Due to the 321% increase in ocean freight ($3,800 last year to $16,000 currently), The Gerson Companies is implementing a 7.75% surcharge on all invoices for orders shipping on July 1 or after. Although many companies in our industry added a surcharge several months ago, we delayed this as long as possible, but can no longer afford to absorb the entire freight increase. In addition to the onerous ocean freight increases from the shipping carriers, prices for many raw materials used in manufacturing our products have increased up to 70%. The Gerson Companies will continue to absorb 100% of the increased manufacturing costs, but we do not have the ability to absorb the unprecedented shipping cost increases. The increase in shipping cost to us is much greater than 7.75%, and we are sharing in this additional cost.
As a cost plus business, our company prides itself in offering the lowest prices in our industry, which we feel is still accomplished with the 7.75% surcharge. This increase is based on where freight rates are today, and we have not built in any potential future increases. Our sincere hope is that we will not be coming back and increasing again. We do not take this lightly.
We apologize for this message, and will work hard to limit the time this surcharge will be in place. If you any questions, please feel free to email any questions to firstname.lastname@example.org
To stay up to date with recent tariff news and updates, please see below for a timeline of events, and any previous communications. In continuing to maintain an open and transparent dialogue with our customers, we will be updating our site with any new information in addition to our email communications.
We are writing to you regarding a very important topic that has significant consequences on several products and product lines sold by The Gerson Companies. We are all reading and hearing about the on-going “trade war” between the United States and China, and the potential for a third round of U.S. import tariffs. To date, the first two rounds of tariffs – at a 25% incremental duty on the designated goods imported into the U.S. – has had very limited impact on Gerson’s products.
However, the proposed third round of tariffs, at a 10% incremental duty on over 6,000 assorted consumer products, would impact several of Gerson’s product lines. Based on our current understanding, if the third round of tariffs were to be enacted, they would go into effect in September/October 2018. As a result, Gerson would be required to pay an incremental 10% duty on certain designated items that would clear customs after September 2018.
While we hope that the current administration is able to negotiate a trade agreement with China that does not include these new tariffs, we have to be prepared for the worst case scenario. The impact of the increase in import duty of 10% would mean that Gerson will have to increase the sell price of the effected products as much as 10% in order to offset the incremental duty expense. This price increase would go into effect immediately this fall in the event the third round of tariffs is implemented.
This price increase would be on several of our Gerson Everyday™ product lines as well as on several product categories in our Gerson International™ Spring 2019 product offering. If a price increase on our tariff-impacted products is necessary, we will contact you advising about the change in prices on all of the related products
We will keep you informed of any impact these trade negotiations have on our prices as this process progresses. In the meantime, we will post any relevant information or articles on our website.
Please do not hesitate to contact us with any questions.
I am really glad to be back from my Asia trip – 26 days in total! Truth be told, I combined a family vacation with two weeks of work. I knew it was time to come home when I completely used up my large tube of toothpaste. 🙂
Our year is off to a really strong start. Atlanta, Dallas, and our own Olathe Open House have all been terrific markets. As of this point, I do not have the final results from Las Vegas, but we are seeing really nice increases each day.
The most eye-opening piece of data thus far is that of all the orders we have received to date, customers who ordered last year have ordered an average of 35% more this year. That’s a really big number!
We are quickly approaching the February 9th Gerson International™ order cut-off date for our seasonal program. With only this week remaining, the deadline is coming up fast. A number of our customers wonder why we ask for orders this far in advance of the season, and the one and only reason we have this deadline is because we want to be able to deliver product to our customers in a timely manner.
Believe it or not, our factories are already booking up their capacity for the 3rd and 4th quarters. We source our amazing product from over 300 factories, and after we receive our customers’ GIL orders, we split up every order to separate the items by factory. We will then total the pieces and “cube out” the items so they will fit into 40-foot containers to be shipped to our Olathe, Kansas distribution center. We will receive about 8,000 orders in this program, so it takes us about a week to process our customers’ orders to place with our factories.
I am not trying to lull you to sleep with all of this information, but I want all our customers to understand that if we do not submit orders to our suppliers in this time frame, we will not be a priority to our factories and thus our orders may not be shipped on time. When our orders do not ship on time, we cannot ship our customers on time. This is why we have our cut-off date for orders from our seasonal GIL product lines.
After we place orders with our factories, we spend the next 90 – 120 days cajoling, begging, demanding, and encouraging our factory partners to produce and ship on time. We visit our suppliers numerous times at the start and during production, and we inspect all the product once an order is complete. We do not allow factories to ship any of our orders until we sign off on the quality of the product.
