And it sets a whole new standard in the retail industry.
Covid is the perfect storm
Covid is the perfect storm
One and a half years after the pandemic occurred, we are now experiencing a wave of consequences. Corona is in many ways "the perfect storm" where all forces influence each other and no one escapes unnoticed.
Now we have to be completely honest. Because it is important that you understand how everything is connected when it comes to Corona and all the consequences we now see a clearer contour in the retail industry. We have had ice in our stomachs for the past year, but now see that the trend only continues in the wrong direction. And we have to take some action, like many others in the industry.
Increased demand creates growth
And KAOS has grown well through the pandemic, we are very happy about that. We increased sales by about 100% in 2020 and spent a lot of time increasing the volume in both textile and wood production. However, these are not changes that are made overnight, it takes months to increase and adjust the large appliances we are now working with, and there are many players involved in each individual “supply chain”. But new agreements with larger volumes came into place in February 2021. So then you’d think everything could go painlessly forward, right?
Suppliers are struggling with delivery
KAOS is far from the only brand that has noticed growth. In fact, our manufacturers experience that all brands have increased relatively radically in production. The pandemic has made people travel less and spend more time and money on themselves and their homes. So the demand for raw materials also increases considerably, and a bottleneck arises among the suppliers. They are unable to obtain enough raw materials quickly enough. Thus, the price of raw materials begins to rise: Who is willing to pay the most to get the raw materials first?
Up to 40% increase in raw material cost
All brands have their calculations where price fluctuations have been taken into account throughout the year. But what we see of price changes now no one has experienced before. It has simply become a complete cowboy business, and it’s not possible to relate to the new raw material prices in existing calculations. As a brand, we are thus forced to adjust our own retail prices towards the end customer.
Truth be told, it is common for brands to make minor price adjustments annually. We have barely adjusted our prices since the launch in 2015. When we were to change our prices in 2019, we rather chose to cut out the entire wholesale link from our calculation. In this way, the end customer would not pay for the wholesale margin (as this is of course reflected in the price you pay as a customer) and rather get the product in a better quality, at the same price.
Now that we have a business model that does not include a wholesale margin, we also have no more to take away. And we are forced to adjust prices.
Quarantine creates major delays
When we talk about Corona as “the perfect storm”, we mean that one takes the other. And anything that can go wrong goes wrong. The price and demand problem is enough to deal with alone, in addition, major challenges arise as a result of constant local outbreaks of Corona in various places in our “Supply Chains” and associated lockdowns and quarantines.
Factories we work with must occasionally shut down completely, or operate for half a machine, at the most. This means that the new volume agreements we got in place in February do not mean anything in the world. Because there are no people at work to carry them out.
We are first and foremost concerned that everyone we work with should be healthy and safe, of course. At the same time, we are the ones in charge of KAOS and it is our responsibility that things work. We simply must have goods to sell in order to secure our own jobs. We have never experienced more adversity while growing more than now. The pulse is palpable.
If you want to secure a Klapp Chair, we strongly recommend ordering while they are in stock or pre-ordering so you do not miss the upcoming deliveries.
What does that mean for you?
We will always put customers first. And we’ve had ice in our stomachs for over a year, hoping for better times. Unfortunately, the development of raw material costs is still going in the wrong direction, and just as suppliers are forced to increase their prices, we must increase our prices. We see this as a consequence within retail in general.
Longer delivery times for some items
Due to uncertainty about lockdowns and the quarantine of subcontractors, no manufacturers can guarantee deliveries during the day. We receive new messages every week, and know that our manufacturers are working hard to implement to the best of their ability.
A few examples:
- A batch with accessories for Endeløs has been stuck with our manufacturer in India since January / February.
- We do not know when this can be released, so we are working to find a new textile manufacturer in Europe. We will ensure this in the future.
- We have just been informed that our chair manufacturer can only deliver 20% of what was planned before the summer.
- The next delivery of chairs will thus not take place until August. This means that we will sell ourselves empty and well so.
- We have developed a new solution on the product page so you can now get a better overview of when the next batch of chairs is expected in stock, how many are coming in, and how many are already pre-ordered.
- We are in the process of sampling a chair at a new chair manufacturer in Europe. We must secure ourselves and have two chair manufacturers for the future.
With that said, we want to thank you for your understanding and not least for the fact that you shop small, and support Norwegian designers. It’s in these times that we truly understand how important our customers are, and we are so grateful to be able to do the job we do.
If you have any questions or feedback, we would love to hear from you. Feel free to send us an email: Hello@itskaos.com.
We hope everyone has a really good summer and look forward to a world in better balance soon!
Gineline and Mette