HIGH POINT — Upholstery manufacturers ever are loath to raise prices, but skyrocketing costs this year for inputs from raw materials to labor makes higher price tags for their goods unavoidable.
Vendors view price increases a competitive damper, but with all seating manufacturers facing the same pressures, they won’t stand alone in charging more for products this fall. The reasons are obvious, but the number of vendors declining comment for this article — even some who’ve already notified customers of higher prices — reflects the industry’s “hot potato” attitude on the issue. Several did go on record, however, that price increases are here or on the way.
The cost of getting goods to retailers and warehouses has soared along with manufacturing-related costs, but shipping surcharges related to extreme demand for container space at sea and drayage on land are a separate issue from price increases.
While retailers are feeling the bite for transporting goods, those increases are temporary in nature and don’t show up on formal price lists. Competition for raw materials and labor, however, within the industry as well as with other manufacturing sectors is another story.
Unprecedented seasonal sales for furniture have a lot of producers straining their supply partners for materials such as plywood. Those suppliers also face increased demand from a pandemic-related boom in home improvement, driving prices there ever higher. Upholstery makers also noted big jumps in the cost of “anything petroleum-related” such as foams for seating.
Mother Nature played a role as well when Hurricane Laura forced shutdowns in August at two plants in Texas and Louisiana producing toluene diisocyanate (TDI), a key component for seating and bedding foam.
Ashley Furniture CEO Todd Wanek said those shutdowns alone pushed foam prices up another 16% for the company, which has announced a 4% price increase on all orders shipped after Oct. 18. Wanek is seeing other producers add anywhere from 4% to 7% to their price tags.
Along with foam, Wanek sees price increases on almost all materials such as oriented strand board, plywood, packaging materials and many other materials. In addition, ocean freight and currency fluctuations with the Chinese RMB are increasing the landed cost of raw materials such fiber, fabric and other items.
“We are seeing across-the-board increases in most commodities,” Wanek said, noting increases around 40% this year for OSB and plywood alone.
Manwah makes many of its components — such as mechanisms, actuators and switches — and pours its own foam. All of that helps save on costs, but the company still will have to raise prices. Manwah USA CEO Guy Ray didn’t share a percentage as of press time.
“Costs have increased too much for the industry to ignore it any longer,” said Ray, adding that Manwah already had absorbed a lot of cost increases that began early this summer. “We held off as long as possible knowing the industry is sensitive to increasing pricing. However, the industry needs to understand that working on thin margins makes it impossible to operate in this current inflationary period without passing along increases.”
Manwah is experiencing double-digit increases for inputs such as chemicals, steel, lumber, leather and packaging. That’s on top of rising freight costs for getting materials to the factory.
Domestic producers importing kits from China also face a cost challenge there with tariffs.
“The biggest issue for us is that the tariff exclusions out of China expired Aug. 7, and plywood for frames is more expensive than it’s ever been,” said Homestretch President Skipper Holliman. “We have heard from several other manufacturers about tariff increases related to kits,” adding that container delays and transportation costs also rose more in the past couple of weeks.
While he didn’t give a percentage, Holliman said that Homestretch has notified dealers to prepare for price increases within the next few weeks. “That’s based more on the tariff and plywood than freight costs.”
More to come
Several manufacturers contacted for this article had no firm price increases in place as of press time but say they’re on the way.
“One of the unforeseen outcomes of the COVID-19 pandemic has been the tremendous surge of orders in the furniture industry since the beginning of the summer,” said Terry McNew, president and CEO at Klaussner Home Furnishings. “As a result, the majority of suppliers and furniture manufacturers have experienced significant backlogs and rising costs.”
He added that while Klaussner’s near-vertical integration has offset many of those challenges, and it continues to focus on fulfilling demand while adhering to quality standards, prices will rise.
“We anticipate there will be price increases over the next few months as the industry settles into a new normal production process,” McNew said.
Century Furniture is seeing laminated hardwood sheets, foam and metal inputs such as springs and mechanisms on the rise.
“We hope to keep any price changes moderate for the coming year, but inflation is real, and some portion of that will have to be passed along given the historically low margins in the production side of our industry,” said CEO Alex Shuford.
Looking at labor
People as well as materials play into the outlook for upholstery price increases. A tight market for skilled labor has been an issue for upholstery makers for some time, and the cost of hiring and retaining workers has only risen. Extensive and extended unemployment benefits have allowed furloughed workers to stay at home longer, exacerbating the problem.
Hooker Furniture, for example, has four upholstery units: Hooker Upholstery, Bradington-Young, Sam Moore and Shenandoah. While noting instability in raw materials costs from any type of lumber to smaller components, Hooker Legacy Brands President Jeremy Hoff added that getting workers is an issue across the board.
“COVID-19 has brought definite labor challenges to domestic U.S. manufacturing,” he said. “We continue to look at better ways to recruit as well as making sure our wages our competitive in the market place.”
It’s also a matter of workers’ abilities, not just how many are looking for work.
“Skilled labor costs are certainly rising and will continue to despite high unemployment levels,” noted Century’s Shuford. “There is simply a skills gap between what furniture companies need and what is available in the marketplace.”
Ashley sees fast-rising costs not only for manufacturing positions, but also for warehouse and administrative personnel. In addition to constant wage adjustments, the company has put in place additional hiring and attendance bonuses to attract and retain talent.
“Labor costs are going up in all markets,” Wanek said. “We’re offering retention bonuses, pay increases, sign-up bonuses. Labor is becoming a much bigger percentage of our costs. You can always count on 3% cost increases for labor each year, but it’s gone well beyond that point now.”
Labor cost increases and availability are an issue off-shore as well for manufacturers such as Manwah, which has plants in China and Vietnam.
“We tend to pay better and have a good retention rate that improves our per-piece productivity keeping labor costs down, but (labor cost) is increasing everywhere,” Ray said.
Along with factoring raw materials into its costs of developing product, Ashley focuses on engineering product for the most efficiency in shipping. More products in a container or truck mean a savings.
“We’re reducing cubes by doing more break down of the product” for shipping, said Wanek. “That’s why we’re expanding our RTA line. You can get 60% to 70% saved on cubes if the product can be re-assembled. We engineer every product to focus on how you can save on freight and costs while maintaining a high-quality standard.”
The bottom line is sofas, recliners, motion furniture and other seating will demand a higher price tag moving forward. It’s not a matter these days of padding the bottom line, but of maintaining the ability to deliver on a product that already has slim margins.
“No one wants price increases, but the market is going absolutely crazy, and we’re doing our best to resolve it,” Wanek said.
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