A supplier raised prices: verify, decide, respond (without panic repricing)
A supplier price increase doesn't mean raising every price 5%. Verify the change, run three checks, and pick one of three responses — per SKU, with math.
InventoryX is in development and not available today. ClearStock is the live Shopify app.
The email lands on a Tuesday: "Effective January 1, we've adjusted our pricing to reflect rising input costs." Attached is a new price list. The unit on your bestseller went from $0.85 to $0.95 — about 12% — and the freight line that used to say "included" now shows a number.
This article covers the ordinary version of that letter, because most increases are cost creep, not trade policy. If yours is tariff-driven, the playbook is different — the tariff guide for small businesses owns that scenario, including its tiered pass-through framework, and the math there assumes the increase came from customs rather than a supplier's own costs. Here, the working sequence is the same either way, so start with it: verify exactly what changed, run three checks, then choose one of three responses per SKU. The two classic mistakes — repricing the whole store by the invoice's percentage, or absorbing silently until margin dies — both come from skipping that sequence.
Step 1: verify what actually changed
A "pricing adjustment" email is not information. Four variables can move, and each one is a different problem:
- Unit price. The obvious one. Ask whether it applies to all SKUs or a tier, and whether volume breaks moved with it.
- Freight. "Included" becoming "charged" is a unit-price increase wearing a different label. Recompute the per-unit landed cost, not the sticker.
- MOQ. A higher minimum means more cash per order and more stock risk on slow designs — a price increase compounded by a cash-flow increase.
- Terms. Net-30 becoming net-15 is a financing cost: you're lending the supplier two weeks earlier every cycle. Price it that way in your head.
Get all four in writing, with an effective date, before you respond to any of them. The reply that matters: "Can you send the itemized new price list — per SKU, freight schedule, MOQs, and the effective date, and confirm orders placed before that date run at current costs?" That last clause matters more than it looks. Existing purchase orders usually run at old pricing, which means your timing decision (order hard before the date, or don't) is worth real money — hoarding beats a 12% increase only if the product won't age out before you sell it.
And sanity-check the number itself. A $0.85 to $0.86 bump is a rounding event; a re-tiering to $0.95 is a strategy event. They get different responses.
Three checks before you respond
Check 1: margin structure — does the increase break your floor? Every store has a price below which a SKU stops being worth selling once fees, shipping, and your time are counted. The quick version of the floor math: minimum viable price = new unit cost ÷ (1 − target margin). At a 45% floor and a $0.95 unit cost, that's $0.95 ÷ 0.55 = $1.73. If your retail sits comfortably above that line, absorbing is on the table. If you're near it, absorbing isn't a decision — it's a slow leak. The fuller version of this calculation, including fees and shipping subsidies, is walked through in the product pricing guide; run your affected SKUs through it once and you'll reuse the sheet for every increase after this one.
Check 2: dependency — is this supplier replaceable? If you have a qualified second source for the item, the letter is an opening bid and you can negotiate from evidence. If they're your only source for a custom or branded item, your position is thinner than it feels, and the response shifts toward absorb-and-diversify. The second-source question — how to qualify one, what it costs, when it's worth it — is the dual sourcing guide's territory; read it before the second letter arrives, not after.
Check 3: demand elasticity, the owner-operator proxy. You don't need an economics degree. Ask: is this product comparison-shopped, or differentiated? A generic phone stand competes on price against a page of identical stands — customers punish increases. Your own enamel pin design exists nowhere else — customers have no comparison page. Your own sales history is the best proxy of all: what happened to units per day the last time you changed a price on this SKU? That answer beats any framework.
The three responses, and when each wins
| Response | Wins when | Fails when |
|---|---|---|
| Absorb | Margin stays above your floor and the SKU is a hero or price anchor | Margins were thin before the letter; you're subsidizing it forever |
| Pass through selectively | The SKU has margin room or differentiated demand | The SKU is commodity-priced and matched everywhere |
| Re-shop or re-negotiate | The increase is large, the supplier is replaceable, or a contract window is open | Single-source custom items with real switching costs |
The table's quiet point: "pass through" does not mean "raise everything by the invoice percentage." A uniform 5% across the store overprices your heroes — the products that anchor how customers perceive your whole catalog — and underprices the thin-margin stragglers that actually needed attention. Price the portfolio, not the invoice: heroes hold, add-ons move, losers get restructured.
Worked example: the enamel-pin line, 12% up
The letter: unit cost rises from $0.85 to $0.95 on every pin design — about 12% — freight still included, MOQ unchanged. Three SKUs, three different answers. All figures illustrative.
