Retailers brace themselves for cost increase

Fashion retailers are preparing themselves for rising sourcing costs, knowing it will be tricky to pass them onto consumers, just-style was told today (September 23).

It follows news earlier in the week that cotton prices have broken through the $1 per pound barrier for only the second time in history.

Josh Green, chief executive of trade data firm Panjiva, told just-style: “We currently have raw material prices going up at the same time as labor prices, and that is a really tough combination.”

With consumer demand also in slow recovery for many mature markets, fashion retailers also face the challenge of keeping prices at bay.

Green said: “The total cost of production is going to be impacted significantly by rising cotton prices and most companies are preparing for increasing costs.”

Green added it will be difficult not to pass these costs onto consumers, but that most retailers may prefer to substitute cotton-rich products, or even absorb the margin deficit themselves.

A combination of droughts in China, the world’s largest cotton grower, together with export limits in India and floods in Pakistan, are blamed for rising cotton prices.

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