Rising prices coming back in fashion
Consumers probably are going to see a 10 to 20 percent increase in the cost of a new wardrobe in coming months as manufacturers and retailers pass along escalating prices of cotton, rubber and other commodities.
Seattle Times business reporter
For Seattle shopper Paula Graves, a child-care worker making less money than before the Great Recession, economic relief can be found in the stacks of brightly colored polo shirts on sale at a local discount department store.
At $6, the shirts are surprisingly affordable, so Graves picks out a few color combinations for her 11-year-old son.
"I'd better grab them while the prices are low," she said. "I may not be able to afford them later."
Graves has good reason to act quickly: Like most shoppers, she already is paying more for food and gasoline. Soon, she'll probably pay more for clothes and shoes.
The cost of a new wardrobe is expected to rise as much as 10 to 20 percent in the coming months as manufacturers and retailers pass along escalating prices of cotton, rubber and other commodities to customers.
Although production costs have been going up for a while, shoe and apparel companies resisted price increases out of concern for people who tightened their belts during the economic downturn.
Now, with 2011 showing signs of economic hope, they see an opportunity to charge more for new jeans and a T-shirt.
"I think there's a feeling on the part of companies that consumers will be willing to pay higher prices, given that the economy has stabilized and may be improving," said pricing expert Rafi Mohammed, of Cambridge, Mass. "Some consumers can afford to step up their spending."
Mohammed, author of "The 1% Windfall: How Successful Companies Use Price to Profit and Grow," noted that skyrocketing commodities costs are squeezing profit margins, while workers clamor for long-overdue pay raises.
"Companies that were OK with lower profit margins during the recession are starting to demand higher margins," he said. "It's the perfect storm for pushing prices upward."
Shoppers to retreat?
Consider the Northside "Bighorn" mountain boot, which is designed in Marysville, made in China and sold by the likes of Fred Meyer and Amazon.com.
Triple T Trading, Northside's corporate parent, recently jacked up the wholesale price of the men's cold-weather boot after absorbing increased transportation and labor costs for several years. That means shoppers soon will have to pay an additional $5 for the latest version of the Bighorn, putting its price tag above $50.
"Everybody already is quoting higher prices," said Jack Wolfin, president of Triple T Trading. "For fall 2011, consumers probably are going to see anywhere from a 10 to 20 percent increase, depending on the category."
Still, there's a fear that higher prices will send shoppers back into hiding, especially amid a lousy job market and lingering economic uncertainty. January marked the seventh straight month of U.S. retail sales growth — though at 0.3 percent, the increase was the smallest since June and half of what economists expected.
"They probably won't get as much from me when prices go up," Graves said of the local discount store where she shopped Tuesday for her three young children. "I'll get them the bare necessities — socks, T-shirts, things like that."
Des Moines mom Gina Fletcher said she also will make fewer purchases rather than pay more for products as they become pricier.
"I'll probably spend the same amount, so I might just get less for my money," said Fletcher, a flight attendant who bought $30 of new children's clothes at Gymboree in Westfield Southcenter mall last week. "They won't see me as frequently."
Costs rising daily
To minimize price increases, Northside did away with decorative nylon shoe straps and other costly design features that had no useful purpose, Wolfin said.
Pointing to new rubber rain boots with interior cotton lining, Wolfin noted that prices for the raw materials used to make them "have done nothing but go up every 30 days."
At the same time, Northside must contend with a growing scarcity of factory workers in China and a strengthening renminbi against the U.S. dollar, which gives it less buying power.
"Usually, you'll have one cost go up one year, and the next year another cost will go up, but not everything at once like you have now," said Triple T Trading Vice President Jeff Thayer, who started the company 20 years ago with his dad, Jim, and brother Bob. "The past year has been different than anything we've seen before."
Higher prices are expected to be most noticeable in inexpensive clothes and shoes. That's because labor and raw materials account for a big chunk of the price tag — unlike expensive name-brand merchandise in which production costs are a smaller fraction of the final value.
Doug Wood, president of upscale Seattle-based clothier Tommy Bahama, said he'll hold the line on prices for popular basics to avoid giving regular customers sticker shock. A reversible half-zip sweatshirt, for example, will stay at $98.
But customers can expect to pay a bit more than a year ago for the latest trends. Wood projects an average price increase of 5 percent across Tommy Bahama's fall line.
"I don't believe the economy is getting that much better. Our guest isn't just going to accept price increases of 15 or 20 percent," he said. "We think a 5 percent increase is more logical and maybe will be accepted."
Jennifer Black, a Lake Oswego, Ore., retail analyst who follows an array of women's clothiers, including Nordstrom, Chico's and Ann Taylor, predicts shoppers will go along with paying more for new merchandise, but only if it's "special."
She described a button-down shirt with form-flattering ruching along the front seams as something shoppers might be willing to pay a few extra dollars for.
"Retailers that can raise prices are the ones with a fashion element or novelty," she said. "If you're selling a basic T-shirt, good luck. Raising prices will be tough, because the consumer has gotten used to paying a certain amount."
Small manufacturers and retailers could be hit hardest by the run-up in production costs, because they typically have less leverage with suppliers.
At Kate Quinn Organics, an organic-cotton children's clothing company based in Kirkland, founding owner Kate Quinn plans to mark up retail prices by a dollar to offset a steep increase in the commodity's costs over the past year.
"Cotton had already gone up 20 percent the previous year, and we didn't raise our prices because of the recession," Quinn said. "We don't have much of a choice at this point."
Baby bodysuits will soon carry a price tag of $19 rather than $18, and the cost of a ballerina-style dress will go to $43 from $42.
"I think a dollar increase will be fine," Quinn said. "Our regular customers realize we haven't raised prices in years."
Amy Martinez: 206-464-2923 or firstname.lastname@example.org