The hero: a 3-pin gift set at $5.90 — absorb. Old cost: 3 × $0.85 = $2.55, margin (5.90 − 2.55) ÷ 5.90 = 56.8%. New cost: 3 × $0.95 = $2.85, margin 51.7%. That's a five-point margin dip that still sits comfortably above the 45% floor, and the gift set is what first-time buyers judge the store by. Repricing it $0.30 to chase five points isn't worth the conversion risk. Absorb, and revisit at the next price review.
The add-on: a single budget pin at $1.50 — pass through. Old margin: (1.50 − 0.85) ÷ 1.50 = 43.3%. New: (1.50 − 0.95) ÷ 1.50 = 36.7%, and falling with every fee event. Reprice to $1.75: (1.75 − 0.95) ÷ 1.75 = 45.7% — slightly better than before the increase. Add-on buyers convert from the product page and the cart, not from a price-comparison tab, so the increase lands without much friction.
The loser: a promo pin sold solo at $1.20 — bundle-redirect. Old margin: 29.2%. New: (1.20 − 0.95) ÷ 1.20 = 20.8%, below the floor. Passing through means a $1.58-plus retail on what was a $1.20 impulse item — dead on arrival. The move is structural: pull it as a standalone and make it exclusive to a 5-pin bundle at $7.90. New economics: 5 × $0.95 = $4.75 cost, (7.90 − 4.75) ÷ 7.90 = 39.9% margin. The SKU survives as a component, the margin works, and no customer ever sees a price increase — they see a new bundle.
Same letter, same 12%, three outcomes. That's the entire argument against repricing by invoice percentage: the decision is per SKU, and the letter doesn't know your margins.
If prices change, tell customers — briefly
If the pass-through decisions change retail prices, say so once, plainly, where customers look: a line on the product page or a short post. What's changing, when it takes effect, done. No supplier blame — it reads as fragility and does nothing for trust. No essay. Stores that announce a date ("prices update January 15") usually see a small pull-forward of orders before it; that's a real demand bump, so stage stock for it rather than being surprised by it.
Whether to push back first
Absorb, pass through, and re-shop all assume the letter's numbers are final. They often aren't. Whether to open a negotiation first — asking about volume tiers, freight terms, or the increase itself before changing a single retail price — is a conversation with its own mechanics: the opener, the asks that cost the supplier least, and the walk-away math are covered in the supplier negotiation guide. At minimum, a signed price agreement going forward is worth asking for in the same breath.
Re-time the buy
Higher unit costs change order economics even where prices don't move: the same cash buys fewer units, reorder triggers arrive sooner in dollar terms, and every cash cycle stretches a little. Re-run the affected SKUs through your next buying cycle with the new costs loaded — when that review happens and what it should cover is the rhythm the retail buying calendar lays out. An increase answered in January and re-forecast at the next buying review is handled; one answered twice by panic is not.
Common questions
Do I have to accept a supplier's price increase? If you're on a signed contract with fixed pricing, no — terms hold until they expire. Without one, most suppliers can reprice with notice, and your real options are negotiate, re-shop, or absorb. Either way, get the new costs, freight, MOQs, and effective date in writing before building any response.
Should I raise all my prices when costs go up? No. A uniform increase overprices hero SKUs and leaves thin-margin products underwater. Score each SKU instead: margin above floor and price-sensitive demand means absorb; margin room or differentiated demand means pass through; below floor with no room means re-negotiate, re-shop, or redirect the product into a bundle.
How do I calculate the minimum price after a cost increase? Divide the new unit cost by one minus your target margin. At a 45% floor with a $0.95 unit cost: 0.95 ÷ 0.55 = $1.73 minimum. That's the floor, not a recommendation — the fuller pricing math with fees and shipping is in the product pricing guide.
What if I can't absorb the increase and can't raise prices? Then the response is cost-side rather than price-side: renegotiate terms (net-60 instead of a price concession), ask about volume tiers or freight, get a quote from a second source, or restructure the product with fewer components or bundle pricing. The negotiation sequence is its own playbook.
When does a price increase mean it's time to switch suppliers? When the dependency check fails twice: the increase breaks your floor, no response restores the margin, and a qualified second source exists or the item is commodity-easy to re-source. If the supplier is your only source for a custom item, the honest answer is usually partial absorption while you develop an alternative.
Next step
Ask the supplier for the itemized list — per-SKU costs, freight, MOQs, effective date, and confirmation that pre-date POs run at old pricing — before you touch a single retail price. Then build the three-column sheet for the affected line: old margin, new margin, response. It's about thirty minutes in a spreadsheet, and it turns a scary letter into a to-do list. The decision rule that survives every future letter: absorb only what the floor allows, pass through only where demand allows, and re-shop only when dependency allows.