The economy is expanding. Noting comments from economist Alan Beaulieu, of ITR Economics (view more here,) the 2017 economy looks like a great year for growth. The forecast calls for a bright, sunshiney sky with 3.7 percent growth. It’s been a mighty long time since we’ve enjoyed this type of up cycle.
Based on candid comments from a couple of interviews for a recent article in The Distribution Center, progressive distributors wondering if now isn’t the right time for distributors to raise their prices. They’re right on …
Why we’ve got low margins today …
Downward pressure on margins is the universal distributor complaint. New competitors, supplier sales teams setting prices at unsustainable levels, the internet and customer pushback are all finding their way into the discussion. Further, in spite of some major productivity advances, operating costs continue to rise. One distributor, who closely monitors operational costs, said costs had risen nearly 25 percent faster than offsetting gross margin gains over the post-recession era. Clearly, we need to do something.
When times are tough, margins get another squeeze. During “The Recession,” many suppliers instructed their field teams and distributors “not to let price be an issue” while grabbing what little business was available. We responded. Pricing levels extended on projects, and ongoing flow business took a gross margin nose dive for manufacturers and distributors alike.