Sue Timbo has never known a promo industry not beset by challenges. The CEO of Hexa | Custom (asi/60557) launched her custom outerwear company in late 2019. The promo industry – and suppliers in particular – have been on a roller coaster ever since. “I had lofty goals for 2020,” recalls Timbo. “Customers had big budgets and wanted to lean into their corporate culture. But a traumatic, disruptive event like COVID is going to have trickle-down effects that last three times as long.”
The promo industry and the economy did recover, as did supplier health as measured in the Counselor State of the Industry survey, plummeting to a COVID-driven low of 2.69 in 2020 and then shooting up to 3.55 in 2022. (Supplier health is measured on a scale from 1 to 5, with higher numbers indicating better health.)
Industry Health for Suppliers
During that post-pandemic rebound, suppliers faced a myriad of serious issues, ranging from astronomically high shipping costs to lack of inventory to major labor shortages. The good news was those issues improved. And yet, supplier health declined to 3.50 in 2023 and then further to 3.36 last year. When surveyed again in early June, under the shadow of tariffs, supplier health had fallen to 3.03.
It shows that even as one crisis subsides, residual damage for suppliers still lingers. China’s economy is still recovering, says Timbo, after forced lockdowns and zero-COVID policies shut factories and ports. A shrinking pool of workers has led to what she calls “a cascading waterfall” of negative effects, such as unreliable production, inconsistent lead times and higher freight/logistics costs. Meanwhile, companies in a variety of industries, burned by their COVID experience, have diversified into other countries.
At home, inflation has remained elevated, and the list of expectations on suppliers – from advanced technology to ESG documentation to product testing – keeps lengthening. And now, suppliers are under pressure to maintain prices in the face of significant tariffs on foreign-made products. Those levies are putting downward pressure on nearly every industry, which impacts promo spend.
Sales Slump
Sales numbers just aren’t moving in the way suppliers would like them to. The number of companies reporting an increase has fallen each year since 2022, while the number reporting a decrease has gone up each year in the same timeframe. And in Q1, nearly 60% of suppliers experienced declines in sales. “We’re seeing larger orders,” says Brittany David of SnugZ USA (asi/88060), “but they provide less revenue because they’re of lower-end SKUs. We put in a lot of work for lower-end SKUs.”
Supplier Sales Volume Changes
“Promo is advertising; it’s not life-critical,” says Brittany David, chief revenue officer at Counselor Top 40 supplier SnugZ USA (asi/88060) and a member of the Counselor Power 50 list. “When budgets are adjusted, the first things to be cut are headcount and marketing.”
So while COVID was the first shoe to drop, concern lingers. “It’s supplier caution right now, not confidence,” Timbo told Counselor in April. “Our industry has had it hard.” How hard? Since speaking with Counselor, Hexa | Custom was compelled to pause production due to tariff uncertainty at its partner factory in China.
Suppliers’ Concerns About Tariffs
Heightened Concerns
Tariff uncertainty has suppliers on pins and needles. Nearly half of suppliers when asked in early June were “very concerned” about the impacts of tariffs – a figure that had gone up when Counselor first asked suppliers about tariffs in January. The level of concern spiked in April when the president’s “Liberation Day” tariff policy was first revealed, but has come down slightly as the tariffs have been reduced and industry companies find their equilibrium.
Even Made-in-America suppliers – which are experiencing sharp growth in demand thanks to tariffs – aren’t immune. It’s certainly helped Drum-Line (asi/50873) to be a USA-made manufacturer, and after pandemic paper shortages affected sales in 2020, company numbers in 2022 and 2023 surpassed pre-COVID ones, thanks to domestic manufacturing. Still, CEO Amberlea Barnes says her company is reliant on raw materials for manufacturing – and much of those have gone up. “Paper prices, for example, have increased due to less supply,” says Barnes. “Some paper mills have converted to producing corrugated cardboard due to the high demand for boxes.”
“It’s a new frontier, and everyone has to re-strategize, but things are cyclical – budgets will come back and people will want tangible goods again.”Brittany David, SnugZ USA (asi/88060)
Suppliers, though, can take heart from the lessons and successes of COVID to demonstrate their resilience once again. While the pandemic threw everything into a tailspin for Hexa, Timbo says there were boons for her company. “We had to lean into developing e-commerce software and microsites for customers,” she says. “We came into promo cold, which has worked for us.”
Rob Watson, CEO of Counselor Top 40 supplier Vantage Apparel (asi/93390) and a member of the Counselor Power 50 list, says the pandemic forced necessary change across the industry. Demand for frictionless transactions has led to the development of technology for lightning-fast customer service, including real-time inventory and one-click status updates. “Technology builds efficiency and trust,” says Watson, who adds, “promo has gone from a product-selling to a service-selling model. We’re no longer just order-takers – we’re part of clients’ strategy conversations.”
As 2025 shapes up to be a tumultuous year, suppliers should accept that disruption – exacerbated by COVID and now currently perpetuated by tariffs – is the norm. No company is immune. “It’s not the ‘roaring ‘20s’ anymore,” says David. “That was 2018 and 2019 when customers had big budgets. Now they have to figure out how to weather things. It’s a new frontier, and everyone has to re-strategize, but things are cyclical – budgets will come back and people will want tangible goods again.”
Costing Dearly
Profit margins have ticked up each year since 2022 due to suppliers having to raise prices after years of taking on higher costs in areas like materials and shipping. Nearly 65% of suppliers have raised prices this year due to tariffs, and margins are very likely to decline as they offset some of those major cost hikes. “We’ll soon be implementing modest price increases,” says Rob Watson of Vantage Apparel (asi/93390). “We want to be honest and transparent. Distributors and end-buyers are consumers too, and prices are going to go up on everything. I do see light at the end of the tunnel – the second half of the year will be continued adaptation. We have to embrace change rather than resist it.”
Supplier Profit Margin
(2024)
Raised Prices as a Result of Tariffs
(Asked June ’25)