October 31, 2023- Last year, the annual inflation rate in the United States peaked at just over 9%, highest in over 40 years. By July 2023, it had fallen to 3.3%. But continued inflationary pressure on raw materials, transportation, warehousing and wages have kept capital equipment prices about the same. This fall, as customers scrutinize their capital budgets, sales representatives can expect some tough questions. In response, reps should spell out the broad economic factors affecting capital equipment pricing today and then guide their customers toward solutions that can lead to lower life cycle costs, according to those with whom Repertoire spoke.
“Inflation is still a factor,” says Cindy Juhas, chief strategy officer, CME Corp., Warwick, Rhode Island. “Price increases have leveled off the last eight months but were hefty prior to this calendar year.” Manufacturers attribute rising prices to increases in raw material costs, such as steel or computer chips. Stainless steel shelving units, power exam tables and refrigerators are just a few types of equipment to be affected. Freight remains a hidden cost, she says. In some cases, CME is charged almost as much for freight as for the cost of the equipment itself. Price increases also reflect an increase in labor costs.
“Between labor costs remaining high, the need to source more materials domestically, and the need to keep higher parts inventories, there appears to be no justification to lower costs” on the part of vendors, says Juhas. “We have had to pass all price increases on to the customer, since our own operational costs have gone up. Customers aren’t happy, but if they need the equipment, they have to purchase it.”
Jack Moran, managing partner of MTMC, an independent sales representation firm, says that equipment vendors have experienced higher costs on their components and shipping, while those that are less dependent on sourcing parts have felt less pain. “The other very big issue we are seeing is that high interest rates have caused many delays and cancellations in new construction projects. This is hurting sales of new equipment more than higher costs.”
Read more in the latest issue of Repertoire Magazine.