A New Strategy for Keeping Price Lists Up to Date

What’s going on out there? In the last four days, we have received 12 different notices of price increases.

This continues a trend. Since the start of the year, our showroom has experienced in excess of 100 price increases from every corner of the supply channel. The sheer volume creates two problems. One is to prepare accurate price quotes. The second major challenge is the ability to update our infrastructure and computer systems in a cost- or time-effective manner.

There are a number of factors contributing both to the volume and level of price increases. Jeff Robboy of Baci by Remcraft in Opa-Locka, FL, attributes price increases to a combination of recent spikes in material costs (copper, aluminum, stainless steel and brass) plus “anything related to petroleum – plastics, chemicals, lubricants and finishing materials. It’s the cost of transportation. It’s paper products for packaging. It’s the value of the dollar against foreign currencies. It’s the fact that if you don’t increase your employees’ salaries, they won’t be able to afford the gas to get to work. It’s the 20% to 30% increase we see every year for employee health insurance. It’s a combination of many factors that have been highlighted by 200% and 300% increases in the cost of raw materials.”

Robboy, whose firm manufactures high-end decorative mirrors and lighting, has been forced to pass on the higher cost of operations as a matter of survival, just like others in the decorative plumbing and hardware industry. “Manufacturers that do not take necessary price increases will, likely, not be around much longer. They’ll be out of business,” claims Caspar DeJong of Legacy Brass in Carson, CA.

EFFECTIVE PRICE QUOTING

The fact that pricing is changing almost daily requires showrooms to develop an effective communications strategy to maintain favorable customer relations. Vicki Findley of Miller’s Fine Decorative Hardware in Juniper, FL, comments, “The influx of price increases prompted me to talk to contractors outside of the decorative plumbing and hardware industry to determine how they are responding. One contractor indicated he was receiving quotes with stamps across the top indicating ‘pricing good for 5-10 days.’ Another strategy is to sign off on a selection or specification rather than agreeing to a price quote with the contingency that the price of the product is the current price at the time the product is delivered.”

Tony Carter of Carter Hardware in Beverly Hills, CA, relates, “We are experiencing the same problems as everyone else. We quote a price and before the customer has even placed the order, prices have increased, sometimes twice in less than six months. Our quotes have always stated the prices are good until the manufacturer’s increase. We are now quoting prices and stating on the quotes that prices are determined by what is current at the time the customer takes delivery.”

Carter adds, “It is not sufficient to simply make a statement on a price quote; we explain to the customer what the statement means. That way the customer is prepared in this environment of frequently rising prices. If the customer waits to take a product, that person is the one that risk a price increase. We also make the client aware of the need to inspect all items purchased, especially if the customer is hedging against future price increases by purchasing now.”

Most showrooms place limits on the time frame of proposals. In many cases, manufacturers will honor a price quote provided by a dealer even if prices rise. However, the volatility of pricing has placed a premium on effective communication with clients and manufacturers.

The other challenge of voluminous price increases is the ability of showrooms to update display prices and prices in computer systems. Some cannot.

“It’s a travesty,” reports Stuart Stern of S&H Hardware of New Jersey in Cherry Hill, NJ. “We have not been able to keep pace with the number of changes that have occurred. As a result, we are now relying on price books.”
“It’s been a bear,” concurs Jeff Burton of The Bath and Beyond in San Francisco, CA. Burton reports that he has a full-time staff member who is dedicated exclusively to updating pricing in the firm’s computer system. “It would be a lot easier if manufacturers would simply send a spread sheet or a CD that we could upload into our system. But that is rarely the case. Instead, we receive notices that, in the next several days, we should expect a price increase of 4% on some items, 7.5% on others and 16% on still others. This creates a data input nightmare.”

ELECTRONIC DATA STANDARD

The problems created by voluminous price changes highlight the need for the industry to work together to seek a solution that makes updating easier. Help is on the way.

The Decorative Plumbing & Hardware Association (DPHA) has created a voluntary electronic data standard. The goal of this standard is to help improve business practices and create efficiencies that capitalize on the effective use of technology. The proposed standard is important because it creates a road map to the future. This is the first step.

The voluntary standard provides a framework for pricing information that can be used by almost every point of sale, inventory, accounting, product management and ordering software system. The standard offers a common data format that enables everyone in the industry to use the same information in the same way. Compliance with the standard permits dealers to handle uploading product information and prices in a consistent manner across multiple vendors. This will make preparing quotes, processing sales and even labeling products accurately much easier. With widespread adoption not too far in the distant future, every salesperson in the world will be able to go to a computer and obtain the most up-to-date pricing information on all products sold in a showroom.

The voluntary standard asks manufacturers to place specific data in specific fields, some of which are required, and some that are not. As time goes on and compliance spreads across the industry, more non-required fields will be mandated.

It is important to emphasize that this standard does not dictate information that is to be placed within specific fields, the format of the information within a field or how to number products or finishes. It does ask that all finish information be placed in the same column. For example, if you look on an Excel spreadsheet, the standard requires that item/SKU numbers be placed in column A, finish information in column B, finish description in column C, description of the product in column D, manufacturer suggested retail price in column E, etc. The data standard also offers the ability to link to product information, installation instructions, parts list, specifications, etc.

Most manufacturers that reviewed the standard indicated that it is not difficult to comply. One of the immediate benefits manufacturers enjoy when they comply is organization. The data standard helps manufacturers see the information that they have and the data they need to comply. The main benefit to dealers is the ease of updating software.

The voluntary data standard is only a first step, but it’s a significant one because it offers the potential to create an Industry Data Warehouse. A Data Warehouse is used like any warehouse, but stores information instead of products. A Data Warehouse would enable computers in our industry to either manually upload new pricing or become an invisible part of dealers’ computer systems that would check with the warehouse and continually update prices automatically. No work by the dealer would be required.

Currently, there is no analytical data available in the decorative plumbing and hardware industry to determine what is being sold or how much of a particular product is sold. The reason why this data is unavailable is that manufacturers group products by a range of item numbers that are unique to the manufacturer. There is no standard. You can determine how many switch plates you sold from company A, but you can’t easily determine how many switch plates you sold overall, or which ones generated the greatest margins. If you carry switch plates from five vendors, you would have to look up five different company sales figures and match the numbers to determine how many you sold.

The data standard’s “category” field offers a solution. The field identifies the type of product. This will allow the industry to reveal patterns in consumer behavior, product trends, opportunities for add-on sales, potential problem areas and other information that would improve marketing, administration, merchandising, inventory management and overall business operations.

The data standard’s category field will also allow the dealers to search by product type across multiple vendors. This will be helpful for salespeople to quickly find a product to meet customers’ needs without having to be necessarily familiar will all products from all vendors. The category field will greatly assist in inventory control by providing data that can be used to determine items that should be stocked. The data standard will eventually enable showrooms to determine profitability by product type, customer, project type or time of year.

DPHA realizes that not everyone will subscribe to the voluntary standard, but that will not stop the industry from moving forward. DPHA is partnering with software makers such as Intuit Eclipse and DDI systems to incorporate this standard into their showroom software to allow for pre-formatted uploads with no hassles. The voluntary data standard may be a first step, but it represents a giant leap to improving the industry. The DPHA Voluntary Data Standard is available on the DPHA Web site, www.dpha.net.

David Goldberg is senior v.p. of Union Hardware in Bethesda, MD. He serves as the chair of the DPHA Technology Committee.
Members of the DPHA address issues pertaining to the decorative plumbing and hardware industry in a regular, bi-monthly column, appearing exclusively in KBDN.