Price reductions ease resilient supply challenges

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price reductions
After months of price increases due to increasing freight costs, price reductions are beginning to surface.

Over the last two and a half years it seemed as if no product category was safe from the incessant price increases being felt across the board. As suppliers announced price hikes on an almost monthly basis, most attributed the increases to the skyrocketing cost of freight, which began to rise about six months after the pandemic hit the U.S. in early 2020. In recent months, however, price reductions have begun to surface—mainly in the luxury vinyl category.

It’s no secret the luxury vinyl category didn’t experience the growth that was projected for it in 2022—though growth still outpaced all other categories—due to supply chain issues and rising costs. Why buy a vinyl floor when you had access to hardwood for nearly the same price? That was the question on many a consumer’s lips and one that dealers had a hard time answering. Luckily, price was not (and is not) the only draw for the luxury vinyl category—in just the last two years innovations in scratch-resistance, waterproofing and HD design have driven demand for luxury vinyl—and so it continued to boom while dealers waited patiently for the category to come back down to its $2-$3/square foot range.

Today, there are several luxury vinyl suppliers 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 decreases, which were implemented in September 2021 as costs continued to rise for most. The price decreases averaged 7% and were across the company’s entire product portfolio. Since then, the company has implemented three more price decreases, all averaging about 7%. 

Rotem Eylor, CEO, attributed the company’s ability to decrease prices to its renown logistical prowess. “We not only control but we understand every process along the way,” he told FCNews. “Anytime we can renegotiate a better price or find a way to control the process better and along the way reduce costs, we pass it along to our customers right away. 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 has helped propel the young brand to early success—launched in 2015 with a $2.5 million investment has grown to over $100 million in sales. Republic has built its own national trucking fleet, owns its container chassis, possesses warehousing with $100 million in inventory at any given moment, sources the raw materials for its product and much more. “A lot of companies raised their prices because of increasing transport costs—trucks, fuel, freight,” Eylor explained. “Bringing containers from the boat has almost doubled in the last year. We have that cost locked because we utilize our own freight for delivery. We bring our own containers, lock in fuel prices, our trucks and drivers are our own. A lot of that helped us bring cost savings to our customers.”

On Nov. 1, Eylor said the company’s fifth price reduction will be implemented.

freight
Flooring retailers may be able to expect continued price reductions in 2023 as some flooring suppliers are passing on their own recent cost savings.

MSI is another powerhouse that has been able to reduce costs for its customers of late. “MSI continues to be the advocate for our retailer customers and their consumers with the goal of ‘Making Dream Surfaces Attainable,’” Raj Shah, president, MSI, told FCNews. “We lowered price once this year and the amount was dependent on the product category and region. Our goal is to continually work on behalf of our customers to bring the best value to them.”

For MSI, it’s been the lower shipping charges that has made the reductions possible. “That said, many additional costs have risen outside of freight including overall importing costs (per-diems, drayage, demurrage and warehouse lease costs),” Shah noted. “MSI continues to look at ways to use our volume and scale to overcome many of these costs. This includes working directly with shipping lines rather than freight forwarders, being creative on drayage and using our systems to reduce other importing costs. Our most senior levels of management are working on this daily.”

Shah said MSI values the needs of its customers and plans to support them with savings as possible. “Our customers are fighting a war on numerous fronts right now,” he explained. “A slowing economy, labor costs continuing to increase, warehousing and marketing costs rising and competition becoming fierce. By working with them to provide the best value, they know at least one front of this war is taken care of.”

Bella Flooring Group is another brand that has decreased prices in the resilient category, kicking off a 6% price reduction for its SPC and WPC products back in June. At the time, Paul Dominie, president, Bella Flooring Group, told FCNews shipping costs had been drastically reduced, and it was the company’s responsibility to pass that savings onto its customers. “If you look at the costs of any product that is imported—SPC, LVT—50% of that cost is the shipping. If that goes down 30%-50% there’s a significant cost savings there. That savings, by nature of good partnerships, should be passed 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 company means you ebb and flow based on your costs. We believe it’s a way to support our partners, especially in a time when they’re seeing a slowdown.”

Today, Bella Flooring Group has been able to maintain that 6% price reduction even as other costs have continued to climb. “There have been some continued cost reductions in shipping—probably another $2k-$3k per container,” Dominie told FCNews. “The ‘but’ is that raw materials and transportation have gone up.”

Dominie said the company plans to continue monitoring the cost of business and will implement new cost reductions in 2023 if it becomes feasible. “We are looking at what 2023 is going to look like based on recalculations of shipping costs,” he explained. “If they can stay consistent between $10k-$15k per container, which is not what we want but still better than what it was, I think you will probably see another reduction.”

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Oct. 24/31, 2022

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