Angst in Hong Kong; the price war begins

Richardblogheader (3) 
Homskrim I am beginning to hear from some sales reps and manufacturers that they are very worried about 2011.  It appears that they are being squeezed between heavy price increases from their suppliers and strong push back from their buyers.  In fact, I have heard that one major retailer has said that they will simply not accept price increases over 3%. 

As a result, some retailers are threatening to go elsewhere and as a result those I have spoken with are deeply afraid of losing long held business.  It is their fear that competitors will sharp shoot a price in order to get the business with the hope of increasing prices later.

My analysis of the Chinese economy is that these inflationary pressures are very real and that the price increases (though certainly containing some posturing) are based on reality.  One sign of that is that I am hearing of Chinese suppliers quoting prices in Renminbi (the Chinese currency) in stead of the customary U.S. dollar in order to safeguard against an anticipated increase in the value of that currency against the dollar.

My guess is that when the smoke clears, retailers will want to stay with current suppliers if at all possible in order to avoid the possibility of missed ship dates and quality targets that come from using suppliers who are unproven.   We will, of course, have to wait and see if I am right.

 

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