COVID-19. Pandemic. Unprecedented. Shortages. Delays. Price increases.
Since March it feels as if one or more of these words have appeared in almost everything I write and with similar frequency in whatever I read. To some extent it’s probably unavoidable in talking about a disease that has impacted every nation on the globe, shutdown entire economies and whose nearest precedent occurred 112 years ago.
And as we head into High Point Market this week, one that will look unlike any in recent memory, all of these words will be very much a part of the discussions taking place there. The usual parties, gala dinners and educational events will either be missing or virtual. Attendees will be masked, temperature -probed and banded as they head to appointments that will be in showrooms that are at 50% capacity or less by regulation.
Upon reaching their destination, retail attendees will look at furniture that, however beautiful and elegantly staged, may or may not be delivered this year and perhaps not until the second quarter of 2021. The traditional desire for new, new, new will be replaced this year by a desperate quest for available, available, available.
And even those goods that are available are likely to come at a higher cost. Our package of cover stories for this issue explores the challenge of rising costs, which in general fall into two buckets. The first are short term surcharges to cover recent transportation cost hikes. The massive demand for container space, not just in furniture but across all imports, has put shipping companies in the driver’s seat, and they’ve quickly steered a course toward higher rates. These costs are anticipated to be short-term and as a result won’t be seen in higher product costs, but will instead take the form of temporary surcharges.
Of longer term concern are rising costs for labor and raw materials, which have already resulted in pass-along price increases by some manufacturers, with a growing number expected to follow suit. Unlike the materials increases that struck the industry in 2018, the result of temporary supply and demand issues, the latest round of hikes is being accompanied by increasing use of the dreaded “I” word: inflation.
This could portend a structural shift in the underlying fundamentals of the business climate, meaning these increases could be just the first in a series and could be of a longer duration than those seen in 2018.
The end result of all this disruption is that this week’s High Point Market is likely to be highly leveraged, not in the investment sense, but in terms of those companies with leverage will be using it to its fullest extent. Larger dealers will be employing all the tools in their toolkit to ensure they get the goods they need. And manufacturers in turn will be choosing which dealers they are able and willing to supply and who they can afford to disappoint.
As a result don’t be surprised to see many smaller dealers on hand walking into unfamiliar showrooms in search of new resources. The impact of this unprecedented, pandemic-inflicted series of shortages, delays and price increases is likely to result in significant realignment of the industry and, unfortunately, another year of using those seven dreaded words.