Boutique Design - October 2019 - 46

PRICE LINES
Assessing just how and how much these tariffs
will drive up pricing for your next project goes
beyond straight percentages. Important to
remember that tariffs are not applied directly to
the price of the purchase order or even the entire
budget for that matter-for example a $100 floor
lamp does not turn into a $125 floor lamp. Actually, it's based on the first cost, Free on Board
(FOB) China, of the product. "The problem is that
the tariff goes into effect the day it [the product]
clears customs," explains Alan Benjamin, president, Benjamin West. "We can place a PO for $1
million worth of casegoods from China and 15
weeks later it arrives. When we placed the PO it
was 10%. When the boat sailed it [the tariff ] was
10%. The day it hit Long Beach and cleared
customs it was 25%. Houston, we have a problem."
But Benjamin says the tariff risks are negotiated with the vendor before the PO is placed, so
despite this added dynamic in the process, he
hasn't seen the increases significantly affect a
project yet. "Fifteen thousand dollars a key might
go to just $15,500. A good purchasing agent can
(mostly) negotiate that out because the market is
still incredibly competitive," he says.
Neil Locke, founder, Neil Locke & Associates,
says the fact that the tariffs continue to change
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makes the process contingent upon the vendors'
margins and how they interpret them. "Consequently, it makes it difficult to find some point of
equilibrium so we can advise our clients what the
cost of the tariff will be-not only for a particular
product but for the project," he says. (Be sure to
attend Locke's Nov. 10 conference session Brain
Trust: Insights from Leading Hospitality Pioneers
at Boutique Design New York.)
However, purchasing agents are still trying to
sidestep tariffs with continued exploration of
sources in Vietnam, Indonesia, Canada and Mexico.
But, some companies in those countries are having
problems meeting fast-growing demand, resulting
in poorer quality products, says Ann Chipouras,
founder and president, Purchasing Dimensions.
So, will that make buying American easier? Yes
and no, she says. Recently, U.S. manufacturers
have had to lower bids to compete with overseas
markets but are still purchasing components
from them-an issue in itself in the sense that,
even for these materials, demand and quality
haven't kept pace. Tariffs could be part of the
solution to this as budgets adjust to accommodate them. "That may mean domestic companies
can go back to using better quality components,
sourcing some metals here, for example, rather
than buying all of it from in China," she says.

ALAN BENJAMIN
BENJAMIN WEST

ANN CHIPOURAS
PURCHASING DIMENSIONS

BILL LANGMADE
PURCHASING
MANAGEMENT
INTERNATIONAL

ELISA WHALER
BRAY WHALER

NEIL LOCKE
NEIL LOCKE & ASSOCIATES

RONNIE BRAY
BRAY WHALER

C O U R T E S Y O F T H O M P S O N H O T E L S ( T H O M P S O N Z I H UATA N E J O ) ; C O U R T E S Y O F B E N J A M I N W E S T ( B E N J A M I N ) ; C O U R T E S Y O F P U R C H A S H I N G D I M E N S I O N S ( C H I P O U R A S ) ;
C O U R T E S Y O F P M I ( L A N G M A D E ) ; C H A D C H I S H O L M , C U S T O M C R E AT I O N S P H O T O G R A P H Y S T U D I O S ( W H A L E R ; B R AY ) ; C O U R T E S Y O F N E I L L O C K E & A S S O C I AT E S ( L O C K E )

THOMPSON ZIHUATANEJO, MEXICO; PURCHASING SERVICES: NEIL LOCKE & ASSOCIATES;
INTERIOR DESIGN: ANDRÉS SAAVEDRA DESIGN AND THOMPSON DESIGN SERVICES
http://www.boutiquedesign.com
Boutique Design - October 2019

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