Rising Cotton Prices Hit the Pocket Book

04/11/2010 at 5:30 am Leave a comment

Gone are the days of $5 tees and undies.  Shoppers will begin to pay more for clothing next year as skyrocketing cotton prices force companies to take their chances with price increases even as consumer demand remains slow.

Cotton prices have been driven higher by demand from developing countries, mostly China and India, where rising wealth is boosting consumption patterns.  Severe weather is also to blame, with heavy rains in China and flooding in Pakistan damaging many crops and limiting cotton supply.

Companies like Jones Group, which includes lines Nine West and Anne Klein, and Hanesbrand plan to raise prices on clothing by as much as 10%.  When cotton prices began to rise a year ago, retailers and manufacturers were uncertain how much of the cost would be passed along to consumers but with  cotton now up approximately 80% since the beginning of the year, apparel companies can no longer eat the costs.

Children’s clothing manufacturer and retailer Carter’s Inc., which includes OshKosh B’Gosh brand,  said in October that costs for its spring 2011 product rose 11% and that it expects costs to rise even further for fall merchandise.

“The price increases mark a sharp reversal in apparel price trends, which have been deflationary for at least a decade”, says Emanuel Weintraub, a retail consultant.  “The moves are setting up a “high-stakes poker game” with retailers”, he says, “who are reluctant to accept price increases while their customers remain in a thrifty mood”.

“Larger, well-capitalized vendors are more likely to have the bargaining power to convince retail partners to pass through the increases but some of the smaller firms could be forced out of business”,  says Mr. Weintraub.

Retailers have been shielding customers from the full impact of commodity price rises for some time now.  Weak consumer confidence means retailers are competing even more fiercely for the limited discretionary spending available.  That situation is unlikely to change from now until Christmas, with retailers clamouring to win the attention of cash-strapped consumers through discounting and promotions.

Entry filed under: Cotton, Economy, Organic Apparel. Tags: , , , .

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