Seeking Oil Alternatives in Pricing Struggle
Cecile Corral -- Home Textiles Today, November 26, 2007
For the past several years, the bath accessories industry has been struggling to swallow consistently climbing raw material price increases.
More recently, they've added another weight to their burden — rising labor costs in China, where the proliferation of factories serving all types of industries has created a competitive atmosphere for a workforce that is for the first time moving into the realm of a middle class with an upper hand in salary demands.
These woes are not exclusive to the bath accessories segment — rather, all parts of the home textiles industry are impacted by them.
But more specific to the bath accessories side is the heavy use of petroleum-based raw materials, such as resin, plastic, acrylic and other commodities that suppliers have become so dependent on to create their products.
Still, retailers have avoided sharing those added costs for goods and production, and thus have shielded consumers from paying higher tickets.
But with pressures mounting for so long — and as the price of oil nears $100 a barrel and labor wages escalate — manufacturers of bath accessories are hoping to graduate to a new level of price points that will shoulder their expenses and catch up to inflation.
"Retailers are resisting price increases," said Noreen O'Reilly, vp of merchandising, bath shop, Springs Global. "While there are slight increases of price points at the retail level, these are not enough to offset our [cost] increases."
Added Carl Legreca, president of the bath division, Croscill Home Fashions, "The situation is a little dismal. I've been fighting price increases for about two years, but lately there's no fighting it anymore. I'm taking whatever [retail price increases] I can take. We might put out some higher prices and see if the consumer accepts it or not. I think the entire industry will have to. We've absorbed them for the last two years — the factories, the trading companies and us, the distributors."
On Legreca's side is Creative Bath Products director of sales and marketing Bob Weiss: "The point of the matter is we're all in it together, and the price increases on petroleum affect us all equally in this business. So there are going to have to be price increases at retail. If we need a nickel more here and there, we're going to have to ask for it. Maybe everyone will have to take a margin hit — it will have to shake out someway."
Getting retailers to adjust their prices has been a challenge, suppliers said.
Of the several bath accessories suppliers interviewed for this article, only Avanti Linens said it has been successful in passing along cost increases to its specialty and department store customers.
"We pass along our price increases to the retailers," explained Michael Tauber, president of Avanti, which added the bath accessories category to its assortment less than two years ago. "They understand what's going on in the world."
But the others all agreed that for the past two years, they've had to absorb added compounding oil-related costs — in the form of not only raw materials but production, shipping and transporting — for the sake of maintaining shelf space at the stores.
Veratex cited an example of a hit, albeit small, it took to appease a retail customer. The retailer wanted to repurchase for a second time a two-year-old resin accessory program, but expected to pay the same price it paid originally, said bath designer Jamie Kamezawa.
"We were able to accommodate them," she said.
Kamezawa said Veratex has been "negotiating very hard" with overseas factories "to see what we can do to meet retailers' prices."
She said the factories warn of the higher cost of resin. Yet many retailers expect to pay and sell accessories at the same price levels from years ago.
"In some cases we've been successful in negotiating prices with our factories, but in some cases we haven't, so we've passed on some business," said Kamezawa. "Luckily, most of the time we've been able to achieve paying reasonable [raw material] prices. But it's definitely getting tougher."
The soap dish and other smaller accessory pieces, for example, have been staid at the $9.99 price bracket "since the beginning of time," said Ex-Cell Home Fashions vp of merchandising for fashion bath, Ida Moran, only half-joking.
"Retail prices are not rising. In fact, in some cases they are getting lower," said Moran. "So it's been a challenge to come up with products that make sense to the retailer and the consumer and can meet the established retail price points."
To accomplish this, Ex-Cell finds itself "working backward," Moran continued. "We work from key retail price points and then come up with product that works in that realm. We question every material, every product, ask ourselves if it has the right value equation. It forces you to work smarter."
Another method of offsetting added costs while trying to stay within retailers' price demands is using alternative constructions and media to create accessory lines.
O'Reilly said Springs Global has already begun to "shift materials due to the price increases, and we will continue with this strategy."
Blonder Home Accents is applying mixed media styles in creating its latest assortments, said Roger Sample, general manager of the company's accessories business. "We're trying to add more value to our products through mixed media and by using more natural materials. We're varying constructions and materials and that is a function not only of overall design trends but also an opportunity to offset raw material costs and other increases we're seeing," Sample said.
Blonder's non-petroleum based materials include brushed and polished metals, which have sparked interest at retail not only in bath sales but for other departments in home, noted Jodi Messina, Blonder marketing manager.
"In the big-box stores we're seeing how shoppers cross-purchase these products, and we're definitely trying to respond those trends."
Added Sample: "Brushed and polished metal, for example, are very popular in bathrooms and kitchen for towel bars or knobs on sinks, and so we're trying to use more of that in our accessories to achieve total room coordination."
Baltic Linen Co.'s dark wood collection of accessories, currently carried at a major home improvement chain, has recently seen sales surge for its wastebasket and toothbrush holder components. The company's director of bath coordinates, Rick Lipton, said he thinks he knows why.
"In the dark wood, the toothbrush holder and wastebasket offer multiple uses, and customers are noticing that," Lipton said. "The wastebasket can go anywhere, such as an office. The toothbrush holder can hold pens as well as toothbrushes."
The environmental movement has sparked consumer interest in natural materials, giving bath accessory suppliers another viable alternative to oil-based materials for their wares.
Allure Home Creation is employing "more sustainable products with an environmental appeal" and at the same time saving on costs for materials and production, said Gaby Colquitt, vp, design and marketing.
Category newcomer Westgate, which added bath accessories to its line earlier this year, is on that same page. Susi Goldberg, vp, design and product development, fashion bath, said that while her collection debuting in February is heavily comprised of ceramic and resin products, she is "exploring more natural materials for the second half of next year. I was thinking about wood and bamboo, among others. I definitely want to offer more variety in design to the line, but I'm also looking to possibly offset raw material costs."
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