No thanks to the Russia-Ukraine war which has led to a spike in oil prices amidst the ongoing pandemic, quite a few retail products have seen an increase in prices due to the increased costs.
Since there are increased costs, what suppliers tend to do is push the burden of paying them to the consumers via heightened prices.
There’s no need to wait for the eventual GST increase next year for the price increases, because the conflict on the European continent already has that covered.
Whoop-dee-doo!
Effects of the War
According to the President of the Association of Small and Medium Enterprises (SMEs), Mr Kurt Wee, not only will the war lead to price increases for consumers, but it will also disrupt trade flow and reduce business confidence and sentiments.
Owing to the rising oil and energy prices, business costs will inevitably rise, Mr Wee stated. The market will need some time to adjust and look for alternatives, but it’s undeniable that businesses are burdened with higher costs, so they’ll have to adjust their prices accordingly.
Since the world is reliant on fossil fuels and oils for energy, the surge in oil prices has affected almost everything from transport to supplier’s materials.
For instance, The Cocoa Trees, a chain of chocolate boutiques, had no choice but to make some price adjustments.
Mr Paul Loo, the Group Chief Executive of Focus Network Agencies International and owner of the chocolate brand, declares that the prices of his products will be raised by 3 to 5%.
Even then, the business will still be absorbing 2% to 3% of the extra costs incurred by the rising transportation and freight bills, in addition to the fact that the shipping schedules have been delayed by one or two weeks.
The suppliers from Europe and the United States (US) have also increased their prices by 3% to 10%.
With the opening of more Vaccinated Travel Lanes (VTLs) and the reopening of borders, Mr Loo hopes that there will be more sales.
With regards to the expansion of his chocolate brand, Mr Loo had been negotiating with prospective Ukrainian partners, but he has put those plans aside for now.
Price Increases for Furniture
The Russo-Ukrainian war is like a literal rock that is jamming up the system of gears that make up the supply side of things because it has caused supply chain constraints as well.
Any and all Russian exports and imports are summarily banned in many Western countries, don’t even think about flying across the Russo-Ukraine airspace unless you want to get shot down, and the Black Sea has never been more deserving of its name.
Have I ever mentioned that Russia is the second largest oil producing country for crude oil besides Saudi Arabia? Because it is.
And guess who has been isolated economically by a torrent of sanctions? Still Mother Russia.
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In any case, for the reasons listed above, the Chairman of furniture retailer Commune Lifestyle, Mr Ernie Koh, said that the company will be increasing the prices for some of its products by 4% to 10% to help mitigate the rising costs.
You may take his words as the sentiment of all other furniture retailers, because they’re all facing the same problems, even IKEA.
He also posited that consumer confidence will decrease if the war drags out, wherein consumers will be more inclined to spend on basic necessities instead of furniture.
When faced with uncertainties, consumers tend to be more cautious with their expenditure and start saving in case of a rainy day.
For non-essential items and more expensive products like furniture, they might hesitate or delay such purchases.
If one spring on the sofa is broken, that’s okay; sit on the other side of the sofa that’s perfectly fine and leave the spoilt section for the sibling you don’t like as much.
Whereas for their necessities, consumers might start looking for cheaper brands.
Electronic and IT Products
Alternatively, consumers have been purchasing electronic products and furniture before the oil-fuelled price adjustments and the GST hikes kick in.
Courts Singapore also noted a marked increase in demand for such goods recently.
Courts said: “We have also been encouraging customers to buy now before any further price increment, and recommend the use of energy efficient appliances, especially those with four-star or five-star ratings.”
A DFI Retail Group spokesman asserted that its companies will continue to observe the situation closely, and is working with diversified suppliers to give customers as much variety and supply of essential products as they can manage, at competitive prices.
Simply put, having more supply and alternatives will ensure competition between the brands, and that will in turn, lead to lower prices, or at least ensure that the prices won’t increase as much.
Dairy Farm Group Singapore, which owns many supermarket chains and convenience stores like Giant, Cold Storage, Guardian, and 7-Eleven, is also reinforcing its house brand offerings such as Meadows for food and non-food products at prices that are roughly 20% lower than their respective equivalent brands.
Biggest Concerns Regarding the Russo-Ukrainian War
The greatest concern weighing on the minds of businesses and consumers alike is how long the conflict will last, and how it will affect them.
We are already feeling the ripples of effect now after all.
And compared to the film grain, black and white, or shaky footage that we used to have of previous wars, we are witnessing the destruction that a modern war is capable of causing in high definition and in real time on social media.
The Singapore Chinese Chamber of Commerce and Industry said that with the unpredictable nature of the Ukrainian crisis, it’s best that companies review their long-term plans to reduce any possible disruptions in their operations.
Additionally, it hopes that the Government will step in to provide more assistance besides the Budget measures to aid the SMEs, like they had done during the pandemic situation.
For SMEs, their main area of concern is managing the costs of electricity.
Although the Energy Market Authority has measures that help businesses, the SMEs hope that more assistance can be provided, like changes to the electricity contracts, to ensure that they have access to electricity at affordable prices.
For petrochemical industries in particular, like packaging and plastic manufacturing, the continuation of the conflict is quite worrisome because it might lead to further increases in the oil prices. This may cause electricity bills to rise further and negatively impact the production in the industries.
Besides the rising costs, Mr Lawrence Pek, the Secretary-General of the Singapore Manufacturing Federation, worries that business may hold back on capital investments like financing the improvement of digital tools for the sake of conserving their reserves.
In summary, there are monetary and expenditure concerns all across the board.
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Featured Image: Shutterstock / welcomeinside
