September 2026 North American Branded Merchandise Market Brief

Executive Summary

The promotional-products market is not being disrupted because demand for merchandise is disappearing. The evidence points in the opposite direction.

The larger structural change is how branded merchandise is discovered, sourced, sold and fulfilled.

PPAI and Oxford Economics now estimate that U.S. spending on branded merchandise reached $174 billion in 2025, consisting of approximately $50 billion in promotional products and $124 billion in licensed merchandise. Globally, branded merchandise represents a $472 billion market.

At the same time, several forces are converging:

1. Demand remains resilient, but margin pressure is persistent.
2. AI is rapidly compressing the time between product search, quote and order.
3. Distributors are increasingly sourcing outside the traditional supplier network.
4. Retail-quality products are taking share from generic promotional merchandise.
5. Tariffs and compliance complexity are increasing the value of scaled supply-chain infrastructure.
6. Consolidation is continuing as technology and operating scale become more important.

The strategic implication is important: the supplier of the future is becoming less like a catalog and more like infrastructure.

The companies that control product data, inventory visibility, decoration capacity, compliance information, brand access and AI-compatible ordering will increasingly determine how the industry operates.

1. The Market Is Larger Than The Traditional Promo Industry Has Historically Measured

PPAI's new Oxford Economics study changes the framing of the industry.

U.S. branded-merchandise spending reached approximately $174 billion in 2025, representing roughly 51% of global branded-merchandise spending. Promotional products accounted for approximately $50 billion of that total.

This matters because the traditional industry has historically treated promotional distributors and suppliers as a relatively closed ecosystem.

That boundary is breaking down.

The addressable market increasingly includes:

• promotional merchandise
• corporate gifting
• employee merchandise
• retail brands
• licensed merchandise
• direct-import products
• creator merchandise
• company stores
• event merchandise
• recognition programs

The competitive set is therefore much larger than traditional ASI/PPAI suppliers and distributors.

2. Revenue Is Holding Up. Margin Is The Problem.

Recent industry research continues to show demand resilience.

PPAI reported that 76% of distributors and 65% of suppliers surveyed in its latest sales research experienced revenue increases, while roughly 70% of both groups reported higher unit volume. Larger suppliers were performing particularly well.

But profitability has become considerably harder.

Earlier PPAI research found that 49% of suppliers and 30% of distributors reported margin declines, with tariffs/duties, freight costs and reduced customer budgets cited among the largest pressures.

4imprint provides one of the clearest public examples.

During the first half of 2026:

• Revenue increased 1% to $666.4 million
• Gross margin declined from 32.8% to 31.5%
• Adjusted operating profit fell 12%
• Adjusted operating margin declined from 10.7% to 9.4%
• Average order value increased 3%
• New-customer orders declined 7%, although the decline moderated during Q2

4imprint specifically attributed part of the gross-margin decline to higher tariff-related supplier costs.

That is a useful snapshot of the broader market:

Demand has not collapsed. The cost of servicing that demand is rising.

The next competitive advantage is therefore operational efficiency rather than simply sales growth.

3. AI Is Moving From Marketing Tool To Industry Infrastructure

September produced some of the clearest evidence yet that AI is moving directly into promotional-products operations.

Hit Promotional Products launched HANK, an AI-powered distributor assistant capable of retrieving order status, tracking information, invoices and product sales information. It can also analyze purchasing behavior, identify product gaps and recommend additional merchandise.

Koozie Group has similarly introduced an AI interface allowing distributors to interact with order, quote, inventory and product information through AI tools.

PPAI's September innovation research concluded that digitally advanced suppliers and distributors are increasingly using technology to streamline operations, improve communication and raise service levels.

An industry commentary from Showdown Displays President Kevin Walsh captured the shift particularly well: expectations around quotation speed are changing because customers accustomed to instant AI responses increasingly expect immediate answers from suppliers as well.

The important development here is not the chatbot.

It is machine-accessible commerce.

Historically:

Buyer → Distributor → Supplier rep → ERP → Quote → Distributor → Buyer

The emerging architecture is:

Buyer/Distributor → AI → supplier inventory/pricing/product data → immediate recommendation or quote

That dramatically lowers the transaction cost of routine promotional orders.

For suppliers, APIs, structured product information and AI-compatible systems may eventually become as strategically important as catalogs once were.

4. The Traditional Supplier Wall Is Becoming More Porous

Another important trend is occurring upstream.

PPAI research found that approximately one-third of major distributors increased sourcing from non-industry or direct suppliers.

Among those distributors:

• 60% cited access to product categories unavailable through traditional promo suppliers.
• 47% cited better pricing.
• 47% cited customer demand for consumer brands.
• 79% reported increasing demand for retail and premium merchandise.

Canadian data points in the same direction.

PPAI and PPPC estimate Canadian distributor sales at approximately C$2.03 billion in 2025. Importantly, 16.6% of reported distributor sales came through non-industry suppliers, and nearly eight in ten respondents said they used non-industry sources to some degree.

The threat to traditional suppliers is therefore not necessarily another promotional supplier.

It may be:

Nike. Stanley. YETI. Alibaba. A local manufacturer. A packaging company. A specialty consumer brand. Or a factory discovered directly by a distributor.

Product differentiation and brand access become increasingly important when basic product sourcing becomes easier.

5. Alibaba And AI Are Making Factory Discovery Easier

Alibaba's direction is worth watching closely.

During September the company continued expanding its AI strategy across its ecosystem, while Alibaba.com's B2B operation increasingly emphasized AI-assisted supplier discovery and sourcing.

