Price rises may be a fact of life, but Covid-19, Brexit and a host of other factors have helped open the floodgates to serious hikes – with a good deal more to come. Furniture News' Paul Farley looks at how the trade plans to deal with the squeeze …
Resources are finite, yet the global population continues to grow – so, given due course, price rises are as inevitable as death or taxes.
Repeated lockdowns may have created massive demand for home furnishings, yet material and component shortages mean much of this potential has gone unfulfilled. From foam to fixings, supply has often failed to match demand. Add soaring freight costs, labour shortages and Brexit red-tape to the mix, and you have a recipe for widespread furniture price hikes – many of which are yet to come.
The BFM reports that, YoY, the price of materials and fuel increased +4.7% in January, +5.2% in February and +5.7% in March – while the NBF states that nearly three quarters (72%) of its members reported significant cost increases in Q4 2020, compared to just 8% in 2019.
Now the UK’s stores have reopened, many expect the more traditional patterns of trading to reassert themselves, and prices to level out – leaving the trade to come to terms with how it negotiates the new status quo. Can production and material costs be negotiated or absorbed any further, or must they be passed on to the consumer – and if so, will they even notice?
Andy Stockwell (Gardiner Haskins): Price rises are coming through thick and fast. Aside from organic increases, Covid-19 has created issues with labour costs, raw materials, freight, production schedules and any number of other costs.
This applies to pretty much all products in all industry sectors, and inflation figures are sure to rise in the coming months.
As much as nobody wants to be seen to be adding further hardship to stretched household incomes, it seems inevitable that these additional costs will have to be passed on down the chain and ultimately will hit the pockets of the end-consumer.
It’s interesting to see how suppliers are handling the increased costs. Most are implementing across-the-board price rises. Some are targeting the products most affected, and where possible holding the prices of unaffected products. At least one has decided to add a surcharge to each invoice to cover the massive increases in freight charges, which can be easily stopped when freight costs realign to something more reasonable.
In terms of communicating this to customers, I’m not sure there needs to be any specific message. Cost increases are affecting every business, every producer, every supplier and every retailer. It’s simply a fact of coronavirus that prices are going to go up, and it’s something consumers will find almost impossible to avoid, no matter where they shop.
Steve Adams (Mattress Online): We work with our supplier partners to minimise the impact on consumer pricing, but there is only so far you can negotiate when component prices are rising. As a buyer, Mattress Online are pragmatic and realistic, and want the relationship to work for both parties.
We have passed these price rises onto our customers. I would argue that, industry-wide, our products are undervalued and underpriced. Being a periodic purchase, price sensitivity is not a particularly big challenge, and therefore requires no additional communication to our consumers.
Emma Leeke (Leekes Retail): We will pass these on to consumers – although we are trying to minimise their overall impact by reducing our cost base at the same time.
Mike and Karen Rowley (Core Products): Price rises are here, and will continue to be for a considerable time to come – we have to accept this.
Every business, regardless of type, is suffering increased operational costs as a direct consequence of the pandemic, so it is not realistic for any company to absorb the costs. Negotiation or switching to cheaper suppliers is not an option, as there is a world supply shortage – consumers are already seeing this on everything they buy, but it’s just far more noticeable on big-ticket items.
Peter Harding (Fairway Furniture): Price rises have been an almost daily occurrence over the past 14 months. Suppliers appear ready to use the pandemic and its connected short-term impacts to impose very significant ongoing price rises, above what I believe can be properly justified by the actual impact. This is making maintaining key retail price points very difficult, and unfortunately I don’t see it changing any time soon.
Blaming Brexit for increases of anything up to +12% is very hard to understand, as furniture is a non-tariff product, and, in reality, the only additional costs are related to the border paperwork, which certainly doesn’t equate to the increases being seen.
Suppliers will, I believe, find they will lose placements if they aren’t prepared to look more closely at their costs as the UK reopens.
Meanwhile, inflation will likely become a significant issue, fuelled by the vast increases in the money supply needed by governments to support economies through the pandemic.
“Suppliers will lose placements if they aren’t prepared to look more closely at their costs
Dids Macdonald (ACID): I think prises rises may be inevitable but, hopefully, there may be balance for some who may have benefited from being able to reduce fixed costs and are able to ride the storm. I don’t think there is any easy answer, other than focusing on all the positive aspects of a commercial/trading relationship based on quality, customer service, design et al, and this need to be accompanied by positive marketing messages.
Royce Clark (Grampian Furnishers): We saw price increases from most of our supply chain at the end of last year. Some had two in a short space of time, with the shipping rates skyrocketing – but I’m optimistic that we’ll see some price reductions. I think the new US government will see the dollar strengthen further, and shipping rates will surely settle.
Like our suppliers, we’ve had no choice but to pass these on – hopefully the end-user understands we are all living in difficult times. However, I do feel the media could help us a little more by reporting on the challenges we are facing, which would help the public see the bigger picture.
Henrik Pontoppidan (S2U Design Containers): The UK was hit extra-hard due to the combination of the worldwide container shortage following the first international lockdown on the one hand, and then the Brexit congestions on the other. The biggest factor, I believe, was the extortionate shipping rates, which were up to 8 times normal rates. This became a huge problem, and inevitably pushed prices up. We share unbearable costs with our customers, so we all lose out.
But I think we are slowly returning to something approaching normality.
As a business, we’ve met only understanding and accommodating attitudes from all our partners in the industry, be it suppliers in Vietnam or customers around the world.
We’ve had no choice but to pass some things down the chain – but not all the costs. Business is not exactly lucrative at the moment, so the best way is to have open and honest discussions based on the facts facing us all, and arrive at optimal agreements. Unlike global politics, my opinion is that our industry is reassuringly civil and pleasant – pleasantly surprising, actually!
Of course, it is also a survival game, so it is important to also look at alternative ways or sourcing channels.
“We share unbearable costs with our customers, so we all lose out
Lee Ness (Global Upholstery Solutions): Foam is the obvious culprit, wood another. We’ve absorbed them so far through efficiency improvements.
Adam Ashborn (Reborn Marketing & Design): Only when we are fully out of lockdown and the new norm has been established will we be in a position to determine what price increases are being imposed – not only by suppliers, but by the Government, through higher taxes.
I personally think everyone is expecting price rises in the future in some shape or form – whether that is immediate or further down the line, only time will tell.
Mike Murray (Land of Beds): We understand the need for price rises, due to the unprecedented situation we find ourselves in. However, it is important that the supply chain is viable and profitable for businesses to be healthy. At Land of Beds, we will always try to ensure that we are giving great value to our customers, and, where possible, we will always strive to keep our prices as competitive as we can.
It will be interesting to see, once the supply chain issues have been resolved, if the surcharges are removed as quickly as they were implemented – one to watch for all businesses …
This article was published in June 2021's issue of Furniture News magazine.
