Mid-season prices jump
Cinde Ingram -- Casual Living, May 15, 2006
Many outdoor furniture manufacturers raised prices an average of 6%–7% on select categories, primarily due to higher raw material costs for aluminum, in addition to increased costs for iron, steel, foam, fabrics, fiber and petroleum. The price hikes went into effect on orders received by specific dates this month or last.
While specialty retailer Mary Fruehauf in Boulder, Colo., was among those who said because most stock is purchased during early buy, "this hasn't caught up with us yet," other retailers were not taking the price hikes in stride.
Dean Luckino of Georgia Backyard and American Backyard questioned why vendors would implement the price hike now. The mid-season price increases affect the price points retailers figured they could sell products at when they placed orders last year.
"For me to keep those retail prices makes my margins drop and I can't do that, so now I'm explaining to the customer that the margin's got to go up," he said. "This should have happened in September or after July, when most of the season's over. The fact that it happened in the heat of the season creates ramifications. So if I don't have a $1,099 price point, I've got to find a $1,099 and I hope that manufacturer realizes they may lose that group off the floor because it no longer can be retailed at that price."
Noting he follows business news closely, Luckino recognized, "There's no big change that's just happened. It should have been dealt with in September/October. And I hope small retailers don't think they can just eat those margins. They can't."
David Ghiz, president of Paddock Pools, Patios & Spas retail division, described the price increases as a major problem for large specialty store groups like his. "I'm not finished with the manufacturers, I can tell you that," Ghiz said. "In our world of retail, doing something like that to a consumer would almost be considered bait and switch. We've committed to a lot of merchandise from these people, put it in our warehouses and we can't go back now.
"This business is tough enough," Ghiz said. "In many cases, the retailer is going to have to eat the margin. When you've got advertising pieces printed and ready to mail you can't go back and reprint them all."
Many manufacturers mailed letters to dealers offering explanations and details about increases for specific collections. Revised suggested price lists were promised in letters from some manufacturers, including Telescope, Mallin, Summer Classics and Suncoast.
"As you are aware, the cost of ... aluminum and oil-base raw materials, such as plastic and PVC woven fabrics, have increased substantially since September," wrote Henry Vanderminden IV, president, Telescope Casual. "We have been fighting to overcome the raw material inflation ... and have absorbed as many of these costs as possible. Despite our efforts, we find it necessary to increase our prices 5% on all of our products."
Woodard also increased its aluminum lines by 5%, but held off on hiking prices of its wrought iron and woven products.
"Aluminum cost is up anywhere from 35%–40%, depending on the time period that you evaluate," Woodard President Dean Engelage said. "It's such a significant component to the total cost of an aluminum frame as well as woven. It's a world commodity so it doesn't matter if you buy it in Michigan, Mexico or China, in large part, it's going up a similar amount."
The cost of foam for cushions, natural gas and petroleum also rose significantly but were absorbed. "That's just the cost of doing business and you try to wrestle it down, but the cost of aluminum was so significant and doesn't appear to be short-lived," Engelage said.
Mike Echolds, CEO, Tropitone, noted over the last couple of years the costs of commodities rose sharply — especially metals as China rebuilt its infrastructure. "What's been hard for the manufacturers is to stay on top of the curve as prices increased every month," Echolds said. "Our responsibility is to keep ourselves financially strong in order to invest in better products and be able to support specialty retailers with products and services consumers find value in."
Summer Classics increased its all cast aluminum groups by 7% in April. Its wrought aluminum Summer Cottage and Villano collections also increased 7% while its Laguna and Brookings collections rose 5%. Wrought aluminum table bases increased 7% as did cast aluminum market umbrella bases.
Harold Hudson, Summer Classics, vice president sales & marketing, said huge cost hikes within the metal categories made price increases necessary, but cushions, other petroleum-based products and transportation costs were also affected. "We chose to go by category on our increases; we're not going across the board," Hudson said. "Manufacturers are not being greedy; we've got to make a profit."
Meadowcraft, Brown Jordan International and Palm Springs Rattan were among the few vendors without mid-season price increases. "We recognize what a mid-season price increase does to your business," the Meadowcraft letter said. "Signage is set, price lists are complete and sales staffs are trained ... This is certainly not the time to start over."