Here’s something you can bank on: the popularity of company stores will continue to increase. To be clear, that wasn't always the case. The percentage of distributors offering them actually declined in 2020 and 2021. The reason was simple: Confronted by the extraordinary difficulties of the pandemic, distributors regrouped and focused on their core offerings. And indeed, other services such as fulfillment and marketing services also declined during that period. Since then, distributors are once again embracing company stores. The percentage of industry firms offering them has increased in the last two years, and now close to half (45%) of distributors sell them to clients. Distributors (and businesses in general) tend to tread cautiously when budgets tighten, but the popularity of company stores will increase even in a slightly slow economy.

It’s fascinating to see how the two sides of the supply chain are behaving under the same market conditions, and how even distributors and suppliers of varying sizes are taking separate approaches.

When companies are struggling and sales are hard to come by, distributors smell blood in the water and start getting aggressive. It happened in 2021 and 2022, when the struggles of the pandemic and low interest rates prompted huge M&A activity in promo and across the business world. This year won't reach those same heights, but the data shows large distributors are reacting the same way they did a couple years ago – in particular distributors with sales $5 million and over, as the percentage of those saying they were likely to buy doubled. Smaller and medium-sized distributors, on the other hand, said they were less likely to buy. While there was a sharp increase in large distributors indicating their desire to buy, there was only a slight increase (from 7% last year to 10% this year) of distributors looking to sell.

Meanwhile, we’ve noted the struggles of suppliers due to a confluence of factors that include supply chain pressures, rising prices on raw materials and difficulty in maintaining a stable workforce. As these troubles stack up, some supplier owners are saying they’ve had enough, and it’s visible in their escalated intentions to sell. The interesting part is that the greatest increases are evident in medium and large suppliers, even though small suppliers have the lowest health ratings. Surprisingly, while suppliers were more likely to sell, they didn't say they were more likely to buy (17% this year, 16% last year, which is basically flat). The economy is the key here. Assuming mild growth in the industry this year and a more optimistic outlook in 2025, expect both of these dynamics (distributors increasingly looking to buy, suppliers increasingly looking to sell) to experience a mild reversal.

Holiday gift-giving, the end-of-year emptying of budgets – you can always count on the fact that Q4 is the biggest quarter of the year. Right? It wasn’t the case in 2023 for suppliers. Q3 actually surpassed Q4 as the most lucrative quarter, and the percentage of sales in the last quarter declined from 29% to 26%.

What gives? The biggest reason is end-buyers pulled back a lot in Q4 as concern over the economy took hold – reflected in the fact that industry sales increased by only .1% year over year in the quarter. However, another key reason is that the supply chain disruption of the past few years has stoked fears that holiday orders wouldn’t arrive in time, and prodded buyers to order earlier. Suppliers obviously wanted to make sure they were stocked up for the biggest quarter and were proactively filling their warehouses. All of that shifted the needle to Q3.

Will this continue? Shipping costs shot up again this year in late spring and early summer (though not to pandemic-era levels) as companies looked to get an early jump on peak shipping season. On the other hand, there’s an expectation that things will settle down economically as the year goes on with a note of optimism leading into 2025, which portends a better Q4 than in 2023. The trend may not reverse this year, but for the future, no, Q3 is not the new Q4.

To be honest, we don’t have a tidy explanation for this one. Everything up until 2023 made sense. Demand for domestic products leapt in 2020 and 2021 in the wake of the pandemic and supply chain disruption. (In fact, the most searches Google ever had for “Made in USA” came in May 2020.) Once the supply chain stabilized in 2022, calls for Made-in-the-USA products correspondingly fell.

So what happened last year when suppliers reported a renewed interest in domestic manufacturing? It wasn’t an election year. Container prices and shipping costs were far below previous years (as well as current levels).

Some theories: Continuing and new tariffs against China are sparking a wave of interest in American-made items. Perhaps it’s a manifestation of growing nationalism and protectionism. Buyers are showing increasing receptiveness to sustainable and socially responsible products, and maybe the interest in Made in USA dovetails with their priorities.

It’s interesting to note that, among suppliers who said clients asked for more Made-in-USA products, those who “Strongly Agreed” dipped for the third consecutive year. Meanwhile, those who “Somewhat Agreed” increased from 24% in 2022 to 38% in 2023. That seemingly indicates American-made is becoming less of a must-have, and more of a nice-to-have. So where does this leave us? We foresee another slight increase in 2024 (being an election year helps). After that, there will be significant declines. As much as we want to collectively champion domestic manufacturing, in reality interest ebbs and flows. This won’t last.

We like to say that everything is faster these days, and it’s true in a lot of ways. Another example – how fast suppliers get paid. Suppliers reported that in 2023 they were paid quicker (25 days) than they’ve ever been. The thrust of the movement comes from larger suppliers, who were paid seven days quicker than they were the previous year.

The obvious question is whether this will keep dropping, level off or creep back up to more extended payments. Let’s rule the latter out. Suppliers are dealing with an array of cost pressures, and have responded by passing along price increases and even beginning to charge distributors for credit card payments. Demanding quicker payment is part and parcel with this series of actions. Consider that, as recently as 2010, suppliers were getting paid in 40 days.

It seems far-fetched to expect another big drop in days sales outstanding for suppliers, so expect this level to hold for a while. This is the new reality for payment terms.

It’s a delicate balance for distributors. They want to identify their top suppliers that they can trust, and funnel business to those select companies to get beneficial pricing and more favorable terms. On the other hand, distributors are always looking for the hot new thing for clients, and are being pushed by socially conscious buyers to diversify their spend with minority- and woman-owned companies.

How did this play out last year? There was a slight tightening in how many distributors sought out unfamiliar suppliers. Nearly half of distributors did widen their net, but that represented a six percentage point drop from the previous year. Four in 10 distributors purchased from the same number of suppliers.

This is a function of the supply chain and the economy. When the supply chain was at its nadir in 2021, distributors tightened the ranks and focused on the suppliers they had the absolute highest amount of trust with. (Well, until those suppliers ran out of inventory and distributors had to go into scramble mode to complete orders.) Along the same lines, when the economy pushes buyers to constrict their spending, nervous distributors aren’t so eager to try out new suppliers.

So even though the largest portion of distributors expanded their list of suppliers, the number decreased compared to 2022. Now, with supply chain costs once again rising rapidly and economic uncertainty expected to linger through the rest of this year, expect that trend to continue. It won’t be a dramatic fall, but it will be a decline nonetheless.