Rising Product Costs

Recently, I read a report from the National Association of Realtors that said we have finally hit the bottom of the housing slump and home sales may rise in the second half of 2008. As Americans are feeling more pinched at the gas pumps and their grocer this sounds like it could be good news. Hopefully, the economy will begin to move out of its holding pattern too.

Unfortunately, as the state of affairs for the housing market is looking up, I received no less than three different reports this past week, from our industry suppliers, that prices of promotional items, mainly sourcing from Asia (which is where nearly all promotional products originate) are going to increase significantly over the next year. We are already seeing our suppliers reprinting catalogs with pricing inserts, so they can easily be changed out for new ones without the cost of creating a new catalog every time there is an increase. We also have a great many suppliers that are coming out with “Mid-Year” catalogs to combat having to absorb the price increases.

The increase in costs is stemming from the decreasing value of the U.S. dollar against the RMB – (China’s currency). Our dollar has fallen by about 15% over the past three years. Then there is the cost of metals, oil, petroleum (from which plastic is made) and other raw materials where the price is consistently rising due to higher demand and waning availability in China. Now add in social compliance (remember my article last month), where as of January 1, 2008 China has implemented a new labor law requiring employers to offer employee benefits such as an annual leave, medical coverage, insurance, and overtime pay. Chinese employees now realize that they can go elsewhere and get paid better. When this happens, just like here in America, it costs more to find and train new employees which can affect production.

As American’s expect, as they well should, that the items (whether promotional items, costume jewelry, clothing or toys) purchased from overseas are compliant, meaning the materials these products are made from are not dangerous, the factories where the products are made have sanitary conditions, and employees are well treated, the prices of these goods will continue rise.

The good news is that you have choices too. When working with an experienced promotional products distributor your budget and the quality of the products selected should be foremost in their minds. By planning your events and promotions as far as 120 days or more in advance you can effectively beat price increases. Look over your marketing plans for the next 6 months to a year and determine the products you will need to fit those promotions.

Call Creative Expressions for help in determining which products will best fit your plan. By ordering at least four months out or longer you can take advantage of having your product imprinted, debossed or embroidered overseas at the factory, saving you money and help offset the rising costs of products coming in from overseas. Shipping these products to you will not cost more, as they will be FOB: USA Factory.  If you purchase the amount of items you think will last you for the next six months to a year, you will save money by protecting yourself from price increases that may be incurred by ordering smaller amounts, having them decorated in our normal 10 business day or less production time and then having to reorder at a higher price in the coming months.

If you can plan ahead, ask your Creative Expressions Representative to quote you pricing and times for overseas production or help you to find similar products to replace products that may not fit your budget because of increased costs. We are here to partner with you.