Due to the outbreak, several things transpired in the fashion world, including a near-complete shop shutdown, a swift shift to producing masks and hand sanitizer, and now, the danger of price hikes. Price inflation is something the fashion business hasn’t seen in a generation or more in the ever-promotional, always-on-sale environment.
The market’s supply chain has been affected as a result of the outbreak, and fewer clothes have been created since last year. As a result, the cost of newly manufactured apparel has increased. This is supported by the simple logic of demand skyrocketing as the world opens up to business.
Why are clothing prices rising?
According to the report, which polled more than 220 international fashion executives and experts, inflation in fashion is caused by a combination of material shortages, transportation bottlenecks, and increased shipping prices, which puts a strain on supply and demand.
Why are high-end brands raising their prices?
On Wednesday, pricing increases for Louis Vuitton products went into effect, with certain handbags seeing a 26 percent increase in price. Early this week, a spokeswoman for the French luxury goods brand, which now holds the title of largest in the world, confirmed the impending increases, saying that “The increase in price tags was caused by changes in production costs, raw materials, shipping, and inflation. Meanwhile, LVMH chairman Bernard Arnault announced last month that price increases are in the works, stating that the luxury goods business has room to raise prices of its luxury goods and services “In an inflationary environment, margins must be protected.”
Price increases are routinely used by luxury brands, such as Louis Vuitton, to offset the effects of inflation and currency fluctuations (the latter of which is a key driver of global gray market sales). However, given that luxury groups, including Louis Vuitton owner LVMH, have touted sustainability, there is likely more going on with the recent pricing plays than just protecting margins “Revenue and profitability are at all-time highs.” LVMH recently announced that its Fashion & Leather Goods division and the group as a whole saw increased profitability in 2021, with the operating margin (i.e., the profit a company makes on a dollar of sales after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax) for 2021 at 26.7 percent, up 8 points from 2020 and 5 points from 2019.
While Louis Vuitton and other similarly situated companies primarily “cite cost inflation for rises,” Neev Capital managing director Rahul Sharma stated on Wednesday that luxury’s record-high margins suggest that the latest price hikes for Louis Vuitton, at least, are also about “pricing power and creating scarcity,” echoing sentiments expressed by UBS analysts this week. The practice of luxury brands using price increases as a positioning tool as well as a weapon to offset inflation appears to be guiding enduring price hikes for Chanel, which appears to be angling to align its model more closely with Herms, which maintains a relatively tight hold on and enjoys cult-like demand for its most coveted offerings, thanks to its pricing and careful distribution.
To be honest, costs for brands in the premium market and beyond are rising across the board. The cost of leather products production for luggage, such as suitcases, travel bags, backpacks, and other types of bags, is on the rise, according to Federal Reserve Economic Data.
With rising costs in mind, manufacturers that haven’t raised prices yet are likely to follow Louis Vuitton’s lead. Chanel, Dior, and Celine have already raised prices, according to a note from Barclays analysts, and Herms is poised to follow suit to some extent (likely modestly). Tag Heuer and Hublot, both owned by LVMH, have announced price increases for April, while Moncler, Prada, and Versace, as well as Michael Kors owner Capri, have all announced price increases.
Furthermore, Kering’s management indicated that it would raise prices across its brands in 2021, following price hikes for its major brands in 2021, when it reported its 2021 revenues on Thursday. (Gucci, for example, raised prices twice in 2021 and has been increasing the average price of its offerings more broadly by introducing capsule collections, such as the Aria collaboration with Balenciaga.)
Returning to Louis Vuitton’s prices, one of the things that stands out more than the brand’s moves to maintain its record profitability and boost its positioning in the eyes of consumers (and thus retain its market share) is the brand’s pricing strategy “The ongoing price disparity between its offerings in China and other markets is a source of “luxury” goodwill. According to Bernstein analyst Luca Solca, the company’s latest price increases “are consistent across different markets on most of the products,” with “higher price increasesin France, the United Kingdom, and the United States than in China for some of the entry-level monogram canvas bags,” but the China price gap remains.
Is clothing becoming more expensive?
Pro tip: It will be difficult to avoid being overcharged on groceries. Ramhold recommended keeping an eye out for weekly specials and stocking up when you can. While clipping coupons may appear to be a thing of the past, many retailers now offer digital offers or membership discounts that might help you save money. A credit card with supermarket rewards can also help you save money on a weekly basis.
Clothing
Americans are finally ready to ditch their sweatpants, but now isn’t the greatest time to go shopping. Despite the fact that clothing sales are expected to fully recover this year, with many shoppers looking to refresh their pandemic-era wardrobes, supply chain pressures will drive retail prices higher by an average of 3.2 percent, according to a McKinsey report on the Business of Fashion, with 15% of fashion executives expecting price increases of 10% or more in 2022.
Turn your old clothes into cash before you buy anything new. Tradesy, Poshmark, and thredUP are just a few of the sites where you can consign in person or online.
What exactly is inflation?
Inflation is defined as the rate at which prices rise over time. Inflation is usually defined as a wide measure of price increases or increases in the cost of living in a country.
What is the impact of inflation on the fashion industry?
Inflation’s Consequences: Inflation will disrupt the garment supply chain and cause volatility in the global apparel market. A rise in the price of clothing leads to a decrease in the number of garments purchased.
Why did LV increase their prices?
The internet was buzzing earlier this week with rumors of yet another Louis Vuitton price hike, and it’s finally here. This is the brand’s second price hike in as many months, following the brand’s latest price hike in 2021, which occurred in October. Price hikes are par for the course for luxury goods fans, and Louis Vuitton isn’t the only luxury business to raise its pricing since the coronavirus outbreak began. Herms and Chanel have likewise consistently raised their prices, citing inflation and supply chain concerns as justifications.
