This entry was posted on Friday, October 31st, 2008 at 9:10 pm and is filed under Trade talk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Over on the trade-only forum of BikeBiz.com there’s an interesting trade-only discussion about a trade-only topic that members of the bike buying public may be interested in. The forum is trade-only so I can’t name any of the trade-only commentators but suffice to say there’s some big-hitters, including MDs of huge Brit bike companies.
They’re chin-wagging about prices. They’ve gone up, you see. And, if they haven’t yet, they will do. Those companies with stock to shift - and who’ve already paid for the goods - will be able to delay their price rises but most bike companies are having to tell their bike shop customers the price lists they were sent t’other week should now be shredded.
This is a British bike trade forum so some of the £ vs the $ comments don’t apply across the pond but some of the other comments are applicable worldwide.
Complaint from bike shop which started the thread: “[Bike name] 2008 price £300, 2009 price £400!!!!”
Answer from supplier of said bike: “1991 [Bike name]. £249.99. Steel frame, steel one piece crank, steel rims, steel chain ring, gumwall tyres, plastic pedals. Sold like hell. 2009 [Bike name] (after price increase from Monday) £249.99. Alloy rims, part cro-mo frame, sealed bearing mid B/B hooked up to cro-mo 3 piece cranks, alloy pedals, cassette rear wheel. Sells like hell.
“Decisions have not been taken lightly, currency movements have been extreme.”
Cynical shop, chipping in from left field: “Another question to ask those who are not putting up prices is what are they doing to the quality of the bikes in order not to.”
Big hitter: “First, £ fell from being worth $1.98 in August to $1.52 last week, against the Japanese Yen the £ fell from being worth ¥241 earlier in the year to ¥138 last week and the Euro from €1.40 to €1.21. This level of currency fluctuation in such a short period of time is unprecedented in recent history…You can’t hedge indefinitely and sooner or later you still have to deal with the reality. The drop off was rapid and hindsight is wonderful.
First supplier, back again: “Labour costs are increasing in China as they aspire to a better life for themselves.”
Big hitter: “I am sure during next year there may be some cost reductions due to reduced global demand for raw materials but I think in general higher prices for goods is going to be a reality and this is far from exclusive to the cycle industry. The constant deflationary pressure on products was not sustainable and [as was] pointed out earlier the prices for bikes now compared with 10 or even 20 years ago is ridiculous.
“Sure it is a pain having to increase prices all the time (none of us like doing it despite what people may think) and historic key price points may no longer be possible and it is unclear how this may impact on sales of certain products and volumes but these are extreme times.”
First supplier, back again: “No panic in front of a screen. Currency hedging is in place but in our specific case the speed and severity of the fall of the £ exeeded previously successful currency management strategies.
“I took part in a conference call with a bloke called Neil Parker who is Nat West’s chief economist on the day that oil hit $147 a barrel and I asked if there would be a commodity price bust after the boom. He assured me that domestic demand in China was so strong oil would not fall below $100 a barrel for 5 years. Hindsight is always 20/20 and if we had bought 12 months of $$’s a while ago things would be easier (and more profitable) but, when I bought a big trade at $1.98, there was advice available that said $2.40 was on the cards as the fundamentals of the US economy are/were so bad.
“Lower growth rates in China is true. Now down to 9% - You’d be wrong if you didn’t think we don’t send graphs showing commodity indexes etc etc when combating price increases. One issue is the growth of cycling in many new markets such as Taiwan. Demand has outstripped supply.
Fresh new business, hurting already: “My shipping prices have increased by 160%!!!”
Big BMX importer, who has yet to raise prices, cos he has stock: “Some price rises are inevitable, in the near future. But we are inclined to hold back until we see where the REAL exchange values are heading…
“The current climate is extremely unstable… and I don’t think it is the place to invoke knee jerk reactions to wild currency swings, at least – not quite yet.”