As fuel prices skyrocket so do the day-to-day operations in every business. The balloon business has been one industry that is weathering the storm and is starting to feel the increasing pressure to raise prices. Pioneer Balloon Company, the leading balloon manufacture, announced to distributors that a 7% increase will be starting in July 2008. “Distributors have started increasing prices and will quickly show up in wholesale prices,” says Michelle Obrochta operations manager for online balloon retailer www.mbd2.com. “We have a small profit margin because of the manufactures distribution chain. We have to buy from our distributors who sell retail and online. So distributors are quick to pass on the price increases but slow to changing their retail price, which makes it difficult to compete fairly.”
Many balloon companies have seen profit by selling on the Internet, but e-commerce companies are feeling the pressure by major shipping carriers by adding fuel charges to the shipping cost. “We do 99% of our business over the Internet and people want to know ‘How much shipping is going to cost?’, and that’s a fair question”, says Obrochta. “We calculate the shipping charges and pass that directly on to the consumer, but days later we receive a UPS bill with a fuel surcharge. These fuel charges can be from 9.0-10.25% in addition to the shipping cost. This is a price that we as businesses have to absorb”, says Obrochta.
As fuel costs increase, local governments are increasing the sales tax to offset the loss in revenue. The city of Chicago has increased its sales tax by 1.75% to make them the highest sales tax at 10.25%. This leads to New York, Los Angeles, Dallas, and Houston which follow behind. Customers looking to avoid sales tax are going online to save money or applying for retail sales licenses to be tax-exempt.
Companies like mbd2.com are working to improve their profit by increasing distribution outlets. In March 2008 they started an affiliate program that allows balloon entertainers, hobbyists, or any person with a website to become an affiliate of mbd2.com earning a percentage of every sale that goes through their affiliate link. The affiliate store is a duplication of mbd2.com which offers Qualatex balloons, Mac Pumps, Twist’em Up Aprons plus 300 other products.
Mbd2.com offers customers reward points on purchases. “The reward points are designed to offset shipping cost and save repeat customers money”, says Obrochta. For every purchase you make, you earn points. These points are allocated towards purchases or shipping. We feel loyal customers deserve a reward and the points are our way of saying thank you.
Gas may go down, but the price increases are here to stay.