Apparel Sourcing Intelligence - Worldwide

Who’s paying for UK price cuts?

How are UK apparel retailers affording to slash prices when their US peers aren’t?

UK clothing prices again fell 9.3% in February compared to the same month in 2008. The equivalent US measure showed prices still rising – just by 0.8%, but still rising. And that’s extraordinary, since retailers on both sides of the Atlantic seem to be having similar pressure on sales – but the British have a 30% devaluation to deal with as well. And with almost all clothes imported, and most vendors trying to price in euros or dollars, someone’s having to pay for those cuts.

Part of the explanation might simply be that British retailers are more prepared to take a profit hit. Another might be that, with the pound overvalued in 2007 and 2008, many overseas manufacturers priced in British pounds – and that we’ll be seeing the price of that in severe financial difficulties among UK-oriented factories. And a third explanation might be that retailers are expecting some hefty contributions from suppliers – both manufacturers and intermediaries – to offset these price increases. That was certainly the general sense of what Mark and Spencer said in an interview recently.

The issue is receiving scant attention in the UK, where the sight of inflation overall close to disappearing is grabbing everyone’s attention. But no-one can keep on forever reducing prices of imported products if most currencies have risen 30% in the past year.

Something, somewhere’s got to give. Whether that’s retailers’, manufacturers’ or intermediaries’ profit, or prices are going to move up sharply while sales really start to fall, is anyone’s guess. But things can’t go on like this for much longer