The sharp rise in raw material prices in the last 5-6 months has had an adverse impact on many industries. Industries such as signage and those catering to the retail industry, including store fixtures and others, have been hit hard and are feeling the punch, being forced to absorb the costs.

Prices of metals like aluminium, mild steel and stainless have seen a 30-40 % increase in  prices in the last 6 months.

Talking about the impact of the price rise on the signage industry, Amit Kapani, Pradhan Sewak,  LPFLEX Sign System Pvt. Ltd, says, “As sign makers and converters, we are the ones  getting badly, as all raw material prices have increased. But the customers are still asking for further discounts.  In our trade, about 85% is taken up by raw material cost, and after the logistics and installation costs, we earn only about 10%. But now we end up incurring losses . Apart from the increase in prices, there has also been hike in petroleum prices, so the transportation cost has also increased. So the last 5 months have been very challenging. Just when work resumed post Covid, the price rise happened . But in keeping with our organisational culture,  we are committed to completing the jobs we had taken up, even  if it means facing lot of challenges in the process.”

Agrees N Badri Narayanan, Managing Director, Sinex Systems Private Limited/Euroceil Systems Private Ltd,  “Yes we are facing huge problem because of the cost  escalation. Earlier the price increase would happen once or twice a year and we would be informed about it well in advance by the suppliers, so we could be prepared.  But now post Covid,  it has been increasing continuously and we have to keep watching it like the Sensex. So any project we have take up for a duration of 6 months -1 year is facing huge challenges as we have to absorb the cost due to the rise in prices.”

Says Harjee Gandhi, Director, HG Graphics, sharing his concerns, “The raw material cost is definitely affecting us. People who are working on volumes are still able to survive, but businesses that have already been hit are hardly able to survive. Metal is the material mainly affected, but the fact is that whenever something of this sort happens then everybody tries to take advantage of it, so even the cost of other materials like vinyl goes up.”

Given the situation, some retail clients do agree to revise the contracts and purchase orders based on revised pricing due to the increase in raw material cost, but not many do, as these players point out. This is especially so now since many of the retailers are also facing the brunt of the pandemic and are themselves under margin pressures. 

Nevertheless, some of these solution providers have sought to communicate to the clients on the need to revise pricing or include an escalation clause in the contract so that any increase in raw materials will result in a corresponding increase in the total price of the final product. 

A few others have found other ways to manage the situation. Says Murali Balgar Director, Disha Retail Fixtures, speaking about the impact of the price rise,“This is a huge challenge, which we have to face. But the fact is that retailers are also just coming out of the Covid impact, and increasing the capex is very tough for them too. So we decided to take a four pronged approach to manage the situation.  One was to make the process as efficient as possible to compensate for the increase in raw material prices.  And then we tried to convince our customers to agree to a marginal price increase and bring about other cost reductions through process improvement and value engineering and finally, of course we also looked at sacrificing a bit on the margins on our side too. We were also able to leverage the strength of our cash flows,  make payments on delivery and get whatever discounts possible.”

He adds, talking about the clients,”Retailers also understand that there is an impact and that there is a need for collective effort to manage the situation.  We have both walked a few steps and managed the situation through proper dialogue.”

Many industry bodies, particularly in the MSME segment, have come together in the past couple of months to discuss the issues and chart the way forward. One wonders if the signage and retail solutions industries too might perhaps have been able to leverage the benefit of an industry body had there been one, especially during such challenging times. Says Amit Kapani, striking a somewhat resigned note, “Nothing much will happen; our trade is so unorganised.  But we have come to accept the situation and make sure we do our part.”

As Murali too says summing up, “These are tough, unprecedented times, and there is no tailor-made solution.  All of us stakeholders have to do our bit and take a viable decision.”

Indeed, if all stakeholders in the eco-system, the suppliers and the buyers,  could come  together, understand each other’s pain points and arrive at a consensual approach that takes away at least some of the pain points for all concerned,  then perhaps everyone could tide over the challenging times with as less damages as possible.