Hi-School Pharmacy drops supplier over tariffs tiff

Hi-School Pharmacy has featured a 12-cup coffee maker for years. It’s a staple of general merchandise retailers.

But this summer, the wholesale price skyrocketed for the product, which is made in China. The Virginia-based supplier blamed Trump administration-imposed tariffs for the increase on the coffee maker as well as other consumer goods.

Hi-School Pharmacy executives, however, were skeptical and resisted the increase. They eventually made a decision they hadn’t anticipated when the push-and-pull talks began with their longtime supplier. The experience provided a learning opportunity about tariffs for the executives, as they made a choice that best serves the company through the end of this year and through the crucial holiday shopping season. But when it comes to tariffs, they’re already concerned about 2019.

The company’s credentials in Vancouver have few peers. The High School Store opened in 1925 on Main Street across from Vancouver High School. In 1939, a pharmacy opened next door, absorbed its neighbor and the venture was named Hi-School Pharmacy. The store was sold in 1948, and it grew some more.

In 1967, pharmacist Steve Oliva, who was 27, bought Hi-School Pharmacy. In the 1970s, Oliva built new stores and purchased others, rebranding them as Hi-School Pharmacy stores. The chain grew to 42 stores in Northern California, Oregon and Southwest Washington before some stores were sold to Walgreen Co. in 2003.

Hi-School Inc., which kept its headquarters near downtown Vancouver, now has 22 stores, 15 of them with hardware sections. That means the company lacks the size and reach of its big-box competitors, said Stephen Barrett, vice president of store operations. Still, the locally owned company checks its rivals’ prices daily to be competitive.

“I think we, as a small business, do a pretty good job to compete with those big-box stores who have better buying power than we ever will,” Barrett said. But “the retail industry is getting difficult. I mean, the government is not making it easy on us to buy items and put merchandise on our shelves.”

Barrett was referring to tariffs.

The U.S. has assessed tariffs on $250 billion of Chinese imports, roughly half of what China ships to the U.S. annually. On Jan. 1, the levy is scheduled to jump to 25 percent. In turn, China has retaliated with tariffs of its own on American products.

Big price jump

This summer, Hi-School executives began seeing increased wholesale prices for some of the goods, particularly countertop kitchen appliances, said Rick Meyer, chief operating officer.

“We’ve had a brand of appliances that we’ve carried for the last 20 years,” Meyer said. “They came to me with a 30 percent (wholesale) increase in July and ended up creating a situation where I just stopped doing business with those guys (and) moved to another manufacturer.”

Meyer said the sales representative used tariffs as the excuse for the 30 percent wholesale increase.

“I can understand components of an appliance going up 2 percent or 5 percent or 10 percent,” Meyer said. “But not the entire item.”

That’s because, to his understanding, several of the kitchen countertop appliances with increased wholesale prices, including the 12-cup coffee maker, had not yet been affected by tariffs.

A spokesperson for Hi-School’s former supplier defended the company’s action.

“The tariffs that were enacted by the United States in July and September on imports from China have impacted a small number of Hamilton Beach products,” Mary Beth Brault, the Hamilton Beach group manager for corporate and consumer communications, said in an email. “Additionally, any other product categories that are cited will have price increases Jan. 1, 2019. If Mr. Meyer has other issues with Hamilton Beach and our pricing policies, he should contact his sales representative.”

For now, Meyer has moved on. Hi-School’s 12-cup coffee maker going forward is a Mr. Coffee brand, part of the Newell Brands family of kitchen counter appliances. It’s only slightly less expensive than the product Hi-School abandoned, but Meyer said Mr. Coffee is better known.

And there’s a principle involved.

“It was basically a failure of a partnership that had been established for 20 years,” Meyer said. “For them not making concessions — it was necessary to make a pretty dramatic move on our part and change suppliers.”

Meanwhile, Hi-School has geared up for the possibility of more tariffs next year by purchasing several products now, getting a step ahead of those possible tariffs. Barrett said people who sell products to Hi-School have encouraged the practice and he said other retailers are doing the same.

So that means the Portland warehouse on North Vancouver Avenue where Hi-School stores its goods is more full than at any point in the past five years. In early November, it essentially had no storage room left.

It’s a protective action, Barrett said.

“We’re buying ahead of the curve so that we can avoid absorb any tariff increases,” he said, “and affect retail pricing into 2019.”