BEAUTY IN THE FRIDGE

Secretlab raises chair prices by 10%, disputes idea that its “profit margins are insanely high”

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Singapore’s chair manufacturing startup Secretlab has officially raised the prices of its chairs by 10 per cent.

In an email sent to customers over the weekend and seen by Vulcan Post, the chair manufacturer titled the subject as: “A note on our prices”.

“We wanted to let you know that our prices are increasing by about 10 per cent worldwide. We wish we didn’t have to, but the past few months have been immensely challenging for us. At Secretlab, we’re committed to using only the best materials and shipping partners for our products, but these prices have increased tremendously.”

Image Credit: Secretlab

It prepared a list of questions that customers might have and addressed them one by one.

A check on the website on Wednesday (Sept 30) showed its chairs priced at a range, from S$559 to S$709. A Secretlab OMEGA series is selling for S$559, while a TITAN Evo 2022 Series is priced at S$709.

Why are prices increasing?

Secretlab said in the email that despite being buoyed by customers’ support, shipping freight rates have skyrocketed more than 600 per cent since 2019.

It provided this infographic below:

Image Credit: Secretlab

The prices of aluminum and steel — major components in its chairs — have also increased by over 60 per cent.

Secretlab showed the rise in aluminium prices with this infographic below:

Image Credit: Secretlab

Prices of aluminium are currently hovering at a 12-year high, up 43 per cent from the start of the year, a check with news reports showed. This comes as a global push towards greener ways to generate the power needed for production has led to soaring commodity prices.

Why can’t Secretlab absorb the additional costs?

The chair manufacturer added that it is currently near 0 per cent with these cost increases, and it “cannot continue at the current prices and maintain quality standards without affecting its normal business operations”.

It said that the reason it sent the email was to be “transparent” to customers.

“We’re sometimes faced with the misconception that our profit margins are insanely high, but that’s simply not true. We’ve historically made around 17 per cent profit per chair after all the associated costs such as research and development, product development, manufacturing, and operating costs.”

Image Credit: Secretlab

According to past reports, Secretlab has seen a surge in gaming chair sales as more people work from home and there’s been a surge in chair orders.

The company, co-founded by Ian Ang and Alaric Choo in 2014, was said to have turned profitable in just one year after its inception.

As of June 2021, Secretlab was reported to manufacture more than 300,000 chairs a year that are sold in over 60 countries.

The bulk of the company’s sales come from North America, which chalks up over 50 per cent of total sales. Meanwhile, the Singapore market takes up five per cent of the pie.

Secretlab co-founders Alaric Choo (left) and Ian Ang (right) / Image Credit: Secretlab

When will the price increase take effect?

The price increase took effect on September 27th, 23:59, Singapore time. 

“As always, we remain committed to providing you with the best possible product. We never compromise on our design and materials and are continually investing in research to advance our ergonomic edge and support you better,” Secretlab said.

The price increase depends on how long the higher costs stay for. “We’ve had to increase prices slightly before, but we also readjusted them downward after a few months as costs began to normalise,” said Secretlab.

Image Credit: Secretlab website

Increased prices did not sit well with some customers

In the Secretlab Chair Owners private group on Facebook which has more than 17,000 members, some customers complained about the price increase.

A few customers like a Mr Yeo complained about how Secretlab co-founder and CEO Ian Ang bought S$51 million of properties recently and questioned whether it was really “immensely challenging” for the business to have to raise prices.

Image Credit: Facebook, Vulcan Post

Another customer defended the company, saying that it is only trying to come across as being honest and upfront about the situation. However, he also questioned the discrepancy with public media coverage over how successful the business has been in addition to Secretlab’s co-founder Ian buying those said properties.

Some customers added that there’s been quite a number of other brands increasing their prices over the last year. “Guess that’s what happens when a pandemic never ends,” one said.

Image Credit: Facebook, Vulcan Post

A customer from Australia shared that his TITAN Evo 2022 Softweave Plus Plush Pink chair was late in delivery.

“This is the second time they’ve sent me an email moving my shipping date. I am so frustrated with what’s happening (sad emoji).”

The customer included a screenshot of the email from the chair manufacturer, where it explained that the vessel carrying the order is taking longer than expected to reach its destination port, and sought the customer’s understanding.

Global shipping costs rising

According to research from ING, the first months of 2021 have seen a new surge in prices across different freight rates (dry bulk, containers) along major trade routes. Prices for several trade lanes have tripled compared to last year, and charter prices for container vessels have seen similar rises.

There are little signs of relief in the short term, and shipping rates are therefore likely to continue spiking up in the second half of 2021, as rising global demand will continue to be met with limited increases in shipping capacity and the disruptive effects of local lockdowns.

Shipping deliveries are not as on time as before / Image Credit: Sea-Intelligence, ING

The lack of alternatives to ocean freight also makes it hard for companies to avoid surging transport costs at the moment. This is especially so for higher value and bulkier products.

“The difficulty of absorbing increases on this scale in margins means that consumers may start to feel the impacts through price increases, or changes in product availability,” said ING.

Shipping ports continue to face a congestion problem, with lower vessels keeping to schedule, and delays for vessels rising. For this year, the share of shipping vessels arriving on time has fallen to around 40 per cent, compared with pre-pandemic ratings of 70 to 80 per cent.

Shipping prices may not abate, not before 2023 at least

Container liner firms have been ramping up in orders for new container vessels. Over the first five months of 2021, new orders reached a record high of 229 ships with a total cargo capacity of 2.2 million TEU.

However, the new capacity can only be ready for use in 2023, and will represent only a 6 per cent increase.

Backlog of shipping orders due to Covid-19 supply chain disruptions / Image Credit: Reuters

As much as the additional capacities might place downward pressures on shipping costs, it won’t necessarily return freight rates to pre-pandemic levels.

So, expect operational costs to continue to be higher than before, and that will impact the shipment of bulky items of products manufactured overseas, like Secretlab chairs, and even televisions.

Should I buy a Secretlab chair now then?

With material costs rising and shipping rates not easing, it has shown operational constraints with companies like Secretlab passing on the costs to consumers. For those who have been waiting on the sidelines to wait for a good deal for the chairs, now might be a good time to buy them before prices rise further.

Image Credit: Windows Central

Also, since the impending GST hike in the country is unavoidable and will probably take place in a matter of years, as announced by the Singapore government during Budget 2021, a two per cent increase means that customers will have to add around S$14.00 more on top of a pricey S$699 Black TITAN Evo 2022 Series chair, which means a bigger hole in consumers’ pockets.

All these into consideration, provided that the freight rates and aluminium costs do not climb up further.


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Featured Image Credit: Secretlab, Vulcan Post

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