Growth is usually going to be measured by a topline number. If something gets bigger, then it grew.
And thus, the branded merchandise industry is technically growing. According to PPAI Research’s recent bi-monthly survey, distributors grew by 2.8% in July and August compared to the same months in 2025, and suppliers grew 2.1% by the same criteria. These numbers are up ever so slightly from May and June when the growth rates were 2.3% for distributors and approximately 2.1% for suppliers.
However, growth tends to tell a larger story. The rate at which the industry’s sales numbers grew over that period is fairly tepid compared to the previous cycle. Furthermore, these growth numbers lag significantly behind the most recent U.S. inflation rate of 3.4%.
- 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.
That larger growth narrative can be sliced into a number of different narratives as you dig into the data. Companies of varying sizes are experiencing growth differently and the supply chain isn’t moving at as even of a pace as you might hope.
“The industry continues to grow, but the numbers underneath that growth are becoming increasingly important,” says Alok Bhat, market economist and PPAI’s director of research and public affairs. “Distributors are generally seeing stronger revenue and order momentum, while suppliers are navigating a more uneven combination of demand, costs and margins. Two companies can both be growing today and still be having very different business experiences.”
Alok Bhat
Market Economist, Director of Research & Public Affairs, PPAI
Distributor Insights
Growth remained steady for distributors in July and August, continuing to inch forward. The majority of small and mid-sized distributors, especially, do not seem to be struggling to grow in terms of sales revenue. Nearly 75% of distributors responded that they experienced higher sales revenue in July/August.
- Every size segment saw majority growth among distributors. Even about 56% of small distributors reported increased sales revenue, but overall that segment was more mixed than the mid-sized and large distributor with 42.9 reporting flat or decreased sales.
Where the data is showing unequal results among distributors is less in sales revenue and more in order activity, which looked markedly more volatile among smaller distributors. Order volume continues to increase for a healthy majority of mid-sized and large distributors. Even when you factor in small firms, 64% of distributors reported higher order volume overall.
- Those results become much more mixed when small distributors are surveyed with order activity cooling among many in the segment.
- Over 60% of small distributors reported flat or decreased order volume.
- All of this data lays out an important distinction: If distributor revenue is growing overall, but only 64% of distributors reported a higher order volume, then the underlying volume of business is not moving equally for all companies.
There are two sides of this coin, however. While large companies are seeing more increased sales revenue and order volume, they are also seeing a more glaring increase in cost pressure.
- To be clear, cost pressure is an issue facing all size segment, with two thirds of distributors reporting increased procurement costs.
- But that pressure is felt most prominently by distributors that earn more than $100 million annually. Roughly 80% of firms in that segment are reporting moderately higher procurement costs.
Even with cost pressures mounting on them, larger distributors seem to be able to handle the burden of inflation on their margins, at least better than small distributors, which are beginning to show the impact of margin pressure.
- More than half of PPAI 100 distributors reported that they were seeing little or no margin impact.
- That isn’t reflected when distributors making less than $20 million annually are isolated. With less order momentum, they have less room to absorb costs and inflation.
- Midsized distributors sit somewhere between the two with a cushion that seems to be shrinking when it comes to margins compared to previous cycles.
Supplier Insights
It is becoming a troublingly familiar story: For nearly two years, supplier growth has lagged behind distributors, a trend that doesn’t spell ideal health for the industry’s supply chain.
Only 51.9% of suppliers reported higher revenue in July and August, and nearly one quarter reported decreased revenue.
- Supplier revenue is barely ticking forward in this cycle, having cooled from the momentum of the previous cycle.
- Growth is generally mixed, with the mid-sized suppliers showing the most consistent revenue growth.
- Largest suppliers, which were leading the previously cycle, are showing divided results in July and August.
“The supplier market is becoming more company-specific,” says Bhat. “Execution, customer mix and where demand is coming from appear to matter more than size alone.”
- Order volume is more uneven this cycle and procurement costs are continuing at an elevated level for suppliers. Both factors are contributing to stress levels on suppliers.
The impact, however, depends on where you look. Many large suppliers are actually showing improvement in margin performance, able to absorb inflation and costs. That’s not the case for every segment.
- Mid-sized suppliers are now carrying the greatest burden when it comes to margin pressure. Revenue is still being consistently generated, but converting that into profitability is a different story.
- Smaller suppliers have shown slight improvement in margin improvement, which is something to watch going forward. Whether that is a trend in margin erosion or just a bit or variability.
