August 2008

Extra

Distributors: Price Increases Are Inevitable

Price is such a sensitive issue when dealing with clients that distributors will often absorb the cost of minimal increases from suppliers, as well as inflated business expenses. However, many distributors say that they can no longer afford to eat these costs, and are now being forced to raise their prices – in some cases by double digits. Increasingly, they are being forced to pass along increases as high as 15% to end-users, according to distributors.

Why? Vendors who had not increased prices in the recent past are now electing to up their prices, says Geri DeGood, vice president of Trinity Systems Inc. (asi/347043). “Last year I absorbed the costs, but I can’t anymore,” he says. “This is hurtful for repeat orders. I pretty much go with the standard. I have to make 40% on a product.” Gas is part of the changing price equation. “Freight has gotten outrageous,” says Marsha Sypher, president of Initials Included Inc. (asi/231118). “I used to be able to pretty accurately guess the costs. Not anymore. In the clothing field, prices are up 5% to 10%. The sale prices are more than the regular prices were last year.” The issue for companies that provide services like embroidery is that they are forced to pay the extra shipping costs three times, says Deanna Duncan, general manager of Olympic Embroidery (asi/287459). “It costs the suppliers to get the apparel in. Then they ship them to me. Then I ship them to the client. We have three areas to mark up to cover our costs. It makes us look bad, because we have to raise prices. The economy is affecting everything.”

Many other categories are affected as well. For example, an 11 oz. coffee mug now incurs a shipping cost of $1, says DeGood. “We pass along the shipping. We lost a lot of orders because people said they want another product instead.”

Not all distributors have committed to raising prices – yet. Dan Broudy, vice president of sales for Clayton Kendall (asi/162968), says that even though several manufacturers have raised their prices, he hasn’t. “For certain programs, we are locked into price and can’t move,” Broudy says. “I had one guy in here the other day who reps a seat cushion line, and it said right on the front of the catalog that prices were being increased 15% across the board. Still, we’re doing alright. It hasn’t affected us too much.”

Lisa Davila, owner of Bdazle Promos (asi/134454), says she fights back by seeking out supplier specials. “We are surviving by picking up the larger companies that are shopping around. If I see an item they requested on sale, I send them an e-mail. Ninety percent of what I sell now is on special.”