Housewares suppliers are facing an average price hike of 18.5% on their products – but retailers are prepared to pay only 5.8% more.
The discrepancy is revealed in a new survey by the British Home Enhancement Trade Association, which says it is clear that increases in the cost of raw materials, energy, logistics, distribution and packaging are being felt by all its members. Those using steel and sourcing from China are the worst hit.
“Some members are dealing with price increases of up to 100% on steel products, and anything between 8% and 50% on other types of products,” says BHETA’s housewares director Pam Plant. “On average, raw material costs have gone up 11%, energy costs are up 6.5%, labour costs are up 4% and logistics and distribution costs are up 5% across the board – and retailers still continue to ask for additional support, up, on average, by 2.6%.”
However, members who had asked for price rises at the end of 2007 reported meeting universal resistance from retailers, while those negotiating in the first quarter of this year found that retailers finally seemed to accept that some rises were inevitable.
Attitudes towards price increases do vary amongst buyers.
“Retailers who direct source their own products from China are having to absorb the increased costs, and can be very resistant of price increases from UK-based suppliers,” explains Plant. “Others seem to recognise that prices have to shift up across the board, otherwise ultimately, they will lose the breadth of choice and quality of supply.”
But now, in a new twist, members are reporting that retailers are asking for 12-month price guarantees to protect themselves from any further price rises this year, and suggesting that they may move business elsewhere if their request cannot be met. This demand was described by one member as “impossible to agree to at current price levels in the present economic climate”.
The widening of the gap between retailers’ expectations and what suppliers are offering is also highlighted with overseas retailers. Members report that they have been forced to reduce the time validity of their price quotes down to two weeks from a previous three months, whilst customers who were once happy with a three-month quote are now asking for prices to be held for 12 months.
“Long term, if suppliers can’t get the price rises they need – and one member has told us of the 1,500 lines they offer they have achieved price increases on just 34 – we’ll see the types of products available become polarised towards the very cheap and the luxury ends of the scale,” says Plant.
The survey also showed that exchange rates were against most members, with the pound moving unfavourably against the Euro and Chinese RMB, although recent falls against the US dollar had helped slightly.