose it. No one wants a smaller budget for next year, so spend, I believe, they will.

“Eventually, there has to be pent-up demand that needs to have an outlet, and there are signs that we’re getting really close to that point,” says Nate Kucsma, ASI’s senior executive director of research.

Kucsma continues: “For instance, companies in the U.S. are experiencing record profits and the stock market continues to ride high. I wouldn’t be surprised if Q4 was unusually strong as companies and departments that have budgets, but have been reluctant to spend, start to realize they need to by the end of the year – lest they lose those budgets the following year.”

The Presidential Election Will Be Over

I don’t want to descend too deeply into the cobra’s den of politics. However, we can’t just ignore something so significant. Presidential elections create uncertainty, and business leaders don’t like uncertainty. I’d argue the uncertainty generated this year by the election has been particularly pronounced, given the incredible volatility of the race and what many would agree is the stark contrast in personalities and planned policy direction.

Just getting the election over will give the marketplace – and buyers – more clarity. And that’s a really good thing.

Regardless of who wins, decision-makers will have a clearer picture about what lies ahead and can plan accordingly. This alone should help get more merch buyers off the sidelines and back into the swag-buying game.

Dr. Mary Kelly, an internationally renowned economist, U.S. Navy veteran and the CEO of Productive Leaders, a firm dedicated to leadership and economic development, happens to think along similar lines.

“The biggest disruptor to the U.S. economy right now is our own elections because of the uncertainty,” says Kelly, who’ll be speaking on the economy at the ASI Power Summit in October. “We can take bad news. We can hear our taxes are going to go up, and we can adapt to that. But what we don’t like is uncertainty.”

Knowing who will be the next president should help settle some of the topsy-turviness, Kelly says. As far as the economy and policy goes, “Not much is going to change in the next six months or year because the things that are already in place are going to stay in place,” she says. That stability, if it plays out, should help foster investment in promo.

Fed Dropped Interest Rates

In mid-September, the Federal Reserve approved reducing benchmark interest rates by a half-percentage point to a range of 4.75% to 5%.

If nothing else, the move will have a positive impact on the psychology of many business leaders, including promo buyers. The rate cut signals that the worst of the multi-year battle against runaway inflation is over, at least for now. That should help merch purchasers and the decision-makers they report to feel greater comfort about investing more deeply in marketing and retention initiatives, which stands to benefit our industry.

Beyond the better “feels,” there could be real dollars and cents upsides.

The Fed’s benchmark short-term borrowing rate establishes what banks charge each other for overnight lending and affects borrowing/interest rates throughout the economy. As lower rates trickle across the marketplace in the months ahead, end-buyer companies could have greater access to capital and carry less expensive debt loads, factors that should provide more cash on hand for investing in branded merchandise and other business-building initiatives.

Promo firms themselves could also have more money at the ready for investing in their own businesses, which can help spur sales gains.

“As rates come down, it should ease the financial burden for companies who are leveraging debt while allowing them to reinvest those savings into growth efforts for their own business,” says Andy Shape, CEO of Counselor Top 40 distributor Stran Promotional Solutions (asi/337725) and a member of Counselor’s Power 50 list of promo’s most influential people.

A Word of Caution

Of course, nothing is certain. I still laugh (grimly) reading a prediction article I wrote in late 2019 for 2020. COVID derailed some of those forecasts, for sure.

That could happen here, too. What if geopolitical flash points, like conflict in the Middle East, spread and involve more countries, affecting global supply chains and commerce? What if the possible massive worker strike at East and Gulf Coast ports actually begins in October and becomes protracted? What if there’s another wild twist in the presidential election?

What if … what if … what if …

You could make yourself crazy thinking about the endless permutations of chance. In the end, promo can only plan as best it can for variables and adapt swiftly and smartly as complications arise. The what-ifs shouldn’t scare anyone into inactivity or drop you into the doldrums of a defeated mindset. Because, as it stands today, there are notable tailwinds propelling promo forward. Commit to making the most of them through the final months of 2024.