The Turning Point Of The Fashion Industry: The Price Rise After Shrinking

"The era of deflation in fashion is over," concluded Richard Noll, chairman and CEO of the clothing industry's famous Hanesbrands company.

The prices of raw materials and cotton for clothing increased by 50% over the previous year, and labor and freight rates were also climbing. Moreover, a large number of garment factories went bankrupt in the 08 financial crisis. These factors have restricted the supply volume today in the demand surge.

The rise in the RMB exchange rate against the US dollar is even worse, resulting in higher cost of clothing for China's exports.

"Global consumers have noticed that the price of products is rising, not only because of the increase of production costs, but also by the imbalance between supply and demand."

Noll said, "there is no doubt that the series of price increases we are seeing now will affect the overall price of clothing in 2011."

In order to control costs, reduce inventory and speed up the flow of goods, the distributors in apparel industry have become the trend, which brings many turnover pressure to suppliers.

In order to pport goods from Asia and Central America back to the United States, Hanesbrands has spent $15 million on air freight this year.

Nol said frankly, "when lead time is limited (when the order to delivery time) is limited, you need to deliver goods at the fastest speed.

Air pportation is our only option, which is much more expensive than shipping. "

Retailers and distributors naturally want to shift these extra expenses to consumers.

But at present, the economy has not yet fully recovered, the unemployment rate of up to 9.5% of the United States, this is undoubtedly a major challenge.

Eric Wiseman, chairman and chief executive officer of VF group, the world's largest garment producer, warned that this would be a "rest" for the fashion industry's recovery.

Indeed, there are more and more signs that the pressure of rising costs in these production processes will be accepted by consumers sooner or later.

But this may be a long process, and the price will continue for more than a decade.

According to us trade department data, clothing prices began to slide after reaching a high level in 1992, except for 2 exceptions, including a slight increase of 0.6% last year.

Despite these small growth, the price of clothing in 2009 is still lower than it was 17 years ago.

Dealers and retailers continue to fight for price. This is a long-lasting negotiation that can span the whole quarter, and even in the next quarter, retailers will come back to suppliers to lower the purchase price to compensate for the losses they suffered in the last quarter.

For example, VF group relies on its strong brand base, and the global production and raw material supply network to minimize the increase in costs.

But the increase in the cost of China's labor market has affected the sharp increase in the cost of some products, though less than 25% of their products come from China.

Investors are paying close attention to the price of cotton. Last year, the price of cotton surged 53% to 76 cents per pound.

The cost of materials accounts for 50-60% in the cost of VF products, while labor accounts for 20%.

"The price of cotton and denim is a factor for us," Shearer said. "The price of copper and zipper is also a factor for us."

"Cost is not the only problem that needs to be considered."

David, managing director of AlixPartners retail department, American business consulting company

Bassuk stressed, "prices are rising, but at the same time, we also hear consumers' complaints about rising prices.

Retailers and brands know this very well.

We will see more and more players, whether retailers, brands or manufacturers are losing in this competition.

Ultimately, the rise in prices will affect consumers.

The key is how consumers choose to face the price increase.

The fashion apparel market has experienced several years of deflation, and trying to raise prices is indeed an adventure.