Someone in your business has asked what the merch line is for. It might be finance, it might be procurement, it might be the person who picked up sustainability reporting this year. The question landed like a threat, and the noise in the market did not help, because you have probably been told that brands are walking away from physical merchandise and that Microsoft is the proof.
Check it. Microsoft’s official merchandise store is open and selling right now, apparel, drinkware and bags branded for Azure, Microsoft 365 and Copilot. And the market did not fall. PPAI put US promotional products distributor sales at $27.1 billion in 2025, up 1.3 percent, the first year the industry has accounted for north of $27 billion.
So the line item is not being cancelled. It is being audited. That is a different problem, and it has a better answer. If you already know your answer and want kits that hold up to it, you can order custom branded tree kits. If you do not yet, what follows is the audit itself, question by question, and what a merch line needs to survive it.
Key Takeaways
- US promotional products distributor sales reached $27.1 billion in 2025, up 1.3 percent. Spending on merch did not collapse. The story that it did is not supported by the sales data.
- Scrutiny rose in the same period. ASI found sustainability credential inquiries to suppliers rose from 71 percent to 76 percent between 2024 and 2025, with distributors going from 27 percent to 36 percent.
- Growth of 1.3 percent lagged inflation, so the same budget bought less. That squeeze is the pressure behind the questions you are being asked.
- An audit asks four things of a merch line: what it cost per person who kept it, what happened to the leftovers, what your supplier can prove in writing, and whether the environmental claim on their website would survive a regulator reading it.
What do the numbers actually say about merch spending?
They say the market grew and the questions got harder, at the same time. Those are two different things, and the merch-is-dead story collapses them into one.
PPAI’s 2025 US Distributor Sales Volume Estimate reports promo channel sales of $27.1 billion, a record, and a growth rate of 1.3 percent. That is the headline. The detail underneath it matters more to you, because it is the detail your finance lead already knows. PPAI notes that the 1.3 percent growth rate lags significantly behind the 2025 inflation rate, and it names the causes plainly: tariff volatility, rising costs of compliance and freight, tighter client budgets and compressed margins. Alok Bhat, PPAI’s market economist, puts it in one line: “Many distributors sold more but made less.”
Read that as a buyer and the picture is clear. Money is still going into branded product. It is buying less than it did. So every pound and dollar in that line now has to work harder, and somebody senior has started checking whether it does.
The second number tells you what they are checking. ASI reported that between 2024 and 2025 the share of suppliers receiving sustainability credential inquiries from clients and prospects rose from 71 percent to 76 percent, while distributors saw a jump from 27 percent to 36 percent. Those are inquiries about credentials, not about price. Someone on the buying side is asking suppliers to show their working, and they are asking more often.
PPAI’s own read on the category agrees. Sustainable product sales came to an estimated $3.8 billion in 2025, 14 percent of total sales, with growth slowing. Bhat’s summary: “Sustainability has shifted from a fast-growth category to a standard offering across distributor sizes.” A standard offering is not an upsell. It is a baseline you are expected to meet, and being expected to meet something is exactly when people start asking you to prove you have met it.
Put the two together and the conclusion is not that merch is finished. It is that the easy version of merch is finished. The line item survives if you can defend it. That is the audit.
What does a finance or procurement lead actually ask about a merch line?
Six questions, in roughly this order. None of them are hostile. They are the same questions that get asked of every other line in the budget, and merch has been getting away without answering them for years.
1. What did it cost per person who actually kept it? Not unit price. Unit price is the number that makes a merch line look cheap and then falls apart under a second question. The number that holds is the delivered cost of everything you bought, divided by the number of people who took an item home and still have it. You will need to work that out yourself, because nobody publishes an industry keep rate that will survive being applied to your specific giveaway. Take last year’s order, subtract what is still in the cupboard, subtract what went in the bin at the venue, and divide. If the result frightens you, it is telling you something useful.
