A RECAP OF Q1 2023 AMIDST RECESSION CONCERNS ACCORDING TO ASI CENTRAL

For over 60 years, ASI Central has been at the forefront of the promotional products industry, connecting suppliers and distributors to help them grow their businesses. With a membership of over 25,000 distributors and 5,000 suppliers, ASI Central is a trusted source of industry news, trends, and best practices. Their commitment to providing valuable tools and resources to industry professionals has made them a well-respected and influential leader in the promotional products space.

Our very own Jesse Goodwick, Director of Operations, was recently featured in an article on ASI Central’s Promogram newsletter. The article, “Distributor Sales Cool in Q1 Amid Recession Concerns,” explores the state of the promotional products industry in the first quarter of 2023.

Jesse opened up about our company’s experience and current feelings while navigating this tumultuous quarter. Stating,”The loss of two customers who were more interested in what executives described as bottom-dollar pricing than the white-glove service Team Phun provides, contributed to a quarterly sales decline for the firm.”

It may have been a blessing in disguise.

“I’m not happy we had two larger customers move their business, but at the same time, it’s allowed our team to better service those clients who value what we do, and we’ve seen an increase in their business.” Jesse added that “Q2 business has been brisk, with pre-existing clients spending and the distributorship adding new customers.”

“Everything is already getting better. We still anticipate overall annual growth in 2023 from last year, even being down in Q1 year over year. The new accounts we’ve brought in Q1 while expanding our fulfillment, print-on-demand, digital and overall service is bringing our business to the next level.”

Our current feelings about the looming-possible recession are standing firm in positivity. As we may have experienced similar struggles to many other Distributors during this quarter, we see exciting, steady growth to come and have made improvements to our business to keep up our momentum!

Many Distributors have mixed feelings in our industry about growing concerns and theories surrounding the current economy and performances in 2023.

North Dakota-based, Go Promo, shared a similar sentiment and outlook on the previous quarter and what might be to come.

“In the first quarter, clients were probably a bit worried about a potential recession, so they held back, but now seem to be purchasing again,” Go Promo partner, Casey Glandt, shared. “Also, there was some spending hesitancy among clients earlier in 2023 that now appears to be abating. We’ve already seen an uptick in sales in the second quarter and feel we’ll still hit our year-end goal of close to $5 million in sales.”

According to ASI, “The Q1 performance of the index, which measures distributor financial health and optimism, seems to capture the present sentiment of many distributors: There’s leeriness over economic headwinds, but so far current business and sales pipelines have remained ample enough to prevent outlooks from plummeting. And in fact, several distributors that spoke with ASI Media reported encouraging early returns in Q2.”

While that is uplifting, we still see mixed opinions surrounding the current economy and performances in 2023.

DISTRIBUTOR CONCERN ABOUT A RECESSION AFFECTING 2023 SALES

More than 90% of distributors expressed some level of worry that a recession will affect sales in 2023, ASI Research shows. 42% of Distributors feel “somewhat concerned” about the current climate of the industry and 23% of Distributors reported feeling “very concerned.” While 26% are only “slightly concerned” and 9% of Distributors are not concerned at all. In this quarter, 33% of Distributors’ sales declined – the highest percentage since the first quarter of 2021; even while the Promo Industry Sales Revenue grew overall by 3.3% in the first three months of 2023 compared to the same period the prior year.

As you can see in the graph below, Promo Industry Sales Revenue’s Increase rate dropped by nearly 10% from an 11.1% increase in Q4 2022 to a 3.3% increase in Q3 2023. The lowest increase our industry has seen since Q1 2021 when we were amidst a battle to sell during Covid. Distributors’ 3.3% growth was the slowest rate of increase since promo’s recovery began – two percentage points less than the previous low experienced in Q1 2022.

PROMO INDUSTRY SALES REVENUE BY QUARTER (YEAR-OVER-YEAR INCREASE/DECREASE)

According to Nate Kucsma, ASI’s senior executive director of research, industry sales may have been flat or even declined last quarter if not for inflation.

“Q1 was still strong, but rising prices over Q1 2022 certainly pushed results in a more positive direction than they otherwise would have been,” explains Kucsma, who spearheads the quarterly sales survey. “Overall, sales growth from Q4 2022 has definitely slowed in the industry as end-buyers appear to be more cautious with their spending as concerns about a possible recession continue to grow.”

Firms were split when asked to describe Q1 in a word, using a roughly equal mix of negative terms (“cautious,” “uncertain,” “challenging,” “slow” and “difficult”) and optimistic ones (“healthy” “encouraging,” “positive,” “busy” and “good”).

What One Word Describes Q1 2023?

As these times are uncertain for all of us, we see new potential ideas and opportunities for growth start to arise and that can be equally as exciting and hopeful as it can be threatening.

Thank you to ASI Central for the pertinent and helpful research and information provided by your article, Distributor Sales Cool in Q1 Amid Recession Concerns. Give this a read to learn more information about the current climate and state of our industry and common feelings amongst Distributors at this time.

Overall, in this most recent quarter, we are happy to see an increase in overall sales- albeit a concerningly low increase in comparison to past quarters. Rising concerns about the Distributor Sales Market during these trying economic times are appropriate but seemingly subsiding according to us and many fellow companies. We, as an industry have navigated through a very intimidating and scary period and are looking forward to what’s to come.