The home furnishings world has been on a wild ride for the past few years. Container costs and consumer demand have been lumpy—up one month, down the next. As inflation and uncertain growth have taken the economy through its ups and downs, a lot of home furnishings companies have found themselves stuck in the middle. On one side, they're facing volatile prices for materials, freight, and overhead. And on the other, there is pressure to keep products competitively priced to capture the shopper.
Some manufacturers opt to absorb increased costs rather than pass them on to retailers and consumers, fearful of dampening any consumer demand further than it already is. But it’s important to make sure this strategy doesn’t threaten the long-term health of your business by squeezing margins too tightly.
If you’ve been on the fence about a price adjustment and are feeling the pressure to maintain profitability, here are 5 key considerations manufacturers must weigh when it comes to increasing product prices.
1. Understand the short- and long-term impact on your business.
It’s important to look at it through a right-now lens as well as a down-the-road lens.
While weathering the short-term impact may be possible if your business can absorb some of the increased costs, it's crucial also to forecast how things might change when the current volatility normalizes. This long-term view will be essential in determining the right path forward.
But if costs are threatening your margin—now or in the near future—don’t let fear about the demand hold you back from protecting the long-term health of your business.
It’s also worth considering how key competitors in your product category are handling price fluctuations to make sure you stay competitive and don’t price your products out of the market.
2. Understand retailers’ rules.
As you navigate price increases, it's critical to have a solid grasp of your retail partners' policies and processes. Each retailer approaches this differently, so taking the time to understand the ins and outs will be key to a smooth rollout.
Many retailers have specific procedures in place for submitting a price increase request. Some may require a minimum 60-day timeline before the change can be implemented, while others - particularly large big-box stores - may be more resistant to accepting increases altogether. They'll want to carefully review the impact on their own margins and sales forecasts.
To facilitate this process, it's helpful to proactively communicate which products will be affected and by what percentage. Providing visibility into your overall pricing strategy - including any items that may be holding steady or even decreasing in price - can help retailers better understand the full picture. This transparency and collaboration will go a long way in maintaining strong partnerships.
Ultimately, your retail buyers are looking to protect their own profitability, so being prepared to justify the need for price adjustments and work closely with them will be essential. Understanding their unique requirements upfront can help you plan accordingly and minimize disruptions.
3. Avoid a blanket increase across all SKUs.
Of course, it would be easiest to average out the impact of your business’ supply costs overall and apply that as a flat percent increase across all products.
But from a strategic standpoint, pinpointing the exact places where an increase is needed to offset costs will help minimize interference with sales.
If freight costs are impacting every product in your catalog, there may be an across-the-board increase to account for those. But for a cost like materials, take the time to understand what materials are required for what products, how those costs are rising, and apply those increases accordingly.
If your catalog includes overstock or “while supplies last” items, these should be exempt from price increases.
4. Revisit your promotional calendar.
In addition to carefully evaluating the pricing structure, manufacturers must also revisit their promotional calendar to stay competitive in the current environment. Regardless of the price point or category shoppers are increasingly seeking deals and discounts, even as overall demand zigs and zags.
This heightened demand for deals is only expected to intensify as we approach the critical Q4 holiday shopping season. Manufacturers who can offer compelling promotions will have a distinct advantage over competitors during this pivotal time of year.
It’s a great idea to lock your promotional calendar in at the beginning of the year—but also to be flexible enough to give it a fresh look at pivotal points, such as Black Friday/Cyber Monday. If you aren’t already, consider offering deeper discounts on select SKUs, especially on key items that drive a significant portion of your revenue. Prioritize offering these deals to your most important retail partners who can move meaningful volume.
Balancing price increases with strategic promotions will be crucial. If you need to adjust pricing to offset costs, your promotional calendar certainly deserves a second look. Promotions aren’t just about the discount—they also play a big role in maintaining product visibility on your retailers’ websites.
All that said, don’t plan a price increase during an already scheduled promotional period. It’s guaranteed confusion for you and your retailers alike and creates a lot of room for error that could hurt sales during a key event.
5. Timing and communication should be planned thoughtfully.
Remember, every retail partner treats a price increase differently. Be upfront and transparent about why the increase is needed and give retailers a reasonable time period to implement it.
Even with an understanding of current manufacturer costs, buyers may want to have a conversation about the proposed increases and game plan on how to ensure minimal disruption to sales. Remember that retailers are your partners in success. Be prepared to openly communicate with them for a successful rollout.
Price adjustments can be tricky to navigate and even more so in this up-and-down environment. Manufacturers who maintain this thoughtful approach to increases will not only be set up for success but will also help preserve strong partnerships with retailers.
