Anthony Coughlin’s appliance store has little trouble filling orders for high-tech washing machines or designer ovens. More difficult: satisfy customers looking for simple, low-budget machines.
“There was a day when a customer could walk in the door and buy a secondary part or a special owner and have 100 options to choose from,” said Mr. Coughlin, co-owner of All Shore Appliance in Port Washington, NY “Now, it’s more like, we explain to the customer what we have.
As the global supply chain crisis increases production and manufacturing and shipping costs, companies that make products ranging from lawn mowers to barbecues are prioritizing more expensive models, in some cases rendering cheaper alternatives harder or impossible to find, business executives, retailers and analysts say.
Some offer premium products in an attempt to offset the additional costs of labor, shipping, and manufacturing. Whirlpool Corp.
, maker of washing machines, KitchenAid mixers and other home appliances, said in July it would switch to more expensive products as part of a plan to cover rising costs.
Automakers and other businesses, faced with short-lived suppliers, are directing limited parts to their higher-margin products.
“A combination of inflation and scarcity is pushing manufacturers towards more expensive products,” said David Garfield, head of consumer products practice at consulting firm AlixPartners. “If a manufacturer can’t get enough parts to make all the products they want, they can make a higher quality product to protect their bottom line. “
The move to high-end products is in addition to other measures companies are taking to recover costs and offer as many products as possible to consumers. Across industries, manufacturers of products, from toilet paper to televisions, are raising prices, sorting product assortment, and imposing purchase limits on retailers.
Supply chain bottlenecks, which worsen as the pandemic persists, have resulted in significant congestion at ports as well as skyrocketing transportation and raw material costs. Meanwhile, manufacturers, retailers and consumers are hit by higher inflation, which is expected to last until next year.
An inexpensive outdoor grill, for example, can be harder to find. Weber Inc.
typically builds its cheapest models in China, while the company’s U.S. operations supply most of the company’s product line, which tends to come with higher prices, chief executive Chris said. Scherzinger in an interview. Because port slowdowns in China have delayed the shipment of goods from the country, products made there are less readily available than options built in the United States, he said.
However, Mr Scherzinger said the biggest factor driving more sales of higher-quality options is that consumers favor more expensive grills because they spend more time at home and outdoors. in the midst of the pandemic. “Anything that we can’t compensate for with productivity, we have the ability to go to the market and compensate for that with the price,” he said.
The US Department of Labor’s consumer price index rose 5.3% in August from a year earlier on an unadjusted basis. The CPI measures what consumers pay for goods and services, including groceries, clothing, dining out, recreation, and vehicles.
Mr Garfield, of AlixPartners, said it was difficult to determine how much of the increase was attributable to companies that partnered with low-cost options and what is due to the price increases. In calls with Wall Street analysts, several business executives listed an improved “mix”, a move to higher-end products, as part of their strategy to deal with rising costs.
U.S. automakers face anemic inventory after a two-month shutdown of auto factories in spring 2020 to curb the spread of Covid-19 was followed this year by a computer chip shortage that hampered global production vehicles. Automakers have sacrificed less popular, less profitable models to focus on more expensive vehicles with more functionality.
General Motors Co.
, for example, stopped making the mid-size Chevrolet Malibu sedan for over six months, but maintained all shifts at a plant that makes its more expensive SUVs.
The average new vehicle in September sold for a record $ 42,800, up nearly 19% from the previous year, according to research firm JD Power.
Televisions are among the items where cheaper models are scarce, said Mike Abt, co-president of Chicago home appliance salesperson Abt Electronics. He said the price he pays for home appliances is rising and he expects that to continue next year. For the first time he can remember, the price of TVs actually went up – they usually get cheaper every year.
Mr Abt said the range of product variants available to him has been reduced, up to 50% in some cases, as factories strive to increase production. Manufacturers have also focused on high-end devices at the expense of cheaper models.
“They thought they would earn less [variations], and more of them, ”he said. “It also tended to be a bit more luxurious: medium to medium-high, less inexpensive. “
Toro Lawn Mower Manufacturer Co.
Tax incl. 0.82%
has reduced the product line it manufactures in response to parts shortages. Rick Rodier, who oversees the construction activities of the company that make tools to help dig ditches and lay underground pipes, said the limited availability of components means Toro must decide which products to make and which not. do not. Leaders base their decisions on volumes, profitability and broader strategic goals.
“If we only have a limited amount of this or that, we want to make sure that the components are allocated to the most popular lines or the lines most strategic for us,” Rodier said. “Let’s make sure we’re building the right things at the right time. “
—Mike Colias contributed to this article.
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