Many importers and manufacturers believe that although it may be too early to say, with the current rise in raw material prices, the price of finished furniture will also rise this year, up to 15%.
In addition to leather, wood, sponges, glass , cardboard and even spray paints and coatings that have been increasing prices recently, the most critical steel : the increase of up to 30% makes the cost problem suddenly emerge.
Ashley President Todd Wanek believes that rising iron ore prices and increased demand for steel have caused steel prices in China and the United States to rise sharply, while other materials have also increased prices. This phenomenon will affect the end market next year at the latest.
Mark Quinn, executive vice president of marketing from Leggett & Platt, agreed. Jim Ziozis, president of Powell and Linon, added that the price of raw materials has been rising at a staggering rate recently, which the industry "has not seen in 40 years."
Price instability
Matthew Briggs, the president of home importer Four Hands, has been paying close attention to the cost of raw materials. He said: "We all want to make ourselves more efficient, and we all see that everyone will seek to make their chairs cost as low as three dollars. The company. "But in the face of soaring raw material prices," efficiency "is irrelevant. "In the past 12 months, many materials have surged. For example, mango wood has risen by as much as 25%."
Briggs added that in order to give retailers the best prices, importers often have to invest a lot of time and effort to find the best purchase price. Once a good price is found, importers generally purchase in large quantities to reduce overall costs. Therefore, the price increase of raw materials will be buffered by importers to a certain extent. But even so, the price increase on the retail side is only a matter of time. He speculates that the average retail price will increase by 15% in the next 12 months.
Suppliers said that as of now, the impact of rising raw material prices has not yet reached the retail end. But they feel that manufacturers and importers have not been able to sustain it for long.
Quinn of Leggett & Platt also mentioned that as the economy began to pick up, inflation also began to become a possibility, which may further promote price increases.
But for now, the economy is still weak, and wholesalers and manufacturers have not yet passed on the increased cost pressure to retailers.
Dangerous decision
Suppliers say that price increases are a very dangerous decision because it may hit the retail market hard.
Almog Lieber, vice president of Berg furniture company, a teenager furniture manufacturer, said he was "stunned" by the price increase of 50% when he was preparing to order some plywood recently. He said: "Fortunately we don't need to use a lot of this material, but cardboard, plastic , glass and other materials are also rising, and we have not raised the price since March 2008. The economic situation is not good, the price is rising It is not yet time, so new technologies and new equipment to improve work efficiency is our way to reduce costs. "But he also said that if the price of raw materials continues to soar, the company will have to re-evaluate existing pricing strategies.
Kurt Darrow, President and CEO of La-Z-Boy, is carefully weighing product prices. He said: "We can't control the price of raw materials, wood, leather and metal. You have to use these things to make furniture."
He believes that this price increase stems from economic recovery. Due to the recovery of the real estate and automotive industries, the demand for wood and steel is also increasing. Therefore "this is just the impact of a simple supply and demand relationship", and "in the long run, if the raw materials continue to rise due to economic growth, we would be happy to comment on this situation."
Since it is impossible to predict when this price increase of raw materials will be the head, the situation is still complicated, "even a stable long-term price is difficult to negotiate." Darrow said helplessly. At the same time he said that La-Z-Boy has not yet decided whether to increase the price. "Everyone wants to try their best to control costs, but once they can't control it, they can only pass it on to downstream companies."
Jena Hall, vice president of marketing and design at importer Aspenhome, revealed that they are also evaluating the current price situation. But she revealed: "The current market demand is still sluggish, and we are also sensitive to it. The business has improved, but the increase is limited. So we will continue to pay attention and will observe whether there will be any turnaround at this high point exhibition. . "
Retailers also said that making changes to product prices is a big deal, and its timing is crucial.
Fred Berk, president and CEO of retailer Robb & Stucky, said: "The entire industry, whether retailers or suppliers, are working hard to absorb these increased costs, which has affected the gross profit margin level of sales. Retailers have just started I have tasted the sweetness of the economic recovery, so even if there are thousands of legitimate reasons, it is not the time to raise prices. Consumers are still very sensitive to prices, and we cannot do anything harmful to the economic recovery. "
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