Average prices for promotional products have risen at an estimated annualized rate of 1.0% from 2014 to 2017 partially due to input cost growth. As the prices of major promotional product inputs, including apparel, textiles and writing utensils, have increased, distributors have been pressured to compensate for these costs by raising the prices of the products they sell to buyers.
The other key component that has boosted product prices during the period has been demand growth. Total advertising expenditure has been growing during the period, indicating higher demand for advertising and promotional products. Additionally, an increase in the number of businesses indicates a larger pool of promotional product buyers. Rising demand for specialty items has therefore alleviated competitive pressure on distributors, allowing them to raise prices at a slightly faster rate. However, the large number of distributors in the market has kept competition high, limiting price growth.
Furthermore, price fluctuations have varied based on product type. For example, the average price of customized USB flash drives, a popular promotional product, has plummeted during the past three years because innovations in technology have made USB flash drives easier and cheaper to produce. Alternatively, prices for another popular item, customized pens, have risen steadily due to price inflation. Ultimately, the prices for individual promotional products have been affected more by price trends for specific product types rather than by the overall trend in the price of promotional products.
Although the prices of different types of advertising specialties have not necessarily moved in line with market-wide trends, buyers have benefited from low price volatility on average. Most product prices, including USB flash drive prices, have not fluctuated greatly from year to year. As a result, buyers have been able to accurately budget for purchases and procure promotional products as needed without worrying about major price changes. Additionally, low price volatility has allowed buyers to reduce the additional expenses caused by excess inventory.
Promotional product prices are forecast to rise at an average rate of 1.1% annually in the three years to 2020 due, in part, to a continued increase in demand. Corporate profit is forecast to return to growth during the period, spurring an increase in demand for promotional products. Additionally, the number of businesses and total advertising expenditure are both anticipated to continue rising in the next three years, further boosting demand growth in the market. As such, promotional product prices are anticipated to rise at a similar rate, detracting from buyers’ ability to negotiate discounts somewhat. However, intense competition among distributors will continue to temper the rate of price increases, bolstering buyer negotiation power.
Price growth is also projected to continue due to the growth in distributor input costs. The price of common inputs, such as wearables, pens and pencils are expected to continue rising, boosting the price of these products. However, distributor wage costs are anticipated to continue declining as distributors seek to automate their processes, limiting the impact of price growth.
Still, price volatility is forecast to remain low, meaning that buyers do not need to worry about sudden fluctuations in price. And while changes in price will continue to vary by each product type, price volatility is expected to be minimal for the majority of products. For example, the prices of both promotional apparel and promotional pens, the two highest-volume promotional items, are anticipated to continue to increase with minimal price fluctuations during the next three years. Ultimately, low price volatility will ensure that buyers should not expect to encounter unexpected price shocks, and can, therefore, budget more accurately for future promotional product purchases.
Although prices are expected to rise for promotional products, buyers should not feel pressured to enter a long-term contract in order to lock in current prices. These contracts are uncommon in this market and limit the buyer’s choice of distributors for future orders, making it difficult for them to choose a new distributor if their current one is performing poorly.