Blog: Leonie BarrieAre clothing prices starting to unravel?

Leonie Barrie | 27 September 2010

With cotton prices last week breaking through the US$1 per pound barrier for only the second time in history, fashion retailers and brands are bracing themselves for higher costs amid escalating worries of a potential global shortage of the fibre.

The rising prices have come as a result of a combination of factors, most notably supply issues caused by the floods in Pakistan, plus heavy rain potentially reducing the crop in China. The situation has been worsened by doubts surrounding the ending of restrictions on exporting raw cotton from India.

And in what is seen as a "perfect storm" for the industry, raw material prices are going up at the same time as labour and freight costs, in a move that could mean firms have few options other than to pass these costs onto consumers.

Sporting goods giant Nike joined the chorus of retailers and brands warning of rising input costs in the supply chain, even though its stable of brands returned strong revenue growth during the first quarter. An 8% rise in sales and a 9% hike in profit to $559m were also buoyed by higher future orders in all markets except Western Europe and Japan.

Two of the world's largest clothing retailers - Walmart and H&M - are focusing their attention on working with their Chinese textile suppliers to reduce water, energy, and chemical use in their supply chains. The companies are partnering with the National Resources Defense Council (NRDC), whose Clean by Design techniques claim to not only reduce water pollution and energy use, but also help plants run more efficiently and use fewer resources, saving companies significant money.

Retailer Sears, meanwhile, is partnering with UK fashion chain Next to offer an exclusive online range of clothing and footwear to US consumers. Hundreds of Next products including dresses, shoes, lingerie, suits and accessories will be available on Sears.com under the terms of the new deal.

And as fashion retail giant Inditex last week posted a 68% hike in first-half net profit, buoyed by international expansion, an article on just-style asks whether the business model of its flagship Zara brand is now due an overhaul in line with its overseas growth.


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