Factors Affecting Price Changes from the Factory to the End Consumer

When exporting furniture abroad, the final price for the consumer is significantly higher than the manufacturer’s price. This change is explained by various costs, regional pricing peculiarities, and the target market segment.

 

Main Costs Affecting Price Increase

• Production Costs – raw materials, labor, energy costs, and factory overhead expenses.
• Packaging and Handling – costs for safe packaging for international transport, pallets, protective materials, and labeling.
• Logistics and Transportation – costs for domestic and international transportation, customs duties, import VAT, and local delivery.
• Customs Fees and Taxes – vary by country and may include additional certification requirements.
• Warehousing and Distribution – costs for storage, inventory management, and local distribution.
• Retailer and Online Marketplace Margins – store or marketplace markup.
• Marketing and Branding – costs for advertising, certification, showrooms, and product promotion.
• After-Sales Service – warranty service, customer support, and product returns.

Example of Final Furniture Price Formation in Poland (Factory to Retailer, Without Distributor)

Pricing Stages | Costs (in units)

1. Production Stage

• Raw Materials and Components – 30
• Production and Wages – 40
• Quality Control and Testing – 10
• Packaging – 15
• Factory Price (EXW, Ukraine) – 95

2. Logistics and Distribution

• Delivery to Customs Warehouse and Customs Clearance in Ukraine – 5
• Transportation Ukraine-Poland – 20
• Customs Duties and Taxes (23% of Factory Price) – 22
• Warehousing – 8
• Total Distribution Costs – 55

3. Retail Price

• Marketing and Advertising Costs – 15
• Retailer Markup (50%) – 75
• Customer Service and Warranty – 10
• Retail Price (Excluding VAT) – 250
• VAT in Poland (23%) – 57.5
• Final Retail Price – 307.5

 

Contract Price Under Incoterms

When signing an international trade agreement, the manufacturer must specify the price according to Incoterms, which define the responsibility for transportation, customs procedures, and risks. This determines who bears the costs of customs clearance, delivery, and import duties. Below are contract price examples depending on Incoterms, based on the above calculation.

Contract Price by Incoterms | Incoterms | Description | Price (in units)

• EXW – Factory in Ukraine, no delivery – 95
• FCA – Warehouse in Ukraine, ready for shipment – 100
• DAP – Delivered to Poland, without customs clearance – 120
• DDP – Delivered, including duties and VAT – 142

 

Price Change Coefficient by Region

The ratio of the factory price to the retail price varies by market due to differences in logistics, taxation, and retail markups:

Region | Typical Price Increase Coefficient

• Western Europe (Germany, France) – 3-5x
• Central and Eastern Europe (Poland, Czech Republic) – 2.5-4x
• North America (USA, Canada) – 4-6x
• Middle East (UAE, Saudi Arabia) – 5-8x
• Asia (China, Japan, South Korea) – 3-5x
• Australia – 4-7x

 

Price Coefficient by Market Segment

The final price also significantly depends on the furniture’s positioning within a specific market segment. Budget furniture has a lower markup coefficient, whereas premium products receive a higher markup due to branding, significantly higher marketing costs, potential additional delivery costs (e.g., refrigerated container), exclusivity, and high-quality materials.

Market Segment | Typical Price Increase Coefficient

• Budget (Mass Market) – 2-3x
• Mid-Range – 3-5x
• High (Premium) – 5-8x
• Luxury – 5-12x

 

Important Disclaimer

The calculations provided are not pricing guidelines but rather an illustration of the price difference between Ukraine and foreign markets, considering the experience of furniture manufacturers we have communicated with and/or assisted in transactions.

 

Conclusion

The final retail price of exported furniture is influenced by logistics, taxes, retail markups, and market strategy. Budget furniture has a lower markup coefficient, whereas premium products receive a higher markup (greater added value) due to branding and exclusivity. Businesses must carefully analyze target markets and pricing strategies to maintain competitiveness and profitability.

📌 The example above illustrates how a factory price of 95 units can lead to a retail price of 307.5 units in Poland, considering all costs. This helps exporters understand key pricing factors and build an effective market entry strategy.

 

Oksana Donska,

Export Expert, Board Member of UAFM