There’s going to be pressure on retail prices in the second half of the year as suppliers navigate a sharp rise in shipping, manufacturing, distribution and virtually all costs tied to bring products to market.

Passing them on?
Much will depend on whether current spate of cost increases hold or ease in the runup to the fall, say licensing industry executives. And vendors will have to determine how much of those cost jumps can be passed on to consumers as higher retail prices, and how much will have to cut into supplier or retail margins. Ultimately, the squeeze could force adjustments to the products themselves to hit specific price points.

Bakeware and small appliance supplier Formula Brands has seen manufacturing costs in China increase 6%-15%, depending on the product and material, says President Mitchell Stevenson.  The company, which has Betty Crocker and Pillsbury licenses for bakeware and small kitchen appliances, in turn has boosted wholesale prices 3%-6.5%, says Stevenson. While there have been, and will likely be, other increases in retail prices, how widespread that will be remains to be seen.

Materials, labor, currency appreciation
“After Chinese New Year, when companies try to replenish inventory or buy the same product again, they are going to get slapped with a price increase,” says Stevenson. “I don’t care what they are buying, the price increases are a factor of raw materials, the increased labor rates in China and the appreciation of the yuan against the dollar.

Nevertheless, there will likely be a “little bit of a lift” in opening price points and a larger increase in mid-priced product, says Stevenson. Luxury goods, which are less price sensitive and could more easily pass on an increase, will likely be less affected.

Fees to secure space on a 40-foot container from China have doubled from a year ago; there’s now an auction-like market for cargo space that goes to the highest bidder.

As suppliers adjust to cost increases, they’re also faced with a bunch of factors that are slowing deliveries. One is the previously mentioned shipping squeeze, and resultant bidding up of cargo space.

“This happens under the guise of prioritization” which results in added fees that are up for bidding, says Ross Patterson, CEO at Robinson Home, which sells kitchenware under the licensed Delish, Nickelodeon, Sunbeam and Oneida brands. “We have experienced locking in a container only to be told they got a higher price, so the spot is unconfirmed. In most cases priority doesn’t get the container shipping any faster. It just provides some guarantee that it gets on the vessel.”

Even with a container on board, there’s no guarantee that delivery dates in ports and to retail warehouses will be met. For example, the time it takes to get products from a ship to a truck has increased in recent months to 14 days from three in mid-2020, says Kim Howard, Import Manager at giftware supplier Mark Feldstein & Associates. And the time it takes for containers to be refilled and returned to China for new shipments has more than doubled to 100 days from 45, says Howard.

Some of the delays are tied to labor shortages at the shipping ports both in China and the U.S. due to COVID-19 precautions that limit the number of workers.  The labor shortages have resulted a slowdown in the unloading of containers, resulting in more than 30 of these ships at anchor awaiting service last week outside the Port of Los Angeles.

“We sold out of some of our top-selling items during the holidays because the ecommerce business was so much larger than anyone, but we can’t get products back in fast enough so there are going to be pockets where we miss sales,” says Matthew Hoffman, CEO at small appliance supplier Uncanny Brands. He doesn’t expect to be back in stock of some top-selling items until mid-year, rather than the more typical March-April period.