Trade promo = $450 billion

One of the questions I’m often asked is how much trade spending there is totally. I’m usually wise enough to respond that I honestly don’t know, though this answer is generally deemed unsatisfactory.

One reason I’m asked, I suspect, is because I was foolish enough for a number of years in the nineties and early zeroes to put into writing an annual estimate of trade spending (this was when I was writing/editing newsletters for former employers TradeOne and CoAMS).

When I started out doing this I was reasonably confident that what I was doing was at least close, given the parameters I was working with. Among other limitations, I tried to limit the estimates to only promotional spending intended to create sell-through – eliminating pricing actions and slotting, for example. As time went on, though, I began to see this distinction as artificial, and also to become concerned about the large percentage of spending thus being eliminated.

I give this background only to warn you that I’m going to try again, and that there is a good chance I’m still way off.

The methodology I’m using is to take the US Census Bureau’s retail sales figures by channel for 2006 and apply to each channel percentages of typical mark-up and trade promo spend in order to get to manufacturer spend in each channel. I then applied the US figure to other countries based on the relative size of their economies, with factors thrown in to account for regional differences (e.g., average trade promo spend in Europe averages about 85% of US levels, according to a study by Hand Promotion Management a few years ago). Some of the less-advanced economies I adjusted based on the percentage of retail trade that moves through modern outlets versus the share sold by traditional mom & pop stores, who presumably receive little if any funding.

So, taking this mix of some actual research and real math, combined with a bunch of tosses at the dartboard, what’s the result?

Worldwide trade promotion spending in 2006 was $456,210,968,840.29.

Well, okay …. Let’s just say that it’s somewhere in the general vicinity of $400-500 billion. Or so.