The decline in cotton prices can not stop the pace of clothing prices

Cotton is not the “culprit” driving up the rise in apparel prices. The increase in production costs is an important reason for the increase in apparel prices. In addition, factors such as multiple circulation links and brand competition also contributed to the apparel price.

This year, the "roller coaster"-like cotton price seems to have gradually become stable. Not only did it show a decline, but it also fell below the country's price adjustment for storage and storage.

On September 26th, the domestic spot price of 328 cotton was RMB 19982/t, which has slightly rebounded after the country started its cotton purchase and storage policy, but it is still hovering around the country’s announced new year's closing price of 19,800 yuan/ton. Compared with the more than 30,000 yuan per ton in March this year, the drop reached 36%.

Although the price of cotton dipped sharply, the price of clothing closely related to the price of cotton has not been loosened. The price of autumn clothing this year is still rising.

Clothing prices all the way up in September, the weather is still hot, autumn and winter clothing new products have been listed, Beijing's shopping malls in the high-end brand new coats in autumn, the price tag is still a thousand dollars, the market is difficult to find 500 yuan in the windbreaker. The increase in domestically produced women's clothing even exceeded that of imported women, which averaged 10%, and individual brands even rose by more than 30%.

The prices of imported women's clothing are also rising this year, especially for clothing produced in Asia, such as South Korea, India and other places, with an increase of 5% to 8%.

In addition to the rise in women's prices, some sports brand apparel also joined the tide of price increases.

Due to rising oil prices, labor costs, and shipping costs, Nike claims that it will raise the price of footwear and apparel products in the spring of 2012 globally.

Li Ning, a domestic brand sportswear company, also stated that due to the increase in wages and raw material costs, it is expected that the cost will increase by an average of 20% this year and the product price will have a double-digit increase.

Seven wolves, Summa and other brands said that autumn prices will definitely not drop, only increase.

Rising rigidity of manufacturing costs is the most important reason why clothing prices rise?

First, cotton is not the main reason for pushing up apparel prices. Cotton is the main raw material for the production of garments, and the price increase of cotton is indeed pushing up the price of clothing. It is just that this change does not transmit much to clothing prices.

Changing cotton into clothing has a process of price transmission. After the cotton is harvested, it is first spun by the spinning mill into cotton yarn, which is then woven into cloth by a cloth mill, dyed and printed by a printing and dyeing plant, and finally sold to a clothing company for processing.

In this process, the prices of cotton yarns and fabrics have indeed increased by about 50%; at the upstream of cotton mills, the price of cotton purchases has increased by approximately 70%; in the uppermost cotton farmers, the prices have actually increased by 80 percent. %.

Because the textile enterprises have low bargaining power for downstream garment companies, although the cotton raw materials in the upstream have been subjected to more than 50% cost pressure, they cannot fully transfer price growth to the downstream. Coupled with the fact that cotton mills can significantly share cost pressures and raw material costs are not a high proportion of total costs, the three firewalls have prevented the trend of cotton price increases from spreading to most branded apparel.

Furthermore, designers in the apparel industry can change materials or design savings, choose lighter, thinner chemical fiber as a substitute for cotton, and reduce cotton use.

Clothing prices are more to pursue profitability, and cotton is just one of the reasons.

Although the price of cotton fell this fall, it is difficult for textile companies to lower their inventory consumption to support the reduction in apparel prices.

The clothing and apparel industry usually starts designing clothes for the second year of autumn and winter a year ago. It usually takes three to four months from design to production of orders. Most of the clothes made now are cotton of this spring.

Due to the high price of cotton in the spring of this year, many cotton companies have accumulated large amounts of cotton at high prices, resulting in higher product costs. It is still in the stage of digesting inventory. In the clothing industry's order-based operation, the upward pressure on raw materials has passed from last year to today to the apparel terminal retail sector.

Second, the increase in production costs is an important reason for clothing prices. In the traditional clothing manufacturing and manufacturing cost components, raw material costs account for 60% to 75%, and processing and manufacturing costs only account for about 25%. The current situation is that not only raw material costs and processing costs are rising, but also in the garment production process, raw materials, energy, labor, and other cost expenses increase, and the ex-factory prices of apparel products also rise accordingly.

Rising rigid manufacturing costs will inevitably be passed to the next link, which is the most important reason for apparel price hikes.

The textile industry is a labor-intensive industry. The continuous rise in the cost of labor for enterprises has pushed up the price of clothing. After going through the “recruitment difficulties” and “employment shortages,” companies have invested money for workers in order to retain workers.

