Mid-season price increases hit industry again
Cinde Ingram -- Casual Living, June 1, 2008
Changes in international exchange rates combined with increased costs for transportation, materials and labor to force some casual furniture manufacturers to impose mid-season price increases in early May. Other vendors held off, but many wrestling with the same problems expect to pass on their higher costs soon.
“It’s extremely difficult and challenging for a retailer to implement a mid-season price increase because the season is short and it comes across as being insensitive,” said Mike Echolds CEO Tropitone. “But the reality is it was absolutely mandatory, and people are going to be shocked at the level of price increases that are going to be implemented this summer. Price is the story. There’s no other story right now other than what’s going on with inflation on commodities, raw materials and everything. It’s really the last thing Tropitone wants to do and we only do it if we absolutely have to, but this year as tough as it was it was the right thing to do.”
In his letter to dealers, Michael Sosnowski, national sales manager, Kettler USA, noted record-level exchange rate differences between the Euro and the U.S. dollar. “The increase in the exchange rate has been compounded by substantial increases in raw material costs,” he added.
Those cost increases made it tough for other manufacturers not to increase their prices. “I’ve been tempted, but I’ve been able to hold off,” said Fred Ilse, president of Outdoor Lifestyle.
“We are getting price increases from our suppliers, but we’re not doing a mid-season price increase,” said Terri Lee Rogers, co-president of O.W. Lee, which makes outdoor furniture in Ontario, Calif. “If I get a price increase after I’ve set my prices, I know it makes me mad.”
Retailers were frustrated with the price increases during a time of hyperinflation. Those sourcing from China were keenly aware of higher production prices there due to new labor laws, regulations and elimination of subsidies as well as record high energy costs worldwide.
Despite ongoing exchange rate changes, China still has 800 million workers and about 800 competing furniture factories in Guangzhou alone, China Export Finance CEO Karl Alomar said.
“The market is changing and things are getting more expensive but it’s not getting so expensive that buyers are moving out. People who are entrenched in the Chinese market now will stay,” Alomar said. “Even though we’re at about $24 billion worth of exports out of China now, it’s going to go to $48 billion by the year 2010 in furniture specifically. There’s still huge growth expected in that market.”