What’s Causing Price Increases and How to Manage Them

Sandy Ruben is the owner of Sandy Ruben and Associates, a Toy Rep Group, representing the Southeast.

When talking with manufacturers, I hear a number of different factors. However, the common denominator is the rising costs (and lack of availability) of containers. Depending on who you talk to, it seems like the cost of containers has tripled and, in some cases, quadrupled. The cost of raw goods has gone up as has the cost of labor. As one manufacturer said, “We’ve had many cost increases over the past decade, and we absorbed them. We kept getting by with smaller margins. We can’t absorb this on our own any longer. It’s way out of control!”

An Urgency We’ve stated before, and will state it again: You will not be able to get the goods you want, when you want them. This condition will persist throughout the remainder of 2021. There will be shortages of inventory. Most retailers have already experienced this – having has orders trickle in. I talked with a rep who told me she spends 25% of her day tracking down the status of orders. All signs are that this is only going to get worse as we progress later into the year.

What should store owners do? I talked to one retailer who said they usually get a storage unit for three months each year, but this year they will be getting one for six months. Having adequate storage is crucial. Consumers are both spending, and supporting local businesses. Indicators are pointing to a great 4th quarter for stores (if they have enough inventory). To ensure success, retailers need to bring in as much inventory as they can, as early as they can. One recommendation is to make a list of 50 items that they feel will be hits this Holiday Season. They should order these items very soon, with the quantity that they will need to cover them right up to late December.

In the past, toy store owners would do pre-orders for an item in August, then again in September, October, and November. This kind of scheduling will not work this year. The manufacturers won’t hold the product for your future ship orders. Yes, they will continue to get containers in, but it wouldn’t surprise me at all if your September ship date order arrives at your doorstep in December. There’s an urgency this year. Retailers need to figure out how to get enough merchandise to last you through the year.

Many store owners are wondering, “Should I keep items on backorder or cancel them, and put them on a new order?” What was a simple process in the past has become very complicated. In previous years, a typical store would place an order, and put a cancel date of 60 days from the order date. The problem is 2021, many items are arriving past the cancel dates. That, in conjunction with the limited availability of product, has many buyers scratching their heads and asking “What should I do?” The consensus seems to be that on orders where a store can get free freight, they should extend their cancellation date until the first week of December. The goods will arrive, but they will definitely trickle in. By keeping a short cancellation window date, stores may find that they do not have enough inventory to last them through the 4th quarter. There is also the issue of limited availability. When the initial order is canceled, and the back ordered items are put on a new order, by moving so far down the queue, that order may no longer be available.

We decided to survey manufacturers to see how prevalent mid-year price increases really are. We found that 36% of them either have done or will be doing mid-year price increases. Another 10% are thinking about it but haven’t yet decided. The remaining 54% will be keeping prices the same. In terms of upcoming months, June and July are the months with the most price increases. A fair number have already raised their prices in March, April, May. While there will be a few in August and September, the majority of vendors feel that June/July is the optimal time.

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