Price reductions ease resilient supply challenges
Ofor the past two and a half years, it seemed like no product category was safe from the incessant price increases felt across the board. As suppliers announced price increases almost monthly, most attributed the increases to skyrocketing freight costs, which started to rise about six months after the pandemic hit the US in early 2020. surface, mainly in the luxury vinyl category.
It’s no secret that the luxury vinyl category didn’t see the growth forecast in 2022 — though still outpacing all other categories — due to supply chain issues and rising costs. Why buy a vinyl floor when you can access hardwoods for almost the same price? That was the question on the lips of many consumers and to which dealers had a hard time answering. Fortunately, price was not (and is) the only draw for the luxury vinyl category – over the past two years, innovations in scratch resistance, waterproofing and HD design have fueled the demand for luxury vinyl – and so it continued to grow as dealers patiently waited for the category to come back to its $2-$3/square foot range.
Today, there are several luxury vinyl suppliers that are quietly touting their ability to offer price reductions. FCNews spoke to three of them.
Republic Floors was the first on the scene with unprecedented price cuts, which took effect in September 2021 as costs continued to rise for most. Price drops averaged 7% and were across the company’s product portfolio. Since then, the company has made three more price cuts, all by an average of about 7%.
Rotem Eylor, CEO, attributed the company’s ability to lower prices to its renowned logistics prowess. “Not only are we in control, but we understand every process along the way,” he told FCNews. “Every time we can renegotiate a better price or find a way to better control the process and reduce costs, we immediately pass this on to our customers. We are very loyal to our customers, and that loyalty keeps them coming back and has helped us grow.”
In fact, it’s Republic’s logistics arm that contributed to the fledgling brand’s early success – launching in 2015 with a $2.5 million investment has grown to over $100 million in sales. Republic has built its own national truck fleet, owns its container chassis, maintains warehouses with $100 million in inventory at any given time, sources the raw materials for its product, and much more. “Many companies have raised their prices because of rising transportation costs – trucks, fuel, freight,” explains Eylor. “Taking containers from the boat has almost doubled in the past year. We blocked those charges because we use our own freight for delivery. We bring our own containers, maintain fuel prices, our trucks and drivers are our own. A lot of that has helped us cut costs for our customers.”
On Nov. 1, Eylor said the company’s fifth price cut will be implemented.
MSI is another powerhouse that has been able to cut costs for its customers lately. “MSI continues to champion our retailers and their consumers with the goal of ‘Making Dream Surfaces Atainable’,” said Raj Shah, president of MSI. FCNews. “We reduced the price once this year and the amount depended on the product category and region. Our goal is to continuously work on behalf of our customers to provide them with the best value.”
For MSI, it’s the lower shipping costs that made the discounts possible. “That said, a lot of extra costs have increased beyond freight, including total import costs (daily charges, per diems, demurrage and warehouse leasing costs),” noted Shah. “MSI continues to look for ways to use our volume and scale to overcome many of these costs. This includes working directly with shipping companies rather than freight forwarders, being creative with transportation and using our systems to reduce other import costs. Our highest management levels are working on this every day.”
Shah said MSI values its customers’ needs and plans to support them with savings. “Our customers are currently at war on many fronts,” he explained. “A slowing economy, labor costs continue to rise, storage and marketing costs are rising and competition is fierce. By working with them to provide the best value, they know that at least one front of this war is being taken care of.”
Bella Flooring Group is another brand that has cut prices in the resilient category, starting in June with a 6% price cut for its SPC and WPC products. Paul Dominie, president of Bella Flooring Group, said at the time: FCNews shipping costs had been drastically reduced and it was the company’s responsibility to pass those savings on to its customers. “If you look at the cost of a product being imported – SPC, LVT – 50% of that cost is the shipping cost. If that goes down by 30%-50%, there’s a significant cost savings. good cooperation, you have to pass it on, just like when it went up.”
Dominie noted that after the price adjustment, the average cost of a Bella Flooring SPC/LVT is in the $2 range. “For us, it’s just an adjustment back to where it should be,” he said. “Running an effective business means that you ebb and flow based on your costs. We believe it is a way to support our partners, especially at a time when they are seeing a slowdown.”
Today, Bella Flooring Group has managed to maintain that 6% price reduction, while other costs continued to rise. “There have been some ongoing cost savings in shipping – probably another $2k-$3k per container,” Donie said. FCNews. “The ‘but’ is that raw materials and transportation have gone up.”
Donie said the company plans to continue to monitor operating costs and implement new cost savings in 2023 if this becomes feasible. “We’re looking at what 2023 will look like based on shipping cost recalculations,” he explains. “If they can stay consistent between $10k and $15k per container, which is not what we want, but still better than what it was, I think you’ll probably see another cut.”