Editor’s Note July 2019

From Margin Pinch to  Hard Squeeze

No one is ever happy about receiving a price increase, and although postponed for nearly half a year, the inevitable 25% tariff on goods imported from China hit just before summer market season. To keep market sales strong, several lighting manufacturers have either continued to absorb the increases or postponed the additional price hike until after June show.

When I was speaking with domestic manufacturers about the impact on their businesses recently – specifically whether the tariffs had the intended effect of increasing American-made sales –
it was tough to determine the answer. For most custom commercial work (which is a specialty for domestic manufacturers) projects have been in the works for one year or more, pre-dating the initial tariffs. Those who are creating custom residential fixtures are anticipating a noticeable increase in business by year’s end. Several executives tempered their enthusiasm by noting that most domestic manufacturers have to rely on components from China, which may then affect the price.

On the distributor side, I was surprised to learn that retailers were less upset about the negative impact of tariffs and more concerned by the increasing amount of “IMAP holidays,” white labeling, instances of manufacturers selling direct to designers and consumers, and the seemingly blind eye turned toward e-tailers who routinely break IMAP.

While many retailers attending market admit they were mindful of whether a vendor would be raising prices due to the tariffs, there were far more who said they were actively seeking out companies who have taken steps to protect brick-and-mortars against unfair online price competition — some even contemplating severing ties with those manufacturers they perceive as margin-eroding enablers/offenders no matter how much they might like the product line.

Both vendors and retailers hope the tariff situation resolves and any price increases are short-lived, but that is probably wishful thinking. The key issue certainly revolves around price alright, but the battleground is not America’s ports but instead is being waged online at the customer and distributor level.

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