I’ve written about gross margins before, and it remains one of the biggest opportunities I see for promotional products distributors to improve profitability and business value.

There is a common belief that a 40% gross margin is “unattainable”, “too high”, or “we’ll lose business”. That maybe 34%–36% is a more realistic number for a distributor, and besides, that’s what we read as an average in industry benchmarking reports.

I disagree, and who wants to be average anyway? What you don’t see in the industry publications is the range, and we’ve talked about margins with over 100 distributors in the last couple of years, and we’ve seen margins ranging from 30% to 45%. Yes, most are in the 33% – 38% range, but many, at least many of our clients, are in the 38% to 42% range.

In fact, I’m looking at the year-to-date results of a group of current clients, and the numbers tell a pretty compelling story. Here are their July 30, 2026, YTD gross margins:

* 42.54%

* 41.19%

* 40.72%

* 40.56%

* 40.22%

* 39.64%

* 38.98%

* 38.27%

* 37.41%

* 36.69%

* 34.14%

* 33.07%

Five of these companies are already producing gross margins of 40% or better. And several more are within striking distance. The average across the top eight distributors is 40.3%!

That is pretty significant, especially since some of these companies are still working to improve their margins. The companies at 33%–37% aren’t necessarily where they want to be — and we’re actively working with them to improve those results.

So how do you get there?

Changing the sales team’s mindset is the answer. Reps spend very little time thinking about margin strategy when preparing a quote. You have to get them to pause before they hit send and think about margin. They have to break the current habit of just throwing on the usual margin that is safe and avoids any perceived pricing issues.

Start discussing margins at every sales meeting. Celebrate large orders with large margins. Call out examples of small orders at low margins and explain how these small, low-margin orders hurt the company’s profitability.

Discuss opportunities to add margin:

* Are you charging enough for artwork and setup?

* Are you passing kitting and fulfillment charges along at an enhanced margin?

* Are you marking up overseas sourcing opportunities appropriately?

* Are salespeople discounting unnecessarily to win business?

* Are you looking at program profitability after all associated costs?

A distributor doing $5 million in sales at a 35% gross margin generates $1.75 million of gross profit. At 40%, that same distributor generates $2 million. That’s a $250,000 difference in gross profit — without selling another dollar. That’s why I believe margin improvement deserves as much attention as sales growth.

I’m not suggesting that every distributor can immediately move from 33% to 42%. Every business is different, and there are legitimate reasons why margins vary by customer mix, product mix, programs, etc. But try moving 2% to get started. And then another 2% next year. You’ll be surprised how fast reps can ramp up margins when they’re top of mind and find success.

40%+ is absolutely attainable for most distributors. Our clients’ numbers prove it.