The one major topic rippling through this week’s Sourcing at Magic show was this: price increases.
With inflation reaching a four-decade high and fabric and supply chain costs soaring, manufacturers at the Las Vegas show said they have had to bump up prices by 15 to 20 percent on average to keep up with mounting costs.
At first, buyers balked at the thought of paying more because they didn’t believe they would be able to pass the higher prices on to customers. But now that everyone is raising prices, buyers have no choice.
“Buyers were not happy,” said Omar Abdelfattah, a board member for Egyptian clothing manufacturer El-Helal Company, which employs 1,800 people near Alexandria to make T-shirts, polo shirts, sportswear and sleepwear. “At the beginning, they said they couldn’t pay any increases, but at the end, they realized this is the situation.”
The Egyptian company ended up boosting its prices by 30 percent. That was to cover the 50 percent jump in fabric prices as well as mounting shipping costs and energy bills.
To offset higher prices, some customers opted to employ more polyester in their T-shirts because they felt customers wouldn’t be willing to ante up 25 percent more for a T-shirt. But most buyers opted to stick with cotton.
Higher production costs have cut into manufacturers’ profit margins, which is one of the reasons there were no more than 300 exhibitors at the show, which in the past has drawn as many as 2,000 vendors. An online version of Sourcing at MAGIC is available until April 1.
China used to make up some 80 percent of the exhibitors, but this year there were only around 20 Chinese manufacturers at the event held Feb. 13-16 at the Las Vegas Convention Center. Many of the sales representatives at the Chinese booths live in the United States. They said China has imposed strict travel restrictions on its citizens, and it is hard for Chinese citizens to secure a U.S. visa.
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Fewer Chinese exhibitors was probably good news for manufacturers like El-Helal Company, which believes clothing labels are starting to gravitate back to China for their sourcing needs. “With Covid, buyers were looking for other factories outside of China, and now they are going back to China because of the prices,” Abdelfattah said. “The Chinese are very competitive on price.”
Transportation costs were another major ingredient contributing to price surges. Manufacturers were swooning at the costs to ship goods and the difficulty in finding available containers. “Our shipping costs to Europe and the United States have gone up 40 percent,” said Serpil Yildirim, a sales and marketing senior merchandiser for Gap Parzarlama, based in Istanbul.
The company, which offers denim fabric, home textiles, yarns and ready-to-wear garments, has a major blue jeans factory that employs 1,000 workers in Egypt to make its Denimga label.
A shortage of electricity at times in Egypt have led to beefed up energy costs, and it has been difficult to get chemicals from China to Turkey where the company’s denim fabric is made. On top of that, wages have gone up 10 percent in the past year. “Buyers wanted to keep the prices the same, but we had to raise them 10 to 20 percent,” Yildirim said. “Buyers are still putting pressure on us to hold our price increases. But there is no way out of this.”
For a while, Ashish Garg, the owner of A.G. Fashion in Jaipur, India, was having difficulty finding empty containers to ship his womenswear to Europe, which buys 60 percent of his merchandise, and the United States, which accounts for 20 percent. Shipping costs were one of the contributors to his 20 percent to 30 percent hike in prices.
His shipping problems have disappeared for now, although higher shipping prices haven’t. And his fabric prices over the past year are up 50 percent. But he will continue to use cotton, viscose and rayon for his dresses, tops, scarves and other items that mix Western and Indian designs made at his factory that employs 150 people. “At the end of the day, I am about producing quality garments, so we are using the same fabrics.”
Swaran Singh, the co-founder of Pearls Apparel, a company that employs 600 people near New Delhi, India, held off raising prices to please customers. But when he didn’t make a profit, he ended up lifting prices 10 to 15 percent this year. “We had to be blunt,” he said. “Buyers understand now.”
To boost profit margins, Singh is shifting from lower-priced bulk production to more labor-intensive items that can fetch a higher price tag. He points to a rack of heavily embellished cotton dresses that he says wholesale for $80 to $100 instead of cheaper items that fetch $20 to $30. “We are doing more expensive things,” he said. “I don’t want to be into cheap pricing.”