Growth ahead
Despite a challenging year, the merchandise sector grew last year and is back on track following the Covid years
The past year has been a tough one for many businesses, not just merchandise. The list of challenges faced are enough to trigger anyone who has struggled through them – pandemic, supply chain problems, raging inflation, cost of living crisis, skills shortage…
However, better days are ahead, in merchandise at least, if the latest look at the health of the sector is to be believed. Sourcing City’s annual look at the sector found that in 2023 the overall promotional merchandise market grew by 4.2% (£47.5m) from £1,134m to £1,182m.
This represents a complete recovery to 2019 levels, after which the sector really hit the skids with a massive drop as the sector all but shut down and was forced to furlough staff, reappraise business plans, and find alternative products to sell.
The report backs up the most recent IPA Bellwether report into the health of the wider marketing sector which found that for Q4 2023, UK marketing budgets were revised up to their strongest level in almost a decade
Slightly over one quarter (26%) of panellists saw total marketing budgets rise, more than double the proportion registering cuts (11.3%). The resulting net balance of +14.7% was up sharply from +5.3% in the third quarter of last year and its highest since Q2 2014.
Good news for merch providers was the state of two segments of marketing spend that are traditionally aligned with them – events and direct marketing. Both of these saw strong growth.
Events was the best-performing sub-category of marketing in the final quarter, recording a strongly positive net balance of +15.9%, its highest in a year-and-a-half. Direct marketing saw its greatest upturn (net balance of +12.6%, from +4.3%) since the opening quarter of 2005.
Commenting on the results, Paul Bainsfair, director general, IPA, said: “Despite the challenging economic climate, this quarter’s upbeat Bellwether findings show that companies are heeding the evidence that continuing to advertise through the tough times can help maintain brand loyalty and protect the long-term health of their brands.”
In terms of promotional merchandise, the industry now contains more distributor and supplier companies than seen before with 2,737 professional distributor companies, the greatest number recorded. Overall, distributor companies have increased by 43% since 2007.
Larger distributors, with a turnover about £1m, continue to have a significantly disproportionate share of the entire market spend. Just 5.6% of distributors have 59.2% of the market, equating to about £700m.
The remaining 40% of the market spend is shared across 2,583 distributor companies.
The number of suppliers in the UK & Ireland marketplace has also been climbing once again following a drop during the pandemic.
Some suppliers are now operating with fewer staff, with reduced resources, and less stock purchased or manufactured. Combined with staffing issues, and wider business concerns such as an increase in interest rates, cashflow, import barriers and rising material and transport costs, it is hardly surprising that Sourcing City notes that customer service levels have been challenged in some cases.
However, David Long, Founder & Chairman, Sourcing City remains optimistic.
“Despite the UK political uncertainty and turmoil, high interest rates, a cost-of-living crisis in many households, and inflation taking too long to get under control, the UK promotional merchandise industry still grew last year. This is a testament to the entrepreneurial lifeblood in the companies throughout our industry. In 2024 we will see the Olympic Games, Euro Championships, and a likely General Election – all will boost our industry. So, there is every reason to expect another year of growth to come – subject to uncontrollable world events of course.”
