The China Crunch

By Barry Lipsett, President & Owner

 

The big topic in the apparel industry right now are prices from overseas, especially China. Cotton prices alone surged nearly 10%, reaching their highest since records began back in 1870 with the creation of the New York Cotton Exchange. “I’ve seen a lot of big moves, and this exceeds everything,” said Sharon Johnson, Senior cotton analyst at First Capital Group. “It’s not something you’re going to see again in your lifetime.”

 

Floods have damaged the cotton crops in Pakistan and other cotton-producing countries reducing the supply and driving up the price. However the main issue behind the increase in cotton prices overseas remains with China. Increased labor costs in China, as well as a sky rocketing demand in China for cotton-based apparel are factors forcing costs up. “American consumers better get used to rising prices on the shelves of Wal-Mart and other retailers,” said Jessica Lo, Managing Director at the Chinese Market Research Group in Shanghai. “China’s manufacturers are getting squeezed not only by rising cotton costs but also soaring real estate and labor costs.”

 

Any retailer offering China made goods from toys to apparel, will be feeling the pressure to raise prices. According to Supplier Global Resource Magazine, executives from Kohl’s, Aeropostale and Guess have indicated cotton prices are exerting pressure on their product costs’. Analysts expect retail prices overall to steadily climb, with the most noticeable markups found in relatively low-cost items like T-shirts.  “It’s really a no-choice situation,” said Wesley R. Card, President and Chief Executive of the Jones Group, the company behind Anne Klein, Nine West and other brands. “Prices have to come up,” reports the Cleveland Palin Dealer.

 

In our industry, it doesn’t matter what you’re selling - if it is China-made you will be feeling the financial crunch. Many suppliers and manufacturers from bags to apparel have already raised pricing several times this year with others shortly following suit. I had Charles River Apparel hold our prices throughout the majority of 2010 (absorbing  the price increases), but with the most recent round  of price increases from overseas I was left with little choice but to increase prices effective December 31.

 

Our Vice President of Production, Rainer Friedrich, just returned from a lengthy trip to Asia and commented to me that in his thirty-five years in the apparel industry, he had never seen anything like these price increases. Again, it’s not just cotton that is going up as it is materials costs and labor costs overall out of China. With the New Year just days away, my wish for 2011 is for stabilization -- and some sanity -- to return to the prices coming from overseas.

Comments

[Tom]

good luck 2011, Hope will have stable market in 2011..