November 15, 2024
The last couple of years we have seen very small increases in the average price of products in our industry and in some cases even price decreases. It looks like this trend is over and prices will be rising more in 2025, so I thought I would give you a look at what I am seeing for likely price changes in 2025 based on discussions with our vendors. At this time it looks like pricing will be up different amounts depending partially on whether products are made domestically or imported.
In general, domestically made products will go up less in 2025 and imported products will increase more. Actual commodity markets have been pretty stable in the past year, so the raw cost of producing things out of wood, steel or petroleum for example has not increased too much. More of the domestic price increases will come from internal and overhead costs. Things such as employee wages, rent and insurance have been going up more than the inflation rate so are increasing the overhead of most companies. You are likely feeling these things in your own business as well. From what we hear from most vendors, it looks like there will be a lot of 3-5% price increases on domestic products in 2025, so not far from normal.
The cost of imported products have similar cost dynamics to the domestic products in that companies internal costs are driving a little more of an increase than the raw commodities used to produce them. Based on this only, the cost increases from imported products would be similar to domestic products. Unfortunately container costs of importing products have nearly doubled since early 2024 due to instability in parts of the world. The average container cost is $4000-$5000 higher right now and was up closer to $6000 a couple of months ago. It is a simple math equation, then, about how much this drives increases in the landed costs for importers. A $4000 increase on a container worth $40,000 is a 10% cost increase, an $80,000 container would be a 5% increase. We import close to 1000 containers a year with the average value being around $80,000. The actual value ranges though from $20,000 to $200,000 so the impact on the landed costs will vary quite a bit. So if the average cost increase from overseas vendors was 3% and then you add the container increase of 5%, you get an average of 8% increase on imported product. You will see a wide variety of price increases on imported product, but as this shows, the average increase will run around double what domestically made product will be in 2025 it looks like.
Increasing tariffs will be a big topic in 2025 now that Trump has won the election and he has talked a lot about wanting to increase tariffs. Any tariff increase will be a direct increase in the landed costs of imported products. At this time we do not know the extent of what any tariff increases will be or the timing. If the increases in tariffs do happen though they could drive possible substantial increases in prices. All we can do is watch the news and see how this plays out in 2025. There will likely be a delay of a couple of months or more from the announcement of tariff increases to when you would start to see the price increases. The range of tariff increases being discussed is 10-60%. With this large unknown in 2025 I would advise you not to lock in long term prices to your customers, especially on imported products.
I hope this helps you in thinking about pricing in 2025 and answer some of your customers questions which I am sure you will be getting. Our 2025 pricing is expected to go into effect in mid January.