Probably the most frequent request from our customers is that we ship our seasonal program as early as possible, and I promise that we are trying! We have some very exciting news to share this season about something we have never done with our GIL program. Last week, we placed orders with our suppliers based on our fact-based estimates of what we will be receiving by the February 9th cut-off date. Although this is not for all of the sku’s we have in our program, the advanced orders we have placed with our suppliers represents over half of the items in our catalogs.
I do believe there are many advantages for our customers to place orders now. In addition to taking advantage of our great prices, our customers benefit in placing Fall/Halloween and Christmas orders while the product is fresh in our minds from the previous season.
Don’t forget we have many great Gerson Everyday brands which you can order and reorder long after our GIL cut-off date. Our Gerson Everyday product lines include: Handcrafted sculptures from the new and exciting Flint Hills Studio™, fashionable and trend-right products of Lone Elm Studios®, innovative and quality LED products from Everlasting Glow®, and our exclusively designed goods for the home from the GG Collection®.
As usual, I am in Asia this time of year, and always disappointed to miss the trade shows in Atlanta and Las Vegas. I am staying very busy here having traveled to six different countries, but am happy to report that I have found the time for a haircut here in China. It was 39RMB, which converts to about $6.00 USD, including tip. My Dad would be so proud!
I received daily reports from the Atlanta Gift Market and am pumped up by the results! We had the biggest sales that I can remember, which is a confirmation that we are connecting with our customers, attracting prospects, and continuing to improve our service levels.
In addition to our results, I find it incredibly exciting that many other gift decor suppliers are showing positive numbers, as well. This is hugely important to all of us because retail needs a financially strong vendor base, and the suppliers need a diverse, successful independent customer base. When suppliers are successful, we will invest in product development, innovation, process improvement, and a multitude of other areas you have come to expect from us.
My associates tell me there was a very positive energy in our building at AmericasMart Atlanta that has been missing for a-while. With so much negative press about retail, we all should feel great about this. We are all making our own real news!
I am looking forward to digging in upon my return to find out what categories and items are driving our sales, and in my next message, I will tell you about them. Until then, please let me hear from you! I am receiving great comments, some in agreement and others sharing a different point of view, and each one of them is very much appreciated.
It doesn’t seem possible that we are winding down another year – It just can’t be! As is our most important company tradition, I would like to begin this message by saying “Thank You.” No different than when my grandparents founded The Gerson Companies over 75 years ago, we exist because of our customers and would like to extend our gratitude for our continued partnership. All of our associates, living throughout four countries, embrace our company core value of “Our Customers Matter” and work very hard to earn your business every day.
2017 Year At A Glance
As we all continue to navigate a quickly changing retail environment, we have much to be thankful for this year. We understand the challenges, and greatly appreciate your faith in The Gerson Companies to partner in your success. In 2017, our sales were even with last year, which is both a good news and bad news story. Every year, we set our goals to include sales increases over the previous year, no different than all businesses. So while we are disappointed, I can’t remember a year that seemed to be more challenging with so many changes to the retail landscape, and I have been working here for 35 years!
In 2017, we accomplished a lot together:
Giftbeat once again featured Gerson throughout the year as a favorite vendor among independent retailers. In its most recent November issue, Giftbeat published Gerson as retailers #1 choice for Seasonal/Halloween & décor.
Evolved and reorganized our Customer Service and Sales departments to focus on enhancing and improving the customer experience.
Reinforced our reputation as the leader in our industry by adding 1,828 new independent retailers to the Gerson Family of customers in 2017. Many new retailers were attracted to the company by Gerson International™ and our Lone Elm Studios® product lines, which achieved a combined 30.1% sales increase this year.
What To Expect in 2018
We will continue to be profitable and reinvest in support of our customers and The Gerson Companies’ future in 2018. Our plans are set, and I am very excited for what the next year will bring! We are introducing in a new brand, Flint Hills Studio™, more new innovative product at great pricing, and new technology to help grow our customers’ sales.
In 2018, our customers will experience:
Specifically designed technology to support our independent customers. G-Commerce, a new drop ship fulfillment program, will be introduced in January to offer an exciting, “no-risk” way to help our customers grow e-commerce sales and their brands.
Our new family members Darryl, Horace, Bella, among many others, will put a smile on your face and dollars in your cash register! Flint Hills Studio™, a beautifully crafted and exclusively designed product line, will debut in Atlanta and Las Vegas this January.
New and innovative designs in our seasonal product offering from Gerson International™ – the industry’s most popular and competitively priced seasonal décor offering. We are looking forward to GIL continuing its double digit year-over-year sales growth in 2018.
We have immense gratitude for our relationships with our customers, and look forward to continuing to improve and become more important to you this coming year. We appreciate the faith you have placed in our company by allowing us to support your business.
