The Economics of Building A Better Blanket
Here at Rumpl we have one mission: To Introduce the World to Better Blankets. We do this by applying modern materials typically found in premium outdoor gear and activewear to modernize a dated and boring blanket category. Since we’re a young company navigating a new category there is no blueprint for us to follow. If you’ve been following Rumpl for a while you may have noticed some changes to our prices. First of all, good eye. Secondly, we want to be clear that this was not an easy decision to make. In the spirit of transparency, we wanted to share how we came to the decision to raise some of our prices. If you have additional questions, please don’t hesitate to reach out to our customer experience team at email@example.com, and we’re happy to help.
We’ve Been Absorbing Tariff Costs For Almost A Year
We will try to leave politics out of this as much as possible, but last year the current administration levied some hefty tariffs against some products that are manufactured in China. Regardless of what you hear from politicians, China does not pay those tariffs; Rumpl (and other companies) pay those tariffs. Due to other important issues in the news cycle, the tariffs and trade war with China have received less attention/coverage, but we’ve been paying and absorbing the cost of those tariffs for almost a year. We didn’t want to immediately pass the costs on to the customer without doing our due diligence to evaluate every option. We didn’t want to increase our prices, but we couldn’t find another way to make this work without sacrificing product quality. That said, we are committed to keeping The Original Puffy Blanket at $99 even though we’re continuing to take a hit on that product. We wanted to make sure our flagship product was available to as many customers as possible.
How Determine Your Prices?
We throw a dart at a wall. Just Kidding ;) When determining the price of a Rumpl product there are two key factors: cost of goods (COGS) and margin. We’ll start with COGS; this includes all the raw materials that go into your Rumpl (insulation, polyester or nylon shell, thread, trims, labor, etc.). This is quite literally how much it costs to make your blanket.
Margin is the difference between what the blanket costs and what it is sold for. Businesses need margin in order to successfully operate. Margin pays for our office rent, employee salaries, employee health insurance, product research and development, photo shoots, web hosting, artist collaborations, and so much more.
Having a ‘healthy margin’ means we’re able to do things like offer a greater variety of prints, partner with cool artists and photographers, hire talented employees, participate in giveaways with other brands, and ultimately do the cool things that our customers expect of us. When we set our previous prices we did not yet know how we would be affected by the tariffs. For the past year while we’ve been absorbing the tariffs, our margins have not been very healthy. In fact, we’ve been a little upside down at times and had to make some hard decisions regarding our business.
Why Don’t You Manufacture Somewhere Else?
That’s a great question, and honestly it might warrant its own blog post. The short answer is we have a great partner in China, and we are not confident that we’d be able to manufacture our products to the same quality standards in other countries. In the US, for example, the size of sewing machines and manufacturing infrastructure to make our blankets doesn’t exist here, and we’re not a big enough company to build an entire supply chain.
Additionally, we’ve worked with the same partner in China since the earliest days of Rumpl, and we’ve built a valuable relationship with our team there. This is a partner that we know well, we know they have a safe and clean factory, we know they responsibly source goods on our behalf, and we know they treat their workers well. When you start chasing partners who prioritize the lowest cost above all else, they are often cut corners in other places. It is important that we align ourselves with a partner who we know and trust to do business in a way that reflects our values - it just so happens that they are located in China.
One of our core values is to “Look to the future responsibly.” This means that we prioritize scaling our business responsibly with the “long-haul” in mind - for both our employees and customers. Continuing to operate with unhealthy margins would have been irresponsible as a company. We owe it to our employees and their families to build a company that can weather storms like our current economic downturn. We’re proud to say that throughout the COVID-19 crisis, we have not had to lay off a single employee. We have to take care of our employees and business, but refuse to sacrifice the quality and experience we offer our customers. To make both things happen, this was a necessary adjustment for us to make.