The Hard Sell: How Buyer Apprehension Results in Smaller, Less Frequent Orders and More Affordable Products

This article originally appeared as part of Counselor's State of the Industry. To view the full report, click here.

It was the middle of last year that Joseph Fisher started seeing the change. At the time, the owner/president of Chicago-based Positive Impressions (asi/297330) noticed clients were paying slower. After that, clients of all types (major corporations, nonprofits, local businesses) started ordering in smaller quantities.

More concerning developments followed, even as the distributor didn’t lose clients and counted more customers than ever. “The last quarter of 2023 and the first quarter of this year, volume had dropped off big time,” says Fisher, “and it was just very quiet – unlike anything I’ve ever seen without a disaster preceding it.”

The situation is one that distributors of all sizes are contending with. The health of the economy has been debated, but what’s indisputable is that consumers and business buyers have approached this year with caution. The proof can been seen in promo industry sales; in Q3 last year, industry growth slowed to 2.4%, and then .1% in the fourth quarter. In the first quarter of this year, year-over-year sales declined .9%. Depending on the distributor, the apprehension is manifesting in numerous ways: less spent per order (order values shrank for the first time since 2020), fewer quantities, longer periods between orders, a shift to inexpensive products and difficulty finding new clients.

Tonia Avey, director of sales for DKspecialties (asi/181469) has a healthcare client who “used to order items like they’re ordering pizza,” she says. Major orders of 50,000 pens and 5,000 pill boxes, first-aid kits and water bottles were regular occurrences. Since the end of 2022, Avey notes the client’s ordering slowed down a lot. “Where before they used to give me quotes of 5,000 to 10,000 of an item,” says Avey, whose parents started the Agoura Hills, CA-based distributorship over 20 years ago, “now they’re asking if they can order 100 pillboxes. Well, the minimum is 250.”

Avey and Fisher haven’t seen a shift in the types of products that clients are buying, but the story is different at Counselor Top 40 distributor iPROMOTEu (asi/232119). CEO Lori Bauer says that while the distributor’s affiliates had a strong start to the first half of the year, they’ve seen a shift to lower price-point items – part of what Bauer terms the reversion to “pre-pandemic buying behaviors.”

Bauer notes that it’s not completely price driven because the trend for retail brand names is still there. “That’s where the distributor is ultimately seeing a more competitive environment,” says Bauer, who previously was with Counselor Top 40 supplier Koozie Group for nearly 25 years before joining iPROMOTEu in 2021. “It’s a demanding environment where clients want the highest-quality, trend-focused items to support their branding and messaging, while still having to adhere to conservative budgets this year.”

On the supplier side, High Caliber Line (asi/43442) had an excellent year in 2023, with sales growing by 26% thanks to robustness in drinkware and stress relievers as well as a strong inventory position. Still, even as the company is faring well in 2024, CEO Daniel Oas notes that order values are down 10%-15%. The company has also seen price-conscious shopping; closeouts were up 20%, and upcharges for decorating techniques like laser engraving were much slower compared to the previous year. “People are buying similar items as before, but just not buying as many,” says Oas, who founded the Irwindale, CA-based company 25 years ago. “And as I mentioned with the laser engraving, buyers will stay with the cheaper decoration method to keep the price down.”

None of the distributors and suppliers that Counselor spoke with are expecting a dramatic turnaround this year, but there are some positive signs. Fisher, speaking to Counselor in mid-May, said in Q2 “it was like everyone woke up at the same time” resulting in a flood of rush orders. And indeed, industry sales in Q2 increased 1.3%, a reversal of Q1's negative growth. Bauer agrees that as the year wears on, buyers will get more comfortable and gain a sense of certainty, and will feel the need to spend their budgets. “There’s definitely a chance for improvement,” she says. “The environment will be stable, but I’d say cautious and more competitive.

The first half of 2023 was decent, the second half wasn’t so great, which means the sales metrics from the year are a bit conflicted. Order values for both distributors and suppliers fell and distributor client retention suffered, yet margins held steady and the average number of orders went up for small and medium-sized distributors. Other findings? Distributors are also generally seeing a shift to lower-priced items and, not surprisingly, are still gravely concerned about price increases.

The economy and the election are cited as the two biggest influences on buyer behavior this year, and though no one’s anticipating a dramatic reversal, there’s hope that the second half of 2024 will end on a stronger note. If that happens, there might be diverging indicators in next year’s SOI report as well.