“It’s a perfect storm” were the words of one eminent brand owner at the opening of streetwear show Bread & Butter Berlin this week. He was referring to cost pressures, which as the market moves deeper into the spring 11 buying season are weighing heavier and heavier on suppliers.
According to some sources, freight costs will hit a 10-year high next week - which, for one menswear supplier, equates to a whopping £1.20 increase on the cost price of a suit. Meanwhile cotton prices, labour costs and weak sterling are also driving increases.
One polo shirt brand has already had to put RRPs up by £10 on last year for autumn, while another major young fashion brand is grappling with a 100% increase on the cost price of its shirts.
The game is changing so fast that others can’t even get their factories to fix a price, while a recovery in the US retail market means that American brands and retailers are flooding Chinese factories with tasty volume orders, tying up production. You couldn’t make it up (no pun intended).
Add to that the VAT rise due in January and there is some serious inflation on the horizon - something which dominated conversation at the opening of B&B. Brand margins are now so paper thin that some are turning down sizable orders as financially unviable. Others are jiggery pokering by increasing margins in the categories they think can take it to offset the hit on more price-sensitive styles. Others are heading to India in a late search for alternative production.
Consumer confidence remains incredibly fragile, yet the mood in Berlin was reasonably positive. If we think we worked hard to beat the recession last year, we’ve not seen anything yet.