Manufacturers Focus on High-End Products to Offset Costs
Manufacturers Double Down on Pricey Products
From Whirlpool (WHR) to Weber (WEBR), manufacturers across the world are pushing their higher-end products as supply-chain problems slow production and send shipping costs skyrocketing. To offset a hit to their bottom lines, these companies are focusing their attention on higher-cost products.
Take Whirlpool, which makes washing machines and other home appliances. The company said in July it would begin shifting production and marketing toward products which cost more, in order to offset some of the rising expenses associated with manufacturing. Meanwhile Weber, which makes grills and barbecues, has more inventory of higher-priced items because its cheaper grills are made in China, where supply-chain issues are prevalent.
A Focus on Pricier Vehicles and Lawnmowers
The lawnmower maker Toro (TTC) is reducing the number of products it produces due to component shortages. The company is selecting which products to make based on volume and profitability.
US automakers are also focusing on their pricier vehicles after months of supply-chain slowdowns and semiconductor shortages which caused companies to curb production at plants. Car companies are shifting focus away from their less popular, often cheaper models. For example, GM (GM) stopped making its Chevrolet Malibu sedan but is keeping its factories at full production for its high-priced SUVs. In September the average new vehicle sold for $42,800, which is up about 19% compared to last year.
High-End Products Drive Profits
Manufacturers’ move to focus on high-end products is not the only way they are dealing with rising costs and supply-chain slowdowns. For everything from toilet paper to televisions, manufacturers are raising their prices, reducing their range of products, and placing limits on the amount of items which retailers can sell.
It makes sense that manufacturers would choose to focus on their most profitable products amid so many supply-chain challenges. But with inflation continuing to rise and consumers’ bank accounts getting pinched as a result, it will be interesting to see if manufacturers’ focus on their upscale products will pay off or leave them with inventory they won’t be able to sell.
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