The cost rose £5. The price rose £5. The margin fell.

Passing a supplier increase through pound for pound feels like holding the line. The arithmetic disagrees, and the gap compounds every time it happens.

By Steve 4 min read
Abstract bridge artwork for The cost rose £5. The price rose £5. The margin fell.

A supplier raises its price by 9%. The input cost on a unit moves from £60 to £65.40. The increase is passed straight through: the selling price goes from £100 to £105.40. Nothing has been absorbed, nothing given away, and the customer has been told the truth about why. Gross margin has just fallen from 40% to 37.9%. This is one of the most reliable sources of quiet margin erosion in businesses that price off cost, and it is almost never visible in the moment it happens. The decision looks…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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