Businesses across the nation couldn’t have foreseen the sudden closures brought on by the coronavirus pandemic. With events canceled, retail shops shuttered, students sent home and restaurants closed, many traditional sources of revenue for promotional products firms all but dried up in 2020.

Now, months into the shutdowns that spread throughout the country, many companies across the industry continue to feel the squeeze. “Budgets are super tight, with not a lot of spending – which many are freezing,” says Deana Endieveri, managing partner at South Glens Falls, NY-based AIA/Northeast Promotional Group (asi/109480). “We’re patiently waiting and making sure our customer base knows we’re at the ready – 2020 is going to be a very tough year.”

This strain was felt across all types of industries in different ways. “I work with a lot of nonprofits and they’ve been impacted pretty hard as they saw donations drop significantly,” says Eric Pehrson, an account executive for Grand Rapids, MI-based Creative Studio Promotions (asi/170976). “I also work with some manufacturing clients that work heavily with the big-three automakers. When they shut down, or significantly scaled back their production, that had a big impact on some of my clients. I also have some physical therapy clients who were hit pretty hard during the pandemic.”

As businesses learned to operate under new regulations, distributors also adjusted to meet the needs in front of them. It should come as no surprise that personal protective equipment (PPE) and health-related items became a top seller. “As for clients’ needs, I’m sure I’ll echo others’ thoughts: It’s been a lot of PPE items,” Pehrson says. “Not exclusively, but a large portion of the requests I’ve received have been for masks, sanitizer, thermometers, no-touch tools and other similar items.”

Size Issues: Before the coronavirus, small distributors struggled most with expanding their customer base – a problem that will be exacerbated in a recession.

Distributors also found business in programs that helped keep people connected while staying home – whether it was students practicing distance learning, people working remotely or families putting together parades or lawn displays for milestones such as graduations or birthdays. “Promotional products can serve as a great vehicle to let people know you care, that you’re here to help them, and you want to make sure that they’re OK. So, we’re seeing some of that business,” says Brad Ness, president of S&S Promotional Group (asi/316120), whose company is based Fargo, ND.

“I feel like sales have been down so much, up is the only direction they can go.” Eric Pehrson, Creative Studio Promotions

While PPE items will likely continue to drive a lot of distributors’ business into the fall, some are starting to see a shift back to a larger variety of items. “At this moment, almost all needs are focused on PPE-related items. Over the last several weeks, we’ve seen a gradual increase in promo-related requests, which is a great sign,” says Tej Shah, vice president of marketing and e-commerce for Top 40 distributor Overture Premiums & Promos (asi/288473) in Waukegan, IL. “We’re expecting PPE demands to decrease over the course of the next six to eight months, while also seeing a gradual increase in promotional merchandise sales.”

As the country begins to open back up, this shift should continue. From businesses giving employees back-to-work kits to retailers promoting now-open status, buyers’ needs will evolve too. Consequently, promo companies will need to be flexible as well, and willing to adjust to changing plans and budgets. “Seasonal spending is out the window for 2020,” Endieveri says. “It’s take what you can get and adapt as quickly as possible to the needs out there.”

Margin Math: Over the past few years, margins have generally increased for distributors and decreased for suppliers. Looking forward, more than a quarter of companies are adamant they will not need to reduce margins to regain sales.

Distributors will also have to stay on their toes to anticipate any additional disruptions that can affect the outcome of clients’ projects. “We caution our clients: We have to all be reacting differently,” Ness says. “We used to be able to take time to consider purchases and details. Now because of potential supply chain interruptions, if we know that a client has something planned and they’re going to need something, we have to take care of it right away. Business has to be even faster than it used to be.”

Perhaps more than anything, it will take confidence from businesses and consumers to start to fuel a real turnaround. “I feel that as restrictions are eased, and the number of those infected with COVID-19 declines, people will start to feel more confident and slowly resume spending. Right now, the biggest challenge for everyone has been the uncertainty,” Pehrson says. “I do think that sales will grow in Q3 and Q4. I feel like sales have been down so much, up is the only direction they can go.”