With the increase in cotton prices, retailers are likely to increase their product prices this year

Hike in cotton prices has left the retailers in a state of dilemma as they are uncertain whether they should pass the high input costs onto end consumers. According to a poll conducted by Retailing360, a staggering 100% of the respondents are of the opinion that the apparel manufacturers will be compelled to increase the retail prices of their products in the coming months due to the hike in cotton prices.

It has been noted that cotton prices have witnessed 30% rise since the last 3 months, whereas yarn prices have risen by 20%. As a result, the increase in cotton and yarn prices is immensely impacting yarn and fabric manufacturers as these are two major inputs. There has already been a hike of 5-10% in fabric prices. “Cotton is in high demand during the scorching summer as it is a light fabric and keeps the body cool. Therefore, retailers expect that the rise in apparel retail prices should not have a drastic effect on consumer spending,” says Rishab Chauhan, manager of Global Pvt Ltd, a small-sized apparel retailer in Pune.  

Impact on premium brands

Leading brands such as Izod, Van Huesen and Arrow, among others are planning to increase their product prices by up to 10%. However, brands such as Marks & Spencer and Wills Lifestyle are bearing the brunt of high cotton prices in order to maintain their sales margins.

Owing to increase witnessed in consumer spending, most garment retailers are expecting good sales despite an increase in the retail prices of their products in the premium segment. “Due to the economic slump, retailers had to lower their product prices in order to attract more consumers. However, the increase in tax slabs that led to an increase in disposable income is expected to bolster sales this year,” says Sanjay Gupta, proprietor of Apparel Limited, a small-sized ready-made garment retailer in Hyderabad.     

With domestic retail market on a revival mode after weathering recessionary pressures, retailers expect their sales margins to remain largely unaffected. Therefore, despite rise in the garment prices, retailers would continue to earn high profits.

Sabrina Mitchell