Regarding policies, the State Council notice stressed that the wages and benefits of textile and silk first-line production workers should be appropriately increased to ensure the sustainable and stable development of the textile and silk industries. The National "Twelfth Five-Year Plan" proposes that during the "Twelfth Five-Year Plan" period, efforts should be made to achieve an average annual increase of over 13% in the minimum wage standard.

Following the announcement in 2010 of many provinces and cities across the country that the minimum wage has been raised, starting from March 2011, many provinces in China have again raised their basic wages. The monthly basic salary in Beijing has been adjusted from 960 yuan to 1,160 yuan, and Jiangsu has used 960 yuan. Yuan was adjusted to 1140 yuan, the minimum wage in Guangzhou and Shanghai both increased to 1300 yuan, and Zhejiang adjusted 1310 yuan has become the province with the highest minimum wage in China.

Research shows that if the average wage rises by 10%, corporate net profit will drop by 5%, and some companies' net profits will even drop by more than 10%. In order to ensure operating profits, companies can only push up the price of clothing.

In addition, the rise in oil prices in the domestic market has caused freight costs to rise, and the price of apparel has naturally risen. Moreover, polyester fibers contained in clothing fabrics are all synthetic fibers, which are by-products of the petrochemical industry and the coking industry. International and domestic oil price increases will also cause clothing prices to rise.

From the texture, clothes can be divided into chemical fiber and fiber. Natural fibers mainly include cotton wool and hemp. This part does not exceed 30%; the rest are chemical fiber materials, that is, petroleum derivatives, which can be basically divided into polyester, spandex. , nylon and vinylon. The rise in oil prices directly affects chemical fiber prices.

Thirdly, multiple passes in circulation have pushed up the retail price of clothing. The difference between the ex-factory price of clothing and the final retail price is relatively large, and there is a continuous increase in prices in all aspects of the circulation process, resulting in a huge price difference between the terminal retail price and the ex-factory price.

In the apparel sales process, the costs of labor, logistics, warehousing, advertising, channel construction, shop rental, and water and electricity are all rising, and the clothing sales price is going up.

The operating system of the demerit points in shopping malls has made it necessary for apparel brands to consider the requirements of shopping malls, and it is inevitable that prices will follow suit. In addition, the multi-tiered agency system that has been formed over the years has also allowed a garment to go from factory to counter, and has undergone multi-agent sales in the middle, and the gross margin increase at each stage is currently around 15%.

Regional agents are also required to bear the pressure of inventory, plus the deduction points and promotion fees of the mall, and may increase their purchase prices into retail terminals.

Judging from the current asymmetric relationship between business and business, the mall is the ultimate winner. Shopping malls often hold promotions and price reduction activities. These discounts must be paid by the brand and do not raise the price. The profit rate will be directly affected.

The inertia of current price increases is about 30%. For example, a T-shirt with a cost of more than 20 yuan may go out of the factory for only about 30 yuan. If you go to a provincial agency, you may become 50 yuan. When you flow into a municipal-level agency, the price can rise to 80 yuan. Finally, the pricing of entering the retail terminal is determined by the brand awareness. The general brand may increase the price by 5 times, ie, 6 times the purchase price, and the famous brand may even reach 10 times. The top international brands are up to several times.

In addition, different retail terminals will also affect the fare increase rate. For example, the retail price of a general community mall is lower than that of a downtown business district.

Fourth, brand competition is also a factor in rising apparel prices. As a competitive brand with the most fierce competition among the homogenization brands, major brand apparels compete with each other on the high-end line, and prices have begun to follow international standards.

High-end brand apparel prices are almost a normal, but also the basic attributes of luxury goods positioning, to maintain price increases is the embodiment of the value of luxury clothing. The rising prices are in line with the brand strategy of high-end consumer goods. These brands need to maintain a constant climb in prices to ensure their high-end quality, while the slower price increase will be eliminated by the market.

In the face of China’s rising consumer spending power, high-end consumer goods companies need to maintain their high-end positioning through regular price increases each year, and low-priced brands will become mass consumer products.

Some domestic producers are trying to raise their prices by purchasing foreign brands or registering foreign brands and packaging themselves into international brands. Some of them are trying to prevent their brands from losing market share in the competition and adopting a price increase strategy. Brand positioning, closer to the distance between international brands. In addition, in order to keep consumers loyal to the brand, follow-up prices have become the choice of brand clothing. (Author: Liu Cheng of the Department of Commerce Circulation Productivity Promotion Center analyst)

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