2022 Price increase: Missing Context and What led to our decision.
To our customers who responded to our recent price increase, thank you for sharing your thoughts. We know many of you have invested your time and interest in our company. We are very grateful. On various social media platforms, we’ve seen a mix of support for the change and outrage against it. For some, our company’s character has been questioned, and it’s this question we’d like to address.
Chris Reeve Knives is founded upon integrity, which means our business is only as good as our word. For the first time ever, we have retroactively applied, on average, a pricing increase of 10% to existing orders, accounting for the current inflation rate and related business costs. This brought a Large Sebenza 31 Plain from $450 to $500 ($50 or 11%), for example. This has caused some customers to examine whether or not we have kept our word. If one price was quoted when ordered but ends up being a different price by the time the order is ready, isn’t that a bad business practice?
In good business, there shouldn’t be catches, “bait and switches,” or price gouging. Each party should clearly indicate their end of the bargain and follow through. We have held true to our word by honoring old pricing for as long as possible, despite a changing economy. Along the way, we have clearly stated the possibility of a price change, if absolutely necessary, before an order is ready. For nearly 40 years, we have taken orders with the following practices:
- We do not take money upfront, not even a down payment. Payment is only taken when a knife is ready for fulfillment.
- When an order is placed, a customer’s request is put in a queue. Our customers may cancel orders at any time with no penalty. There is no contract or obligation to purchase any of our products.
- We will price our knives at fair market value and publish changes when necessary. Our pricing policy is published on our order form and printed materials:
Pricing Policy: It is our intention to honor the quoted price you received when placing your order. If the cost of materials, supplies, and labor significantly increases, implementing a price increase to backorders may be unavoidable. If this becomes necessary, we will communicate changes to your order as promptly as possible. Thank you for your loyalty, patience, and understanding.
The above pricing policy was published in 2021 when we began seeing the first signs of inflation and other aftereffects of the COVID-19 pandemic response. The notification appeared first on the order form just before the “submit” button and was later added to customer email confirmations, price lists, and other printed material. Other variations, such as “CRK reserves the right to change prices at any time,” have been listed previously.
Knowing that we don’t take payment upfront, customers are not obligated to purchase our knives, and that working off of a backorder may require us to up our prices if necessary, the fact remains: It was a difficult decision to apply new prices to existing orders, but it was necessary.
What led to our decision
We’re currently caught up on orders placed before and into January 2020. Why couldn’t we hold prices on two years of orders? Two major factors play a role here: the sheer number of orders and the rising cost of manufacturing those orders.
Since mid-2020, new orders each month have at least doubled (and, on a couple of occasions, tripled) the value of orders produced at our maximum capacity. This was true in 2021, when we first discussed the shift we saw in demand, and remains true, even while expanding our production capacity. We’re growing steadily, but the number of orders flooding in over two years has brought our lead time from 12 months to 4-6 years for a new order. Simply put, the orders from 2020-2022 average around 5 years of production time at our current capacity. That capacity will grow, but it will take time. If we only applied our price increase to orders placed in 2022, the change would begin to impact our company in 2027.
Is this our customer’s fault? No. But the economic reality is that the cost of making a knife in 2022 is not the same as the cost in 2020 or even 2021.
When we quoted prices in 2020 and 2021, they were still accurately weighed against the available facts: raw materials, labor, and operating expenses were not unbearably inflated, though slowly changing. We knew an economic shift was coming, and we planned to the best of our ability. We could not have predicted record-high inflation rates or the many other battles small businesses have faced over the last two years.
We honored our originally quoted pricing for as long as possible, but this year, it became apparent that a change was necessary.
How can you trust that we won't raise our prices in the future?
Truthfully, we cannot predict the future and cannot promise to remain still when we are required to move. You can trust that we will remain straightforward and transparent wherever possible. We will continue to make sound business decisions to the best of our abilities. We will continue to produce knives of the highest quality.