Hey all – so, some unfortunate news, but I wanted to be as transparent as I could around the price increases everyone will see across Inovelli.com and Amazon USA (I can’t speak for Canada or Aartech as their tariffs are different).
This hurts a lot as one of the core values I started the company on was having the best valued products (along with best customer support and best products from a hardware/firmware standpoint). We still believe we have the best value products regardless of the price increase, but it’s still a tough pill to swallow as being a fellow smart home owner, it’s never fun to pay more for the same product.
Below I’ll go into the background and our plan to bring the prices back down if and when we can.
Background - 2020
2020 was, as you know, a crazy year. We took on a couple new products, grew ~400%, which all caused inventory issues. On top of that, the tariffs came back (we luckily received an exemption in 2019 that lasted a year) into effect on September 20, 2020 to the tune of 25% for our switches and bulbs (a whopping 28.9% for lightstrip, which we were supposed to get before the tariff kicked in, but the manufacturer failed to do so).
We tried our best to eat those costs as we are competing against competitors who are charging low $20’s for a switch (not even sure how that’s possible tbh) who are gaining on us from a firmware side. However, as you can imagine, that really impacted our margins and opportunity to invest in more inventory (hence out of stock) as well as new headcount for customer service and other strategic positions.
Finally, from attracting an investor standpoint, having our margins take a hit without offsetting them, really caused us to be undervalued. This hurts when you’re trying to not give away the farm when negotiating a deal when you know you’re worth way more than what’s on the table.
So where does that leave us moving forward as far as pricing? I still firmly believe that we shouldn’t pass on the entire tariff to the customer as most companies do. It really isn’t fair to the customer and it goes against everything I personally stand for (the company as well). However, we’re not registered as a charity, so we can’t keep eating all the costs, especially if we want to grow.
So, rather than the full 25%, we’re increasing prices across the board by an average of about 15% (some higher, some lower, some are the same). I made sure to keep our flagship switch (Red Series Dimmer) to only an 8% increase as we’re slowly creeping up on Lutron prices (still $10 less, but I’m not happy about it).
Gameplan to Lower Prices
My promise to you all is that once tariffs go away, we will bring down pricing and re-evaluate how to improve costs. In the meantime, here’s what we’re looking into in the meantime:
- The manufacturer is exploring Thailand as an option (the costs to make the product will increase, but there will be no 25% tariff).
- So far, this is looking good as the increase in costs are less than the increase in tariff costs.
- Exploring a Gen 3 switch that may break out neutral and non-neutral as well as strip energy monitoring. This should save us a couple of dollars per switch.
- Problem with this, however, is that it will require capital to create the switch which we don’t have right now.
- Bulk manufacturing with partners (ie: we’ll be working with one of the worlds largest alarm companies starting at the end of Q1 – this will open up bulk manufacturing opportunities for their distributors) as well as white-labeling our switches to large companies (who play in a different sales channel)
- This will allow us to purchase more and get pricing down – every penny counts.
So, we are actively looking at ways to offset the price increases so we can bring the prices back down, however, in the meantime, I wanted to at least give some context as to why you’re seeing prices go up.
Just in case you wanted to follow along on when these expire (and let us know if we don’t catch it), feel free to check the HTS codes below. If you know anything about tariffs or are a professional in the industry, if you see anything out of the norm, please let us know – we’d sincerely appreciate it! We do have a company that helps us, but the more eyes the better.
- There are 4 Lists that were created specifically for China – our products fall on different lists (known as the 301 Duty Lists) – all these lists come with an automatic 25% tariff. Some also include additional tariffs
Switches & Paddles: HTS Code - 8536.50.7000 (Overall Tariff = 25%)
Bulbs: HTS Code - 8539.50.00 (Overall Tariff = 2%)
Lightstrips: HTS Code - 9903.88.03 + 9405.40.8440 (Overall Tariff = 28.9%)
Extension Cords: HTS Code - 9903.88.03 + 8544.42.9090 (Overall Tariff = 27.60%)
Accessories: HTS Code - 8536.69.4051 (Overall Tariff = 25%)
Sensors: HTS Code - 9027.50.4050 (Overall Tariff = 25%)
Here are the price increases that will show where we were and where we are now:
|SKU #||Description||Current||New||% Change||$ Change|
|LZW30||Black Series - On/Off||$27.97||$33.00||18%||$5.03|
|LZW30-10||Black Series - On/Off (10pk)||$250.00||$310.00||24%||$60.00|
|LZW30-SN||Red Series - On/Off||$34.97||$38.00||9%||$3.03|
|LZW30-SN-10||Red Series - On/Off (10pk)||$325.00||$360.00||11%||$35.00|
|LZW31||Black Series - Dimmer||$31.97||$35.00||9%||$3.03|
|LZW31-10||Black Series - Dimmer (10pk)||$290.00||$335.00||16%||$45.00|
|LZW31-SN||Red Series - Dimmer||$38.97||$42.00||8%||$3.03|
|LZW31-SN-10||Red Series - Dimmer (10pk)||$350.00||$395.00||13%||$45.00|
|LZW36||Red Series - Fan/Light||$69.97||$70.00||0%||$0.03|
|LZW42||RGBW A19 Bulb||$32.97||$25.00||-24%||$(7.97)|
|LZW45||Red Series - Lightstrip Kit||$64.97||$70.00||8%||$5.03|
|LZW60||Black Series - 4-1 Sensor||$34.97||$35.00||0%||$0.03|
|Paddles (Fan)||Fan/Light Paddles||$3.97||$5.50||39%||$1.53|
|12" LED Strip||Lighstrip 12" Extension||$7.50||$9.00||20%||$1.50|
|6" LED Strip||Lighstrip 6" Extension||$5.00||$7.00||40%||$2.00|
|L Shape||L-Shape Connector||$4.50||$6.00||33%||$1.50|
|T Shape||T-Shape Connector||$6.50||$8.00||23%||$1.50|
|Extension Cord||Lighstrip Extension Cord||$4.50||$6.00||33%||$1.50|
*Average calculated by taking the 10 packs and breaking them down to a per unit price. So, sum up all the individual SKU’s and then add in the 10pks at a per-unit price, then divide by 20 (# of SKU’s represented). Thanks @Chris for the suggestion to add in $ changes.
As you can see, we tried to keep Red Series down as it’s our best sellers. Lightstrip is much higher as we originally priced them without the tariff (as we were promised we’d get them prior to Jan 1), but unfortunately they did not get here in time. We actually broke even on our pre-order sales.