I am well into my 2-week long Asia trip and putting in a few travel miles. The cities I am visiting this trip are Hong Kong (to spend time in our offices and showroom located there), Shenzhen (to see our beautiful new factory showroom and meet with customers), and Shanghai (to work in the Gerson office and with our team). It’s been a productive trip, and I have about 4 days left before returning home!
I have two take-a-way’s from the trip thus far, and today I will address material and costing increases which continue to be the most discussing subject of concern with both our factories and retail customers. This blog is an update from my previous blog, “Why I’m Not Sleeping”, with more real time numbers to give readers a better feel for the current situation.
Price increases continues to be the hottest topic of conversation with our factories and our customers. It drives me absolutely crazy when I’m told our prices are going up without being supplied the specific reasons for those increases, so I decided to put together the numbers below in order to paint a clearer picture. These numbers include the primary component areas that our factories use in determining costs, and the percentage of change from 2016 to 2017.
As you can see, every single area shows a higher cost except for one!
To be even more of a downer on the current sourcing situation, the Chinese government has closed roughly 80,000 factories throughout summer and fall this year in order to address the growing environmental concerns. Less factories to source product means slower production time and less competition for these ongoing concerns.
Although the current situation in China is causing our prices to increases here in the United States retail market, the good news is that China is taking an important step toward making this world a better place to live in, which is absolutely vital. Even better news is that we have put together an absolutely beautiful Fall and Holiday Gerson International™ 2018 product collection for you. I cannot wait for you to see and experience it!
I look forward to hearing from you, and as always, your comments are appreciated.
It’s a fact that I am just not a great sleeper. But lately, my already disturbed sleeping patterns have grown worse to the point where I just cannot get a good night’s rest!
My hope with this blog is that I can offer insight into Gerson world, and share with you current issues that have an affect on our mutual business. And although I rarely get good sleep, the cause of my current dilemma is a result of occurrences across the world in China. You would never think that something happening so far away could cause challenges for us, but this is the world we live in.
The biggest challenge for those sourcing in China (like Gerson) used to be so simple: How and where to find the best product from season to season. But now that has really shifted in such a way that designing and finding exciting products is the least of our challenges, and the bulk of our work really begins afterwards. In 2017 – specifically the last 6 months – factories in China have begun experiencing impactful changes to their businesses, which in turn affects importers like Gerson, our customers, and ultimately, the U.S. consumer.
The four areas which have the potential to increase pricing and challenge future deliveries are:
Labor: Many of our products are hand-made, and the younger workers coming into the labor market in China are seeking work environments such as tech companies and newer, more automated facilities. Thus factories are having a tough time finding enough qualified and dedicated workers, which drives up labor costs.
Environment: The Chinese government has their version of the U.S. Environmental Protection Agency (EPA), called the Ministry of Environmental Protection (MEP), which has recently begun making a concerted effort to improve environmental conditions throughout the country by the end of 2017. In order to meet their goal, the MEP is currently inspecting and closing thousands of factories that do not conform to their environmental standards. This is challenging deliveries of product being imported from China, as well as driving up costs because factories must invest in equipment to conform.
Packaging: Costs in this area have risen 30% in the last 6 months, and this is on top of price increases in 2016. Shipping cartons, product displays and tagging are all significant components in production of product coming into the U.S.
Currency: Like any other currency, the Chinese Renminbi (RMB) fluctuates against the U.S. dollar. And this year, Chinese factories are losing 3-5% on the exchange rate. As a result, Chinese factories are passing along price increases of 3-5% to cover this gap. (It’s interesting to me that when the currency works in their favor, price decreases are rarely offered..)
The effect of these four obstacles in China both challenge future delivery dates and create price increases which we always try hard to negotiate against. And although this quadruple ‘whammy’ is exceptionally tough to manage, our company strategies are aimed at minimizing the effect they will have on us, and in turn, our customers.
Communication is one of our company’s primary goals this year, and we are committed to sharing information with our retail partners and associates. I believe it is more important that we communicate our plans so that our customers understand and know we are always committed to work hard on their behalf to navigate these choppy waters.
We all have challenges in our respective roles in the world of retail, and supplyingWOW product priced competitively and delivered as promised, is our challenge and responsibility. We don’t want The Gerson Company to ever be responsible for anything less than a great night’s sleep!
On that note, even with the growing obstacles these days in navigating sourcing in China, I realize how small these challenges are compared with the millions of people whose lives have been turned upside-down by the hurricanes. Our thoughts and prayers are with those suffering, and we are hopeful their lives will return to normalcy in the near future. We want all our customers to know that we are working closely with our many customers who are scrambling to re-open their businesses in the affected areas.
Thank you for your time, and always feel free to reach out to me with your questions and comments!