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Distributor Growth Slows in Third Quarter

Promotional product distributors increased sales 1.5% during the third quarter of 2017 compared to the same quarter in 2016, though a more substantial gain was likely hampered by hurricane-related disruptions, just-released data from ASI shows. Driven primarily by larger distributors, the quarterly sales uptick was down from the growth rates in the year’s first two quarters, which experienced expansion of 3.3% and 3.2%, respectively.

Released Tuesday, ASI’s Distributor Quarterly Sales Survey showed that about a third (35%) of distributors reported increased year-over-year sales during Q3 2017, while 26% said sales declined. Nearly 4-in-10 said revenue was flat.

As the data revealed, the big got a little bigger: Distributors with annual sales of more than $1 million showed a year-over-year increase of 2.1%. Meanwhile, distributors with yearly sales of $250,000 to $1 million produced a 1.5% gain. For smaller distributors -- those with $250,000 or less in sales -- the quarter was essentially flat, with 2017 revenue rising only 0.3% over 2016’s Q3.

A&P Master Images (asi/102019) was among the distributors that had a strong third quarter. The Utica, NY-based firm, which has annual sales in excess of $1 million, increased Q3 sales 9% over the same quarter in 2016. Getting certified as a woman-owned business and capitalizing on fall and winter-related opportunities – like orders of hoodies and long-sleeve shirts – to schools and local businesses helped fuel the revenue rise, CEO Howard Potter told Counselor. “It was a strong quarter, and we expect the momentum to continue into next year,” Potter said.

While things were good for A&P, hurricanes Harvey, Irma and Maria likely played some role in what was the second weakest quarterly industry sales gain in the last six years -- the most anemic advance being the first quarter of 2016’s 1.4% limp upward. According to ASI, 42% of distributors said that the hurricanes had some impact on their business during the third quarter. Overall, 8% said the storms significantly affected business, while 34% characterized the impact as slight.

“Items we ordered for a new customer were unable to ship in time for an event because power was out at the supplier,” one distributor told ASI. “The customer cancelled the orders.”

Another distributor said: “We had no Internet for over a week and were not able to process orders, nor have sales reps in the field.  Even after the Internet was up, employees and reps had to take time off to deal with insurance and their homes. Sales were slow.” 

Nonetheless, other firms reported that the issues they experienced were temporary and that they expected to bounce back without substantial long-term problems. Some distributors even capitalized.

“We had to spend more time moving orders to factories with capacity in other parts of the country,” a distributor said in the ASI survey. “However, we actually increased our business because smaller competitors were not as well-versed in factory capabilities and didn't have relationships in place, and large companies were not agile enough to react.” 

Perhaps not surprisingly given the overall quarterly sales performance, the Counselor Confidence Index, which gauges the health and optimism of distributors, dropped for the second straight quarter. The Q3 rating of 111 was down from the second quarter’s reading of 113 – itself a decline from Q1 when the index hit an all-time high of 116 in what was a third straight quarter of confidence increase. The index’s six-period rolling average is 113, well above the baseline mark of 100.

 

Even so, the consecutive quarterly decline in confidence reflects a growing sense of concern among distributors as they eye the year’s final quarter and analyze performance over the first nine months. According to ASI’s survey, only 40% of distributors now anticipate that total 2017 sales will surpass 2016’s annual revenue, while 35% expect flat sales. One-in-four believe they’ll experience a decline. During the first quarter of 2017, 55% of distributors expected that 2017 sales would beat 2016’s tally, with only 13% anticipating a decrease.  ​