Last year I put up a couple of posts regarding knife prices and availability. At the time we were feeling the full effects of the Covid virus. Rising labor costs, rising material costs and shipping problems were being blamed on the virus. Here we are approaching the second quarter of 2022 and the situation regarding prices and availability appear to be worsening. We were assured that defeating Covid was the answer to our problems.
Since my last post from December regarding the issue, things haven’t improved. In fact, things have gotten worse and are threatening to get more worse. Some items are impossible to find in stock and the prices continue to go up.
So what happened?
So Covid is no longer in the headlines and we realize it’s not a harbinger of the end of the world. The unemployment rate is sliding lower so we should be seeing the supply chain issues starting to resolve, right? NOPE.
The labor market has been shifting. Many of the jobs that were abandoned due to Covid aren’t being filled. As employers needed employees last year we saw pay increases for everyone from burger flippers and Walmart greeters to skilled production jobs. It became possible to find a job with less stress and better schedules at much better pay. Workers making $10/hr at a menial entry level job were suddenly able to step into a much better paying job with their current experience level.
This trend went through a lot of industries including the cutlery industry. Qualified cutlers have always been hard to find. The shift in jobs and pay made working as a cutler less attractive as you could sell your skill for a job paying better money. In a lot of cases, the experienced cutlers were at or close to retirement age. No one was waiting to fill their position. This left a critical hole in an already tight labor market.
The only options for the manufacturers is to try to hire and train less qualified people. This can lead to quality issues as they work through the training cycle. Training new skilled employees is a time consuming, expensive proposition. Manufacturers can and have increased wages which are passed on in the form of higher product prices. They can try to get by with a reduced labor force (reducing output) or moving some production overseas (and deal with transportation issues). It’s a difficult situation at best.
Current Political Environment effects
As though the aforementioned issues weren’t enough, we see government policies further complicating the situation. The changes in oil production policies last year kicked off a steady increase in oil/gasoline prices. This has resulted in a strain on manufacturers, transportation, materials and labor. Mining companies have to pay more for fuel to power equipment. Shipping ore to the refiners costs more. The furnaces that process the ore cost more to operate. Shipping the finished metal to manufacturers costs more due to higher fuel prices. The manufacturer pays more to heat their plant and run their equipment.
Now, going into 2022 we see inflation becoming a major issue we haven’t experienced in 40+ years. With the push to greener energy sources we don’t see any effort to control the cost of oil. Let’s throw in the situation in the Ukraine and it quickly becomes obvious we’re not going to see the situation improve any time soon. Whether we’re being led by a seemingly well intentioned yet incredibly inept government or a deviously unscrupulous invisible hand, it isn’t good.
Having owned a brick and mortar business during recession of the ’70’s and 80’s, I know what it was like to operate with a loan costing 21% interest. Gas lines were a reality and buying gasoline was limited for a while to even and odd days. We were told to put on a sweater and turn down our thermostats. Prices increased on a regular basis. Consumers slowed their buying and shopped for bargains. I seriously hope we don’t see those days return but at the current rate, we’re well on our way.
What can we expect?
As we see commodity, energy and food prices continue their sharp increase, people are going to be forced to make choices. Will there be as may discretionary dollars left over to spend on that $250 pocket knife? Is it possible we may see a softening in prices of some of the hyper inflated collectibles. Manufacturers will have to deal with these increasing costs as well. Raising prices on a discretionary item is never a good formula in a declining economy.
Were I to make a guess, I foresee some of the high flying collectibles softening a bit. There will always be folks with extra cash to pick up on a bargain. Will those bargains become an even better bargain?
All of the political turmoil with Russia casts some question on what will happen with China. The ties between the two countries could very possibly cast a shadow on Chinese knives. They’ve done an incredible job getting their foot in the knife industry door. In fact, they’re pretty well inside the door. Will that hold?
I question whether we may see in increased interest in some of what I refer to as forgotten collectibles. Maybe not necessarily ‘forgotten’ so much as overlooked. There’s a hardcore group of Case Collectors out there that have stayed loyal to the brand. Buck knives had their own group of followers. Buck and Case are two great examples of US companies that are building knives aimed at the collector market. AND, they’re reasonably priced. Even better, you can find them for sale without paying ridiculous premiums. With a little looking, there are a lot more companies that build some great knives at very reasonable prices.
Watch the pricing
Another aspect of the knife business is to watch prices. In the last few months I’ve noticed that eBay isn’t always the cheapest place to find a ‘bargain’. I sold a couple expensive pieces on eBay recently and paid over 17% for the privilege! Interestingly, the item had been in the Trestle Pine store at a lower price and hadn’t sold. You have an advantage offering items on Ebay but it comes at a cost. There are several name brands that have become more expensive on eBay then through online storefronts. eBay and Amazon have done a fantastic job capturing consumers but that could change.
More manufacturers are selling items to dealers with restrictions on selling the items on third party sites, i.e. Ebay and Amazon. Even more are trying to maintain minimum prices items should be sold at. It’s great to have a giant retailer as an outlet but you have to be careful. A major retailer can have the effect of ‘cheapening’ a brand as they capture the market by driving the prices into the ground.
This happened back in the 80’s as well. Remington Arms abandoned their dealer network when they started dealing with the up and coming Walmart. Walmart was given pricing concessions that made it impossible to compete as a small retailer. Dealers revolted and started dropping Remington. Within a year, Remington changed their marketing programs to bring the independent dealers back to the fold. We were the main product support group Remington had and they had kicked us to the curb.
It will be interesting to follow Yeti (the cooler kings) going forward. They’ve made a change in their marketing strategy that appears to be more supportive of their customers. They’re not cutting prices, but they’re cutting down their wholesale outlets. I think we’ll see more of that and I wouldn’t be surprised to see some of the major knife makers do the same. The days of a manufacturer trying to get as many dealers on board is long over. Most can’t totally support the dealers they already have.
Gonna be an interesting couple of years
I don’t’ really care what your political leanings might be. The point is, we’ve got a mess in front of us that’s not going away on its own any time soon. What I do know is we’re going to see a lot of things change over the next year or two. Higher prices, limited availability and some belt tightening. How this affects discretionary items like knives will be interesting. We really have three choices. Do we buy more and hope they go up in price? Sell them and pocket a nice profit? Sit tight and take our chances? If I just had a three sided coin to flip…….