Rising Sourcing Costs Will Affect Margins

The apparel and textile industry is one fraught with razor-thin margins. Its increasingly tricky trajectory involves staying on top of fickle consumer demand and navigating a flagging retail landscape. Now, the issue of rising sourcing costs is the next headache for companies to grapple with.

“The margins within the supply chain are incredibly tight,” Adam Mansell, chief executive of not-for-profit organization UK Fashion & Textile Association told Business of Fashion. He continued, “Unless you are supplying top-end luxury goods, it is a very difficult world to be in at the moment.”

Factors Affecting Textiles

America’s favorite textile, cotton, reached a six-year peak in the US, reported the Business of Fashion. Natural disasters like Hurricane Florence in North Carolina further impacted cotton production, keeping prices above average. The costs for wool is reaching a peak as well, as farmers are unable to meet the demand.

Naturally, the circumstances as mentioned above would lead brands to turn to synthetic fabrics such as polyester. But, oil, which is required to fabricate the textiles, has seen its prices more than double. The impact is two-fold as it costs more to produce synthetics, and it costs more to ship them. Now, there is not much leeway as there has been in the past.

The age-old practice of moving production to a country with lower labor costs no longer proves effective long-term. Sourcing Journal explains,” almost all current sourcing countries are getting more and more expensive.” Brands are forced to choose between raising prices or allowing the costs to eat away further at their margins. Both are a tough pill to swallow. Do they succumb to the competition with a price increase? Or, do they absorb the cost? Turns out, if it’s the former, there is a solution concerning fighting back against the competition- innovation and speed to market. The McKinsey State of Fashion 2019 report details how these factors will no longer be extra credit for companies. Soon it will be a requirement.

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