According to Reuters, the hike is due in large part to “changes in production costs, raw materials, transportation, as well as inflation,” according to a representative for the legendary French luxury company. Despite the ongoing global epidemic, demand for luxury products has increased, helping businesses to justify their price increases.
Currently, the price rise appears to be affecting practically all bags and accessories. Some of the brand’s most popular monogram bags, which are popular among first-time shoppers, are witnessing significant price increases. Increases in the Speedy family ranged from ten percent to seventeen percent. The Speedy 25 is now $1,490, up from $1,350, and the Speedy 35 is now $1,620, up from $1,390. The popular Louis Vuitton Pochette Accessoires, which were once affordable to individuals looking to begin their collection, have recently increased in price from $1,050 to $1,290, a significant 23 percent increase. The Neverfull family also witnessed significant gains in all sizes, ranging from 16 to 20 percent.
Check out some of the price hikes on popular Louis Vuitton bags below, and join the discussion on tPF right now.
Is Louis Vuitton available for purchase?
Louis Vuitton does not have any sales and does not have an outlet store. If you see Louis Vuitton products on sale online, it’s almost certainly fake.
Why is the price of cotton rising?
Cotton prices have remained high due to increased demand from the textile industry and the economy’s continued opening. This year’s production in the Indian markets is expected to be around 356 million bales, which is slightly lower than the previous year.
What caused the increase in cotton prices?
So we’re back to economics at the end of the day. Supply, demand, manufacturing efficiencies, consumer preferences, and prices are all factors to consider. What’s strange is that the price of cotton has increased while the price of imported garments has decreased. What’s the deal with that?
So, what’s the deal? Cotton from the previous season was used to make the clothing imported this year. Cotton’s run began in early 2020, implying that such price hikes would be reflected in 2021 garment import costs. However, the exact opposite happened.
Why did cotton choose to run up when it did is a fundamental question. After all, 2020 was a bad year by any standard. Many economies were in lockdown, and the shipping issues that had wreaked havoc on the industry this year were still months away. Government stimulus programs, on the other hand, were injecting money into economies around the world, allowing inflation to sneak into supply chains, starting with raw commodities.
Then there’s the matter of supply and demand. China, for example, bought a lot more U.S. cotton to meet the needs of mills who didn’t want to use Xinjiang cotton. The Xinjiang forced labor issue is still alive and well. Cotton grown in Xinjiang accounts for roughly a fourth of the global crop. Nonetheless, from a pricing standpoint, it has been essentially barred from international markets. Chinese mills frequently use it just for home consumption. As a result, an artificial shortage is created. We’re in for higher pricing as a result of late harvests in the United States and a difficult crop in India.
And, of course, garment demand is up this year. In fact, in 2021, garment imports will surpass those of 2019. They’re unquestionably higher than imports in 2020, when the pandemic was at its peak. Increased demand, on the other hand, leads to higher prices, particularly when coming off a bad year. As a result, demand for the various components of the final garment may increase.
Sticking the landing
To blame cotton for industry inflation, though, is to miss the point. The main causes of rising inflation are supply chain interruptions and dramatically higher shipping prices. Cotton prices, on the other hand, fluctuate often. Cotton used to sell for just 50 cents per pound not long ago. Sure, $1.20 a pound is more than quadruple that, but raw material exchange shouldn’t be vilified. Just a little more clarity. For brands, this entails collaborating closely with textile suppliers to gain a deeper understanding of how margins are impacted. Let go of the spin and embrace the reality instead.
Consider this: a pair of pants includes approximately 1.5 pounds of cotton. So, if the price of cotton used in jeans is about 50 cents per pound (as it was at the end of the first quarter of 2020), the total cotton cost each pair is around 75 cents. Furthermore, when cotton reached $1.20 a pound recently, that equated to $1.80 per pair of trousers.
However, if a pair of jeans costs $80 wholesale, an increase in cotton prices from 75 cents to $1.80 per jean still represents a small percentage of the wholesale price. “Yeah, but my overall raw material costs, including yarn and fabrics, keep rising up, hurting my margins,” you would argue. That is, of course, correct. However, it places the price issue where it belongs: with the spinners, weavers, and knitters, because each level of the supply chain will strive to tack on a few cents to the prices they charge for their goods. What’s the end result? An increase in the cost of materials for garment manufacturers.
It’s human nature to want to pay only for what we think a product is worth. Indeed, such perspectives may overlook economic realitiesa tendency that is unquestionably human. However, when it comes to cotton, impressions typically take precedence over facts.
It’s comparable to comparing gasoline to a car. Yes, gasoline makes a car run, but we use gasoline to power our cars in the first place so that we can travel. Of course, we pay attention to the gas price at the pump when filling up, but we do it anyhow because we need to get somewhere. We may not like the gas price, but that is unimportant when we need to get somewhere for a meeting or job.
Let’s be real
So, do rising cotton prices actually hurt clothing manufacturers? The quick response is that the answer isn’t straightforward. The long answer is that rising raw material costs enable supply chain components to simply boost their pricing. These hikes, on the other hand, hurt garment companies by driving up expenses and compressing margins if they can’t be passed on to customers. That’s where the problem arises.
Price variations in the supply chain, on the other hand, occur in both directionsfrom the top and bottom. What about all the goods that won’t arrive in time for the holiday shopping season? Is it possible that we’ll have a fire sale in January? Maybe. And let’s say the holiday shopping season isn’t great. There will be even more items to dump somewhere in that situation. It could end up being a disaster.
As existing inventory is worked off, demand for new products dries up, and the lowly cotton growers may take it in the neck once more. Do you want to save money on cotton? It’s known as “demand destruction.”