by FOB price hike aims to address higher container rates
HIGH POINT — Upholstery manufacturer Man Wah USA is implementing a 3% increase on the FOB pricing of its products shipping starting July 8.
The increase is meant to help retailers control retail price points and prevent overpricing on products during a period of rising freight rates.
“We believe that this increase will help ensure that sales are not impacted, while also addressing the challenges posed by increased freight factors,” company director Gabriele Natale told dealers in a June 28 letter obtained by Home News Now.
Natale further explained that the increase aims to address current freight rates of up to $9,000 per container shipped from Asia to the West Coast and as high as $10,000 to the East Coast.
“The contracts are not being honored so we end up tending to go and buy outside the contracts,” Natale said. “It is very expensive.”
He added that the company is eating some of these costs to help keep the increase in the low single digits. It is similar to Ashley’s 3% increase on all products except domestic case goods and bedding, which takes effect July 15 on all new orders.
At Man Wah, a 3% increase on a $350 starting priced leather motion sofa with basic function would raise the cost by just over $10. On a $600 sofa with better leathers and expanded function, it would raise the cost by about $18.
“So instead of putting out a surcharge for people we are managing freight for, we put out a 3% price increase which is a very modest increase,” Natale said.
The container pricing situation has resulted because of issues ranging from ships being diverted around the Cape of Good Hope to avoid attacks in the Red Sea, to port congestion in Singapore, not to mention a flurry of shipments of consumer electronics and solar panels in May to avoid additional China tariffs.
But Natale noted that the current demand in the marketplace does not support the return of higher container rates, which industry officials say are three times or more what they were earlier this year.
“There is not enough demand to justify these prices,” Natale said. “There is plenty of capacity out there, and that should tell us that we will see freight rates leveling out soon. That is the general consensus. Now the shippers and steamship lines will try hard to pretend that is not the case, but eventually it is going to level off.”
Natale said the increase also runs counter to surcharges that the company implemented for about three years during the pandemic. This was largely in line with what other importers were doing during this period to address high freight rates, some of which exceeded $20,000 per container.
But some industry resources have said that surcharges — often shown at the bottom of an invoice — were unpopular with retailers who wanted to know the actual cost of landed product. Thus some industry resources say they are looking to avoid surcharges this time around.
“Us not putting out a surcharge is a defensive move because we need to protect the business that we have and possibly expand it,” Natale said, adding of the 3% increase, “This is a very small upcharge. We don’t want to change retail price points.”
