Office Furniture Tariffs: 4 Tips To Handle The New Decrees
When the tariffs increased by 10% last year companies had a tough time adjusting to the raise. However, the newest increase this year to 25% was a much harder challenge to tackle.
While America is not the only country trying to make adjustments to afford the new tariffs, China is as well. America purchases many parts and materials from China; while China purchases large amounts of the US's farmed goods.
Companies within the office furniture industries are among those that will struggle most, as commercial office furniture is made from steel or aluminum.
Businesses are discovering that consumers are not willing to pay a higher price for a product that was much cheaper previously. This is leading to companies decreasing their profit margins and cutting any extra cost that they can. Sometimes it even results in laying off workers.
In order to stay afloat, these are a few tips businesses can do to handle the new tariffs.
Communicating With Your Customers
First and foremost, it is highly important that the business communicates with the customers and is very transparent. Businesses should be prepared for the worst when handling the new tariffs. This way if they have to absorb prices it will not leave them in the negative.
However, if it does come to raising prices, it is vital that the company keeps the customer in the loop. Every customer should know why the prices may have changed mid-project and have an understanding of any increases that may have taken place before or during their order. If the price increases too much it may result in the company losing the customer as a whole.
Businesses should consider working with the customer when they are unable to pay the new price due to the tariff raise. It is crucial that the customer understands that the company cannot pay the full difference but that they are willing to help. Considering most projects that the office furniture industry does is rather large; any amount that the company can help will make a huge impact in the customer’s eyes.
Study Profit Margins:
Understanding and having knowledge of where every dollar is going can really help business’s out in the long run when it comes to handling tariffs. When making changes to products, either in price or even manufactures, it is important to know what cost you are capable of absorbing and which must be covered.
Before committing to any price increases consider the effect it will have on your repeat customers. Repeat clients are noticing a price increase of 2-5% due to the increase of services on collaborative companies, such as freight, imports, and tariffs.
Negotiating deals with manufacturers overseas to see if they are willing to cut the company a deal is an option as well before raising prices. In the office furniture industry, many of the materials and goods come from China and are built and assembled in a factory here in the U.S.
When implementing price increases or decreases to products, it is vital to know the amount of wiggle room each product has so the company can make sure the adjustments do not put them into the negative.
Seeing that there are so many competitors for each company; staying on top of market averages will assure that the company is not overpricing products due to the new tariffs.
Manage Inventory Levels:
Many think it is a good idea to have a stockpile of materials and products, in which some cases this is true. Cubicles, in particular, have many similar parts that can be interchanged to create a different look. Having every part on hand is necessary, but keep in mind what products your company may have that are going to sell quickly and others that might sit on the shelf for a while. The products that take a little longer to sell might not be the best ones to stock up on.
If certain products are not moving, your money is tied up in something that could potentially keep the business afloat. Stocking up on products that have an extended shelf life is wasting money and space when the company may need it the most.
Be prepared to fill orders but do not overstock. Make sure to buy and replenish only the inventory that moves. Since tariffs have been raised so drastically, there is no reason to pay extra fees on things that are not an absolute necessity.
Sourcing From Other Countries:
Since the tariff hike went through, many materials and products like aluminum, smartphones, computers, steel has had a significant increase in price. This has caused many companies to abandon their current manufacturers and find different ones outside of China.
Although switching manufacturers will save money in the long run for some companies; many companies will lose a good bit of production time making the switch. However, some small businesses cannot afford to pay the new tariffs at all so this is the best option.
When it comes to cubicles and office furniture; they are not only experiencing the tariff raise, but also the raise in materials that are often used to make their products too. So finding a country that has not only cheaper tariffs, but also better prices for their materials is extremely beneficial.
Switching to countries such as Vietnam, Brazil, Malaysia and Taiwan in order to receive cheaper tariffs on products and goods is something every business should consider. Many companies are shooting to have no production in China at all by the end of the year.
Though the trade war may not last forever, businesses have mentioned that they will not be moving back to China if the tariffs are lifted because of all the money invested into the move.
On the other hand for small businesses are running into more problems than larger corporations. Small companies do not have the capital to move all of their products to a different country despite the need of the tariff break. This is where it is vital to move what you are able and can afford to move to save as much money as possible.
Really studying the company and understanding what changes can be made will help any transition go much smoother. Implementing all or even just some of the tips listed above is a great start to handling the new tariffs. Taking each new obstacle and working it out to the best of the company's ability will assure a strong comeback from the minor setback of the tariffs.