Power Sales CEO Dave Roberts on the State of the IRR Market
Recognition Spending Reflects a Softer Labor Market
Shipping Costs and Tariffs Add Pressure
APIs Are Changing the Merchandise Rewards Business
Can Merchandise Better Compete With Gift Cards?
Automated Packaging Reduces Costs and Waste
Customization Becomes a Growth Opportunity
Consumer Preferences Continue to Shift
Investing Through the Slowdown
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As potentially the largest master fulfillment company in the world serving the incentive, rewards and recognition market, Kansas City-based Power Sales has a unique perspective on the marketplace. Its warehouses and technologies power many of the world’s largest incentive, recognition, loyalty and gifting solution providers and their end-user customers.The merchandise rewards industry faces a combination of economic and operational challenges, according to Dave Roberts, CEO of Power Sales. A softer labor market appears to be reducing corporate spending on employee recognition, while tariffs and transportation costs are putting pressure on merchandise economics. Nevertheless, Roberts remains optimistic about the industry's longer-term prospects, citing continued growth in sales, channel, loyalty and gifting and advances in electronic inventory integration, automated fulfillment, and customization that are helping merchandise rewards better meet business and program participant expectations.
In an interview with RRN, Roberts reports that Power Sales' growth has slowed this year after years of consistent expansion. He attributes much of the slowdown to reduced demand for employee recognition programs, as employers face less pressure to compete for and retain talent than during the post-pandemic labor shortage.
Recognition Spending Reflects a Softer Labor Market
Roberts believes the slowdown in employee recognition reflects changing employment conditions rather than a fundamental problem with recognition itself. When employers were struggling to recruit and retain employees, investments in recognition and retention programs received greater attention. With a softer labor market, some organizations appear less willing to make those investments.
Although Power Sales serves multiple segments of the incentive and rewards business, Roberts believes its employee recognition business has declined while other categories have helped offset the slowdown. He does not suggest that recognition has lost its value, but rather that corporate spending priorities have shifted with economic conditions.
Shipping Costs and Tariffs Add Pressure
Beyond softer demand, merchandise suppliers face increasing transportation and product costs. Roberts notes that shipping expenses can approach the value of some lower-priced merchandise, creating challenges for programs offering individual reward shipments.
Tariffs have also increased prices across numerous merchandise categories, although Roberts points out that the actual impact on retail pricing is not necessarily equal to the tariff rate because duties generally apply to imported product values rather than final selling prices. He says tariff-related pricing has become relatively stable in recent months, but transportation costs and sourcing decisions remain significant concerns.
These pressures are increasing the importance of fulfillment efficiency, inventory management, and product selection.
APIs Are Changing the Merchandise Rewards Business
One of the most significant developments Roberts identifies is the growing use of application programming interfaces (APIs) and other electronic connections between merchandise suppliers and incentive and recognition platforms. He estimates that well over half of Power Sales' transaction volume now flows through APIs or comparable electronic inventory integrations, although not all are fully automated, real-time connections.
These systems enable customers to access more current inventory information, product descriptions, images, and new merchandise introductions. With full API integration, newly available products can appear in connected rewards catalogs almost immediately after they are entered into Power Sales' system.
Roberts contrasts these capabilities with traditional printed merchandise catalogs, which limited selection and frequently created problems when products became unavailable. Electronic connectivity can now provide a broader and more current assortment while reducing manual administration.
Can Merchandise Better Compete With Gift Cards?
Roberts believes technology is helping merchandise rewards address some of the advantages that have made gift cards attractive to program participants and administrators. Historically, merchandise programs often offered limited selections and delivery times of four to six weeks. Today's consumers, accustomed to Amazon and other online retailers, expect current products, extensive choice, and delivery within days.
Roberts says improvements in inventory connectivity, product availability, and fulfillment have significantly narrowed this gap. He sees greater choice, better service, and stronger value as important factors in merchandise's competitive position. He sees strong evidence that APIs have increased the percentage of merchandise redemptions over gift cards because of the potential for immediate gratification and a greater value, since merchandise is usually sold at wholesale rather than retail prices to the industry’s solution providers.
Automated Packaging Reduces Costs and Waste
Power Sales has made a substantial investment in automated packaging equipment designed to improve the efficiency of shipping individual merchandise rewards. The system scans products and creates appropriately sized cardboard boxes, then seals and labels them for shipment. Roberts says the technology reduces excess cardboard, eliminates much of the conventional plastic or other packing material, and can lower freight expenses by reducing package dimensions.
He credits his company’s management team with spearheading the project and believes the investment will generate both operating efficiencies and environmental benefits. For merchandise suppliers shipping individual rewards to thousands of recipients, these improvements can be particularly valuable because packaging and freight represent significant components of fulfillment costs.
Customization Becomes a Growth Opportunity
Another area of investment is personalized and customized branded merchandise. Roberts reports that Power Sales has doubled the space devoted to customization over approximately the past 18 months and now employs about eight to ten people in the operation.
Rather than concentrating on inexpensive promotional giveaways, the company focuses on customizing established brand-name merchandise for corporate incentive and recognition programs, including relatively small orders.
Roberts believes this capability creates additional value for incentive companies and their corporate clients while providing merchandise manufacturers with another way to participate in business rewards programs.
Consumer Preferences Continue to Shift
Roberts also sees changes in the merchandise categories that attract reward recipients. Demand for power tools from established brands has softened somewhat, while outdoor cooking products that benefited from the pandemic-era boom have experienced slower activity.
Cookware preferences are changing as well, with growing interest in ceramic and stainless steel products as consumers become more concerned about certain traditional nonstick coatings.
He also points to the ability of social media to accelerate awareness of emerging consumer brands. Caraway cookware is one example of a relatively newer brand that he says has gained recognition without relying on the traditional television advertising model.
For rewards suppliers, these trends underscore the importance of continually refreshing product assortments rather than depending on categories and brands that were successful in the past.
Investing Through the Slowdown
Despite current economic pressures, Roberts remains optimistic about the intermediate- and long-term prospects for merchandise rewards. Power Sales is continuing to invest in inventory integration, fulfillment automation, and customization even as growth has temporarily slowed.
His assessment suggests that the merchandise rewards business is undergoing an important operational transformation. While corporate demand may fluctuate with employment conditions and economic uncertainty, suppliers are gaining capabilities that could make merchandise programs easier to administer, more efficient to fulfill, and more appealing to recipients.
For incentive and recognition companies, the opportunity is to take advantage of these improvements to offer participants greater choice, faster delivery, and more personalized rewards while managing the rising costs of merchandise distribution.
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