2. What happened to what you did not hand out? Over-ordering is where merch budgets quietly die. Leftover stock is money already spent, sitting in a storeroom, ageing towards a logo change. Have a real answer. If the answer is that half of last year’s order is still boxed up, the fix is not a better product, it is ordering to a number you can defend.
3. Where was it made, and who made it? This is a supply chain question wearing a merch costume, and it is being asked because compliance and freight costs moved. Your supplier should be able to answer it without a two-week delay.
4. What is the packaging, and where does it end up? A single item wrapped in three layers of plastic is the thing people photograph and pass around, and it is what an employee notices before they notice the product.
5. What can the supplier prove, in writing? Not what they say on a slide. What they will put in a document with a method attached. If a supplier tells you their product helps the environment, the follow-up is: measured how, by whom, over what period, and with what margin of error. A supplier who has that ready is a supplier who has been asked before.
6. Would the claim on their website survive a regulator reading it? This is the question that has arrived most recently and it is the one most merch buyers are least ready for. The US FTC Green Guides exist, in the FTC’s own words, “to help marketers ensure that the claims they are making are true and substantiated”. The UK CMA Green Claims Code covers how to stay on the right side of consumer law when making environmental claims about goods and services. And EU ECGT Directive 2024/825 requires member states to apply its measures from 27 September 2026. If your supplier’s website carries a claim you would not want to defend, and you put your logo on their product, you have adopted their claim. You can scan your claims free before somebody else does it for you.
What fails a merch budget audit?
Five things, and they come up again and again.
A blanket environmental word used as a description of the product rather than a measured property of it. Eco-friendly, green, sustainable, planted on a product page with nothing underneath. Regulators on three continents are now treating that language as a claim rather than decoration.
A neutrality claim with no calculation behind it. If a supplier says a product cancels out its own effect on the climate, ask for the arithmetic and the boundary. If it does not arrive, the claim is not yours to repeat.
No chain of evidence. A certificate with no method, a number with no source, a partner with no name. Auditors are not looking for perfection, they are looking for something they can follow back to a measurement.
Single-use plastic in the item or the packaging, in a year when your own company is reporting on waste.
Over-ordering. It fails on cost, it fails on waste, and it fails on judgement, which is the one that follows you into the next budget conversation.
What survives a merch budget audit?
Three properties, and they are unglamorous.
Evidence you can hand over. A method, a measurement, a named source, and a person at the supplier who will stand behind it. If you can forward one link and answer the question, you have won most of the room.
An item that has a use after the moment it was handed over, ideally in front of other people. This is where the real return lives, and it is worth measuring what a gift returned rather than assuming it. It is also the only honest defence of a merch line. A thing that gets used is a thing that keeps working.
A delivery method that does not create its own problem. If half your recipients are remote, the freight, the packaging and the failed deliveries are a cost and a waste story you will have to answer for separately.
If what you need next is which products meet those three tests, we keep the product-by-product comparison on a separate page, and what branded merchandise is worth ordering works through the categories one by one. This one is about defending the line, not filling it.
How does ForestNation answer each of these questions?
ForestNation is a corporate tree gifting company that has helped 500+ businesses plant nearly 2 million trees in Tanzania through verified reforestation programmes. Two things we make answer two different audit questions, and it is worth being precise about which is which.
The Tree Kit answers the evidence question. It is a handmade grow-your-own kit in plastic-free compostable packaging, branded to you, and every kit plants more trees on top of the one in the box. The evidence behind it is our own field study, not a brochure. Ten days across five planting sites in Tanzania, measuring carbon absorption at 0.025 tonnes per tree per year with a 30 percent uncertainty discount already applied, using allometric equations from Mugasha and colleagues, 2016. You can read the FN impact methodology and hand that link to whoever asked. Those figures are field-measured, not verified by a carbon registry, and we say so on the page. Planting trees is a contribution to verified reforestation. It is not a claim that your campaign had no effect on the climate, and we will not write you one, because that is the sentence that fails the audit.
