Independent retailers should expect prices to rise for spring/summer 11 due to an increase in cotton prices and manufacturing costs. With the weak dollar also continuing to put pressure on margins, many brands can no longer afford to absorb the increases and will be forced to pass some of the costs to retailers and consumers.
"Price inflation is always a worry for independents, the summer season is so short if customers are seeing goods up by say 10% on previous seasons it's just another negative to address before a sale can be made," said Gary Bates, buying director for Hobson Shoes, adding that any increase in prices would pile the pressure on indies at a time when consumers spending is still suffering from the aftermath of the recession.Figures from the Office of National Statistics show that the rate of consumer price inflation (CPI) rose to 3.7% in April this year, up from 3.4% in March. Clothing and footwear was the key driver behind the surge in CPI, with prices in the sector rising by 2.2% between March and April, compared to a 0.2 % rise in the same period last year. The largest upward effect came from clothing, particularly womenswear.
The latest CBI Quarterly Distributive Sales Survey also revealed that price increases are a concern for retailers with over half (54%) saying that average selling prices rose in May. The volume of sales on the high street was also lower than a year ago, surprising many retailers, according to the CBI.
Although 30% of retailers said that the volume of sales rose during the first two weeks in May, 48% said they fell, giving a balance of -18%. This was a much weaker result than expected by respondents, and was the lowest balance since March 2009 (-44%). Clothing sales were down after three months of consecutive growth, while other sectors which saw a fall in year-on-year sales were chemists, durable household goods and hardware, china and DIY. Orders placed by retailers with suppliers also fell, as did employment.
Ian McCafferty, CBI Chief Economic Adviser, said, "Retail conditions look to remain fragile. It appears that shoppers are feeling the pinch again and are being cautious with their purchases, given the squeeze to real incomes from higher prices and only a modest rise in average pay."
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