by HIGH POINT — When it comes to containers, the price isn’t right, and some furniture stores are starting to say, “Thanks, but no thanks.”
As the industry’s supply chain disruption slogs on this summer and container prices continue rising, some retailers tell Home News Now they’re finally taking a pass on certain containers when the quote is too high, while others have more generally moved to limit how much container business they do.
When we spoke to Greensboro, N.C.’s American Furniture Warehouse General Manager Jason Fletcher back in May, he mentioned one of the ways his store managed to stay fully stocked early in the pandemic was by not canceling any orders while some others panicked and canceled. Fletcher had yet to cancel or hold a single order, but before the story could run, that had changed.
In June, he had to hold off on a few containers when the cost of freight was more than the cost of the goods. Then a couple of weeks ago, he said no to a $15,000 container quote. “We did the math and said (we’d pay) $12,000 max.” Three days later, the vendor came back with a quote for $11,900, so that one was a go.
But then last week, Fletcher was quoted $16,000 from another supplier, and said, “No way.”
“We are going to have to push back at this point,” he told HNN.
In some cases, particularly when the supplier has plenty of the product in question flowing, it has been willing to work with the retailer and hold off for a few weeks or even a month while it attempts a better booking. But not always, and Fletcher said he realizes in some of these cases, he could be back at the end of the line again.
The goods tied to that $16,000 quote? “I’m pretty sure I’m never going to see that product,” he said. But at the same time, it’s not a great loss. The retailer already has enough on the water that it’s likely to be in a decent in-stock position for the rest of the year, he said.
Also, a lot of the orders tied to the skyrocketing container quotes the industry is seeing were placed during September Premarket, a time when AFW and many others were ordering anything and everything because of the shortages and delays, knowing some of it might never ship.
San Diego-based Jerome’s has a similar approach. “We are taking a pass on rates over a certain premium,” said CEO Brian Woods, though he didn’t disclose the ceiling. We are making decisions from bid to bid depending on what the product is, how long the backlog is and other options.”
Gentry Prestwood, director of merchandising for Jackson, Miss.-based Miskelly Furniture, said earlier into the pandemic “We were in get-everything-you-can-mode.”
“But over the past couple of months, we’ve had a couple of quotes I have passed on, where I’ve been able to talk to the rep and the vendors,” who were willing to hold it for a little while in hopes of a better quote later on. So where the retailer has had that kind of leeway — when a supplier is willing to hold it without moving Miskelly to the back of the line, it’s holding off when container prices are too high. The retailer has yet to face a situation where a pass means Miskelly will lose the goods altogether; Prestwood said he’ll cross that bridge when he comes to it.
He didn’t want to say exactly what “too high” is because it’s going to vary depending on the product, but anything north of $13,000, and “you’ve got to really think about what it’s going to do to the group and the retail pricing.”
That re-pricing of the floor is yet another issue that’s only gotten worse since HNN talked to Miskelly about cost increases in January. “It pretty much takes our whole department just to keep up with re-pricing,” he said. “We’re spending so much time that you can’t look at new product, which you can’t get, anyway.
“Every day you’re getting another letter from a manufacturer (announcing) either a price increase or surcharge or whatever they want to call it, and it’s’ right back to the group again (for re-pricing).”
Other retailers are reporting the same thing about the neverending flood of price increases and surcharges as the crisis moves into its second year. One shared a June 23 letter from Liberty Furniture that said while it was able to ship more containers in June than in April and May, “this has come at increased costs, as imports remain at peak volumes.”
As a result, Liberty is adjusting its ocean freight surcharge from 10% to 15% effective July 1,” Executive Vice President Jonathan Cowles said in the letter. The retailer, who forwarded the letter noted July 1 was the date the original 10% surcharge was set to go into effect, so even before that could happen, Liberty had to up it to 15%. That’s how fast conditions are changing.
Liberty’s Cowles did not return a call for comment.
Some retailers report they’re saying no to high container prices in other ways.
“We are not passing on containers,” said Eric Easter, CEO of Indianapolis-based Kittle’s. “However, we are not buying as many as we used to buy.”
Randy Coconis, co-owner of South Zanesville, Ohio-based Coconis Furniture, said he had to cut back some, but he added his company normally doesn’t do as much container business as a lot of stores its size. And when it does, everything is handled by the supplier and the price is often baked into the landed cost “so we know where we stand,” or the increase is presented as a surcharge.
“Some company’s surcharges may have started out at 8%, then gone up to 12%. Some are up to 17% or 18%,” Coconis said. “They’re adding in what the container price is to handle their surcharge, and we make the decision then on whether it’s still a good value.”
Asian upholstery producer Manwah, for instance, recently tacked on a $4,500 charge,” to a Coconis order, “but it’s such a great value, it’s still worth it to bring that stuff in.”
Ashley is another that appears to have been able to hold the line fairly well. AFW’s Fletcher said he just received an Ashley container that cost $5,000. While it was delayed, like everything else, “I felt like I had just won the lottery.”
Another way Coconis has gotten around the higher freight costs and delays is by shifting more of its import buys to Italy. At the April Premarket, for example, Coconis picked up Digio Leather and another Italian resource.
“The great thing there is there are no tariffs,” he said. “It comes quick because it doesn’t have to travel as far, and it comes into Eastern ports. All we have to do is pay for trucking it to us from New York or Baltimore or South Carolina, so freight is not bad.”
But overall, if there’s a light at the end of this tunnel, no one sees it yet, not even Coconis. Asian supplier Lifestyle Enterprise recently shared information with its dealer base that went on for pages outlining port congestion and the lack of availability on container ships from China and Vietnam. Most shippers are reporting they’re “full” through mid to late July and “tight” into August.
And the situation has only gotten worse in the last few months, retailers say. “When the Walmarts, the Lowes and the Home Depots want to get their Christmas stuff in in August and September, they’re going to move to the front, I guess,” Coconis said.
(Even some of the biggest players have initiated backup plans. See this report about Home Depot, which recently contracted its own container ship.)
Despite the high prices, Sam Zavary, CEO of Houston-based Exclusive Furniture, said he hasn’t been one to take a pass on containers, and he doesn’t understand why any retailer — or any retailer in great need of goods — would do so today. There just aren’t many other appealing options, he said.
“Of course, we’re not paying ridiculous prices — the $18,000 or $20,000 containers,” he said. “We have a stopping point.
“But we are paying $12,000, $13,000. I’ve paid as high as $14,000. And right about now, he’s kicking himself for not paying $12,000 or $13,000 for all the containers he could get from Malaysia — now that a COVID spike has shut down the country.
“We carry seven bedroom sets (from Malaysia), and I’m completely out,” he said. “We don’t know when Malaysia is going to open back up. We don’t know when those bedrooms are going to make it back to us. So in hindsight, I wish I had paid $13,000 for those containers. At least I would have had the goods.”
And with rumors circulating that Covid could soon shutter Vietnam, Zavary thinks the worst is yet to come. He’s been able to add bedroom and upholstery groups to his floor as what he called “fillers,” placeholders for the merchandise he really wants and needs. However, inventory for these items is getting thin, too.
“A lot of people think it’s really bad now,” he said. “But I don’t think we’ve seen the bad yet. Right now, my floor is full, but I honestly think it’s about to get really bad.”