The Gift Story answers the no-ship question. It is a digital tree gift, personalised and branded, delivered to an inbox anywhere in the world. No freight, no packaging, no address collection, no leftover stock in a cupboard, and you send the exact number of people you have. When shipping cost or unclaimed stock is the objection on the table, send a digital Gift Story instead and the objection goes away rather than being argued with.
On the keep question, we will not claim a number we have not measured. What we will say is that a kit asks to be used. Image Source built one tree per order into their workflow and runs branded forests for Microsoft and Mercedes, which is worth knowing if the story you were told is that Microsoft walked away from branded product. JLL handed Tree Kit pouches to tenants at an Earth Day event and described them as a giveaway tenants wanted to keep. Logitech has planted 76,350 trees with us across campaigns since 2023.
On cost, every order gets a live Forest Profile with a tree count you can put in a report, and you can see ForestNation’s live impact data before you commit anything. If the audit has left you needing proof before budget, the 100-gift pilot exists for that. And if you are the distributor being asked these questions by your own clients, see the distributor growth plan.
Imagine the same meeting next year. The merch line comes up, and instead of defending it you forward one link with a method behind it, a tree count with your company’s name on it, and a photograph somebody sent you of a seedling on their windowsill. That is a shorter meeting.
The audit is not the enemy of a merch budget. It is the thing that separates a line item worth keeping from one that was never doing much. When you are ready to put something in that line that answers the questions, you can see branded Tree Kits and what they cost at volume.
Research and References
- PPAI (2026). PPAI Sales Volume Estimate: Promo Reaches New Height But Hampered By External Volatility. US promo channel sales of $27.1 billion in 2025, growth of 1.3 percent, sustainable product sales of $3.8 billion at 14 percent of total. PPAI sales volume estimate
- ASI (2025). Infographic: Demand for Sustainable Promo Is on the Rise. Sustainability credential inquiries, suppliers 71 to 76 percent, distributors 27 to 36 percent, 2024 to 2025. ASI sustainability infographic
- US Federal Trade Commission. Green Guides, 16 CFR Part 260. FTC Green Guides
- UK Competition and Markets Authority. Green Claims Code, making environmental claims. UK CMA Green Claims Code
- European Union. Directive (EU) 2024/825 on empowering consumers for the green transition, applying from 27 September 2026. EU ECGT Directive
- ForestNation Working Trees field study, five Tanzania sites, carbon and livelihood measurement. FN impact methodology
Frequently asked questions
Are companies cutting their merch budgets in 2026?
Not according to the sales data. PPAI put US promotional products distributor sales at $27.1 billion in 2025, up 1.3 percent, a record. What changed is that growth lagged inflation and buyers started asking harder questions about what the spend returns and what suppliers can prove. Budgets are being questioned, not removed.
Is it true that big brands like Microsoft have stopped doing merch?
No. Microsoft’s official merchandise store is trading today, selling apparel, drinkware and bags branded for Azure, Microsoft 365 and Copilot, and Microsoft has a branded forest running through the promotional agency Image Source. The claim is repeated often and it does not hold up to a single search.
What is a merch budget audit?
It is a line-by-line review of what a company spends on branded merchandise, usually triggered by finance, procurement or a sustainability reporting requirement. It asks what each item cost per person who kept it, what happened to unused stock, what the supplier can evidence, and whether the environmental claims attached to the product would stand up to regulatory scrutiny.
How do I calculate cost per item kept?
Take the full delivered cost of the order, including freight and storage, and divide it by the number of recipients who took an item and still have it. Do not use unit price. Unit price ignores the leftovers, and leftovers are usually where the money went.
What evidence should I ask a merch supplier for?
Ask for the method behind any environmental claim: what was measured, by whom, over what period, and with what margin of error. Ask where the product was made and what the packaging is. If a supplier can only offer a certificate with no method attached, that claim becomes your risk the moment your logo goes on the product.