Alibaba now markets its marketplace around AI sourcing assistants, tens of millions of SKUs and a large global verified-supplier network.

Alibaba's own September research describes B2B buyers increasingly using AI engines for:

• supplier discovery
• product comparison
• technical specifications
• certification checks
• manufacturer identification

Alibaba is an interested party, so its research should not be treated as independent evidence of overall market penetration.

But the strategic direction is clear.

The technical barriers that historically protected sourcing expertise are falling.

Finding a factory used to require relationships, trade shows, agents and experience.

Increasingly, AI will identify the factories.

The remaining defensible value moves toward:

Quality assurance, financing, compliance, logistics, decoration, inventory, speed and judgment.

6. Consolidation Continues

Scale continues to matter.

On September 2, The Distributor Exchange, part of iPROMOTEu, acquired Flywheel Brands. The transaction also brings Flywheel's in-house printing capabilities and MerchButler.ai platform into the broader organization.

That follows larger consolidation earlier in 2026, including Proforma's acquisition of Safeguard from Deluxe, a transaction expected to add approximately $180 million in annual revenue to Proforma.

These deals are not simply about adding salespeople.

They increasingly combine:

Customer relationships + technology + production + purchasing power + fulfillment.

That is significant.

The competitive advantage of scale is shifting from better purchasing alone toward the ability to amortize expensive technology and infrastructure across thousands of customers and transactions.

7. Tariffs Increase The Value Of Supply-Chain Scale

Trade volatility remains a major industry variable.

Canada implemented new counter-tariffs effective September 8, 2026, following additional U.S. tariff actions. Depending on the product classification, affected U.S.-origin goods face Canadian surtaxes of 15%, 25% or 50%.

4imprint's financial results already demonstrate how tariff costs can translate directly into gross-margin pressure.

For large suppliers, however, volatility creates an opportunity as well as a cost.

Companies with:

• global sourcing teams
• multi-country vendor networks
• domestic inventory
• compliance departments
• freight scale
• tariff-classification expertise
• alternative manufacturing capacity

can absorb complexity that smaller suppliers and distributors cannot.

Supply-chain complexity therefore becomes a potential moat.

8. Sustainability Is Becoming A Data Problem As Much As A Product Problem

September's PPAI Responsibility Summit placed heavy emphasis on compliance, traceability and supply-chain due diligence.

Industry leaders emphasized that sustainability programs increasingly require reliable data systems rather than marketing claims alone. AI and ESG reporting systems were specifically discussed as tools for managing this information.

Canadian data is particularly notable.

Approximately 21.7% of Canadian distributor sales were classified as sustainable merchandise, representing roughly C$441 million. Nine in ten surveyed distributors reported selling sustainable products.

This creates another potential supplier advantage:

Verified product-level environmental and compliance data.

As procurement departments demand documentation, the supplier that can instantly answer questions about materials, factories, certifications, carbon data and product safety becomes more valuable.

What This Means For Large Suppliers

The largest suppliers already possess many of the assets that are becoming more valuable: global sourcing, proprietary product development, decoration, distribution infrastructure, recognized retail brands and large distributor networks.

The strategic question is how those assets are exposed to the market.

I see three particularly important opportunities.

1. Build The AI Layer Above The Catalog

Every product a supplier carries should eventually be understandable and actionable by machines.

A distributor should be able to ask:

Find me 750 premium drinkware pieces under $22 landed, available within three weeks, with recycled content and individual personalization.

And the supplier's infrastructure should be capable of returning the answer immediately.

That means structured product attributes, inventory, decoration methods, compliance data, lead times, freight estimates and pricing should ultimately become machine-readable.

The catalog becomes a database.

The website becomes an interface.

AI becomes the salesperson sitting on top.

2. Own The Gap Between Promo And Retail

PPAI data showing 79% of major distributors reporting increasing demand for retail/premium products may be one of the most important statistics in the industry.

The promotional industry is moving closer to consumer merchandising.

That favors suppliers capable of combining:

Retail-brand credibility + promotional decoration + inventory + fulfillment.

A strong retail-brand strategy therefore looks less like an ancillary product category and more like a potential structural competitive advantage.

3. Make Distributors Faster Rather Than Competing With Them

AI and direct sourcing will continue lowering barriers between factories and end buyers.

Trying to preserve the old information asymmetry is unlikely to work indefinitely.

A stronger position is to make the distributor extraordinarily efficient.

If a distributor working with a supplier can:

• create a proposal instantly
• generate lifestyle imagery instantly
• confirm inventory instantly
• receive accurate landed pricing instantly
• retrieve compliance information instantly
• order samples instantly
• place an order without manual back-and-forth

then technology strengthens the supplier/distributor channel rather than replacing it.

That may become one of the industry's most important competitive battlegrounds.

Five-Year View

The promotional-products industry is unlikely to disappear.

But the middle of the value chain is likely to be compressed.

Basic product discovery, quoting, mockups, presentations and order administration are increasingly automatable.

Human value will migrate toward:

• creative strategy
• product development
• brand partnerships
• complex sourcing
• supply-chain management
• enterprise programs
• compliance
• logistics
• relationship management

At the same time, scaled suppliers increasingly become the infrastructure underneath thousands of distributors.

The winners may therefore look less like traditional wholesalers and more like a combination of:

Brand portfolio + sourcing company + technology platform + decoration network + fulfillment infrastructure.

That evolution has already started.

September 2026 simply made it more visible.