Thought you’d seen the last of the price increases? Think again. As global supply chains come under constant strain, the new trading relationship with the continent and the pandemic continuing to cause disruption, pressure on prices is only going to increase further during the course of this year.
Supply chain problems
It might be a new year, but the supply chain remains under strain as high demand from 2020 is materialising into new orders at the start of 2021, with orders continuing to be placed by homeowners seeking to kick off their home improvement plans.
Only a few days ago I was told of particularly acute product shortages in certain parts of the hardware market. And we already know that certain glass products used in conservatory roofs are going to be unavailable until the end of Q1. When demand is high and supply cannot keep up prices are squeezed and are raised to make up for higher manufacturing costs and to help suppress demand enough in the hopes that it will slow down just enough for supply to catch up. We do not appear to be at that moment.
One area that more attention should really be focused on to explain part of the problem is global shipping costs. One supplier explained to me that their container costs shot from $1500 per container to over $10,000 in a very short space of time. These skyrocketing costs have hit our industry and many others hard as air freight around the world is nowhere close to what it used to be thanks to the pandemic and travel restrictions. As a result, the only way to ship goods on mass is by sea, which means demand for vessels is higher than ever before. There are not enough ships around the world to currently service demand, which means ships go to the highest bidders, driving prices up.
These are currently being reflected in the composite door market, with suppliers having to put in place surcharges to cover these sudden and very sharp increases in transportation costs. Whilst no one likes rapid price increases like this, suppliers are faced with a hard choice with no easy answer. They have to get their products shipped to the UK to honour orders placed, but they have to fork out way more for that transport than they would have planned on doing a few months ago, and these price increases are too high to take on the chin.
Whether these charges are rolled back when global shipping returns to normal levels will remain to be seen. We are being told they are temporary. But with economic conditions worsening and profit margins requiring repairs, I have a feeling they will stay.
The rest of the chain
I suspect the pace and scale of price increases this year will be regular and steep. We are still yet to feel the full impact of the pandemic and supply chain problems hit home. We’ll feel a lot of it this year. Price increases will be unavoidable. The one thing I will say is that if suppliers are going to raise prices, ensure that customers feel the value of it. Improve customer service. Expand a product range. Upgrade your online offering.
I would urge though the rest of the supply chain to pass on those costs. Especially installers to homeowners. Businesses cannot afford to keep absorbing price increases each time. You do that and you can wave what is left of your profit margin goodbye. It’s important to remember that whilst the economy is getting a battering, homeowners are actually sat on more cash than they normally would be. Millions have benefitted from the furlough scheme, pocketing most of their wages from the Government whilst not being able to spend most of it on things they normally would. There is a significant portion of the public who could afford to pay a bit more for their windows and doors. There’s no reason to sacrifice your own margins.
At the moment, there is no indication as to how long and how far future price increases will go. But I think we can be almost certain that come to the end of the year we’re going to be looking at the cost of our goods being at the very least modestly more than at the start. One area that needs to improve for 2021 and one area that will help soften the blow of future price increases is communication. Explanations of why increases are happening, informing those having to stump up more cash of why they are going to have to pay more will negate some of the push back. Failure to communicate well and the opposite will happen.
To get weekly updates from DGB sent to your inbox, enter your email address in the space below to subscribe:
By subscribing you agree to DGB sending you weekly email updates with all published content on this website, as well as any major updates to the services being run on DGB. Your data is never passed on to third parties or used by external advertising companies. Your data is protected and stored on secure servers run by Fivenines UK Ltd.