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Dawn of a new era comes at a price

Jessica Brown

The prospect of rising prices this autumn through the current fragile recovery is not going to be easy for retailers or shoppers to swallow.

The prospect of rising prices this autumn through the current fragile recovery is not going to be easy for retailers or shoppers to swallow.

With consumer confidence balancing on a precipice ahead of the emergency Budget due to be announced by Chancellor George Osborne on June 22, hitting shoppers straight in what’s likely to become their even shallower pockets later this year is going to hurt. And probably hurt badly.

But there is little alternative. An almost inevitable rise in VAT (expected to be to 20%) compounded by the rising cost of raw materials such as cotton, hikes in freight charges, increased labour costs for Chinese workers all set against a backdrop of the continuing weak pound against the dollar means inflation in the fashion sector is now inevitable - indeed, we’ve already experienced it on womenswear this spring.

It’s the dawn of a new era say some analysts (see p2 to 3), which will see shoppers trade away from price and up to more expensive and better quality retailers offering good customer service and brands. If so, then that’s great news for the indie, the department store, and indeed any multi-brand operator or branded supplier, but it seems premature to write off the value sector just yet.

Through the past 18 months it’s been the likes of Primark, Matalan, Peacocks and the supermarkets which have held the sector up. All face the same cost hikes as the middle and premium markets. The question is how they will manage them. Rumours abound that value players will hike £3 items to £4 - a 25% rise - to offset the impact on margins, but that seems a little too simplistic to be a reality.

One thing’s for sure, when your game is a volume one, autumn 10 looks unlikely to be an easy win.

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