In the most literal sense, the data brings good news. But many promo firms would be forgiven for not quite seeing it that way. Promo’s sales revenue is still growing year-over-year, and that growth actually improved slightly in July and August, but the margins remain thin, and external factors are taking a toll on profitability.
- PPAI Research’s most recent bi-monthly survey has confirmed that industry revenue grew by 0.7% compared to the same two-month period in 2024. This is up slightly from the growth rate of 0.37% reported for May and June.
- That growth rate, however, is being significantly outpaced by the rate of inflation, which currently stands at 2.9% and is putting pressure on the margins of promo firms, along with increased tariff rates.
- The latest revenue data isn’t cultivated from the same methodology as the annual U.S. Distributor Sales Volume Estimate, which polls U.S. distributors of all sizes.
- Rather, the current assessment stems from the aggregated results of PPAI 100 distributors and suppliers responding to a flash survey.
With inflation rising and supply chain questions still looming, the growth seen by promo has not been enough to feel like relief to many promo firms. In other words, revenue has gone up as prices have risen, but profitability is becoming noticeably more difficult for a wider range of distributors and suppliers.
“With inflation at 2.9% and tariff uncertainty persisting, revenue growth has been offset by rising procurement costs and inflationary pressure, hitting margins and limiting profitability,” says Alok Bhat, market economist and PPAI’s research and public affairs lead.
Things are unlikely to become smoother in coming months from a supply chain perspective. According to the National Retail Federation’s Global Port Tracker, the flow of goods at major U.S. ports is expected to steadily decline throughout the rest of 2025 due to the toll that tariffs have taken on imports. Port fees and tariffs are likely to play a part in the next few months of big picture decisions for some promo firms.
“There’s a lot of uncertainty in the market right now, and the ocean freight industry doesn’t do well with uncertainty,” John Janson, vice president of global logistics at SanMar – PPAI 100’s No. 1 supplier, which accounted for an estimated $4.2 billion in revenue in 2024 told PPAI Media.
John Janson
VP of Global Logistics, SanMar
“Carriers have learned that to make money they need to control capacity, so they’re removing capacity from the market right now to drive up some of the costs. The fourth quarter will be very interesting in the ocean arena because there’s not going to be enough freight, and carriers will have to respond to that.”
- The Supreme Court has agreed to review a recent ruling that President Trump does not have the authority to issue sweeping global tariffs. As the highest court in the nation, this could mean some degree of resolution on the matter could be achieved by Thanksgiving.
Distributors and Suppliers: Unequal Burdens Continue
As we begin to examine data concerning the second half of 2025, one trend has established into a clear pattern over the course of the year: Suppliers have felt the burden of slowed growth more harshly than distributors.
- While reports of revenue growth are similar between both distributors and suppliers (nearing 60% for both), it is the reports of declining revenue that begin to show a difference. One quarter of suppliers saw sales decline compared to 17% of distributors.
But it’s the pressure on margins where suppliers are feeling a squeeze that distributors just don’t claim to be noticing at the same rate.
- 56.2% of suppliers have experienced margin erosion (5.3% of them categorizing them as significant) due to inflation, procurement costs spiking or tariff pressure eating into their profitability.
- Meanwhile, only 30% of distributors claim the same sort of margin decrease.
- In fact, 60.9% of distributors say inflation had no impact on their margins in July and August compared to only 35% of suppliers willing to make that same claim.
Alok Bhat
Market Economist and Research & Public Affairs Lead, PPAI
“Most suppliers see margins shrinking as costs rise faster than revenues,” Bhat says. “For most distributors, margins are holding steady, but stability is not the same as strength.”
A look at year-to-date revenue trends shows that while most suppliers are growing only slightly, they are losing ground at a much higher rate on the year than distributors.
- 31.4% of suppliers are in revenue decline year-to-date, with most losses less than 10%, pointing to uneven demand and pressure on discretionary projects.
- Only 13% of distributors reported year-to-date revenue decline.
As Bhat alludes to, it is not a good sign for anyone in promo’s supply chain that suppliers would be carrying a heavier burden. There are a number of potential reasons why this could be the case, but it is unlikely that it is sustainable without having a major impact on distributors as well. Seth Weiner, president of Sonic Promos, wonders if the imbalance and the growth numbers have to do with many distributors that are resisting passing on the rising costs that they’re incurring.
“That may seem sustainable for the short term, but it does damage to the long-term health of the business,” Weiner says. “We are living in a world where unless you are living off the grid, everyone is aware of the increase in costs in most everything. That goes for promotional items and brand marketing, too.
Seth Weiner, MAS
President, Sonic Promos
“By educating the client on how inflation impacts their products and programs, companies can serve as a resource and expert on how to better navigate future needs.”
