Wayne Lysaght-Mason wonders whether rising prices are a good thing.
Over the last three years, I have seen some suppliers raise their prices to an absurd level that has not even been in line with current levels of inflation. In some cases, supplier prices have risen by 20-30%, attributing it to the cost in metal or currency changes. In the same period the cost in metal actually fell by 25%, although there has been some change in currency to offset this. It therefore poses the question why are manufacturers raising their costs to this extent?
Suppliers have tried to maintain that it is reasonable to pass on above inflation increases to us, but I have yet to hear a well justified case! My concern is that some suppliers are trying to support lower sales volumes by increasing prices, instead of reviewing their cost base.
In my experience, increasing prices in a time of recession is counterproductive. In order for us to remain competitive, this results in us having to absorb these increases and we do this by adjusting our cost base. The suppliers that will triumph in the long term are those that support their customers in this turbulent economic time. Suppliers that are working with us to maintain prices will obtain more business from us in the long term.
The up side is that we are increasing our sales as we have become more competitive. This competitiveness is part of our business plan that sees us growing at over 30% a year and attracting over 600 new customers every week.
I feel we have a long way to go to see ourselves out of this recession. Whilst there is some evidence that activity is increasing, the uncertainty of the economy and an election has resulted in it appearing fragile.
Wayne Lysaght-Mason is managing director of Ironmongery Direct.