Raw material prices do not have to panic costs can be so digested

Since the beginning of this year, due to factors such as the increase in the prices of raw materials such as cotton and the increase in the cost of labor for enterprises, forecasts for clothing price increases have long been widespread. Is the sale of clothing on the market today really expected as before, and will prices increase a lot? What are the trends in the price changes between different brands in the apparel industry?

Advantage brand enterprises: Apparel retail prices have been rising together with raw material costs and employee salaries. They are large and medium-sized enterprises with brand strength in the apparel industry.

Some of the financial and other information published by the apparel listed companies attested to this reality: the Xtep semi-annual report showed that the average selling price of apparel products increased by 13.9%; Anta Financial reported that the price of apparel products increased by 7.1% to 49.6 yuan in the first half of this year. Li Ning also announced in June this year that the retail price of apparel products will increase by 17.9% in the fourth quarter of this year; Youngor announced that the average price of new products launched this year will increase 15-16%...

For dominant brands, the increase in prices will not have a big impact on sales, because this part of the consumer groups is mainly buying grades, buying feelings, and will not be too sensitive to price increases.

Export-oriented enterprises: The first half of the increase in profit was due to the increase in profits, which made the Chinese garment industry feel refreshed. The export situation was excellent. Knitted garments and knitted fabrics maintained a strong export growth trend. Moreover, there was a phenomenon that “quantity and price increase”: From January to June 2010, the average price of knitted garment exports was US$2.52 per item, an increase of 6.33% over the same period of last year. Among them, the average price of wool knitted garments in June was 5.96 US dollars/piece, a year-on-year increase of 27.08%.

However, most export clothing companies stated that their export quotation was influenced by factors such as raw materials and labor costs. The price actually increased, but the profit of products was decreasing.

Domestic SMEs: Squeezing profit margins does not dare to raise prices easily. For those small and medium-sized processing companies that do not have a brand effect, their prices will not rise. Most SMEs clearly stated: "We will not increase prices, and prices are almost the same as last year." This phenomenon is even more obvious in the wholesale clothing market. A large number of unbranded clothing and small brand clothing can only compress their own profit margins, and they do not see the signs of price increases at all.

“Manufacturers are forced to raise prices due to cost pressures, but we, as wholesalers, are afraid that raising prices will scare away retailers and customers. There is no way but to reduce costs...” said a clothing wholesaler. Unlike us, their profits are high and the cost impact is not so great. Moreover, they have advantages over us and it is easier to pass on the costs."

According to industry insiders, garment companies can choose simpler processes in the production process, produce simpler styles, and use cheaper raw materials to absorb costs. However, the ability of each company to digest costs is divided, and some smaller companies are less able to afford it. Merchants should respond to this change according to their own situation!