Vendors are redirecting their resources toward pricier products to help cover higher costs.
By Alan Wolf, YSN
Higher-priced products are winning out in the struggle to produce inventory, leaving retailers and consumers high and dry when it comes to entry-level models.
According to a report in The Wall Street Journal, manufacturers are redirecting their limited supplies of parts and components to the production of premium home goods, whose steeper stickers are helping offset the higher cost of everything from labor and transportation to raw materials.
As a result of the reallocation and a culling of product lines, dealers are finding it even harder, if not impossible, to find opening price point appliances and TVs, a staple of the upcoming Black Friday sales season.
“A combination of inflation and scarcity is pushing manufacturers toward higher-priced goods,” AlixPartners consultant David Garfield told the newspaper. “If a manufacturer can’t get enough parts to make all the product they’d like, they may make more of a premium product to protect their profitability.”
Some vendors have said as much in their financial updates, including Whirlpool, which shared in July that it would shift to a greater mix of higher-priced products, along with cost increases, to help cover rising overhead, the Journal reported.
For grill maker Weber, the decision was made for them by port slowdowns in China, where the company’s lower-priced models are built. According to CEO Chris Scherzinger, shipment delays compelled the manufacturer to lean on its U.S. operations, which tend to produce higher-end products. But that’s OK with consumers, he told the Journal, who are favoring pricier grills while spending more time at home and in their backyards amid the pandemic.
Like Whirlpool, Weber is also wielding the price tool to help cover its costs. “Whatever we can’t offset through productivity, we have the ability to go to the market and offset that with price,” Scherzinger said.
That strategy has led to a phenomenon that retailers have not seen in years, said Mike Abt, co-president of Chicago megastore Abt Electronics: Higher TV prices.
Hat tip to The Wall Street Journal.