Manufacturers, Importers Project 10 – 15 Percent Rise In The Price of Retail Goods This Summer

According to a new survey of retail goods manufacturers and importers, consumer goods at retail are likely to rise by 10 – 15 percent later this spring and into the summer, particularly in the apparel and home furnishings segments.

The increases are due to spikes in commodities and logistics costs. 94.4 percent of those surveyed believe that the increased cost of cotton will affect the cost of high cotton content products such as sheets, t-shirts and socks, this spring and summer with almost half (44.4 percent) expecting prices of high cotton content products to increase by 10 percent or more.

The survey polled over 70 manufacturers and importers, and was conducted throughout the week of March 14, 2011.

Additional key findings in the survey included: more than half (62 percent) of respondents said that their logistics costs have increased by more than 5 percent in the past year. Of those who identified an increase in logistics costs, almost two-thirds (64.1 percent) are passing at least some portion of the increased cost along to the retailer and consumer, causing retail prices to escalate even more. For manufacturers and importers the rise in oil prices (89.6 percent) as well as the conflicts in Egypt and Libya (62.5 percent) is the driving force behind this increase.

The Global Retail Manufacturers and Importers Survey, conducted by Capital Business Credit LLC (CBC) (www.capitalbusinesscredit.com), a global integrated financial products and services company with an emphasis in the retail sector, surveyed manufacturers and importers in the apparel, housewares, home furnishings, fashion accessories and furniture industries, who manufacture some, if not all, of their products in China, India, Vietnam, Bangladesh and Pakistan.

“Speculation of inflation has haunted the global economy since the recovery began.  This fear has been due in part, to the rising cost of raw materials. We now have concrete proof that the cost of raw materials correlates to higher consumer prices. At CBC, we believe this is a sustained change that will continue into the fall season and beyond,” said Andrew Tananbaum, executive chairman of Capital Business Credit.

Cotton

94.5 percent of respondents have seen an increase in the cost of raw materials over the last 12 months. To combat the increased cost of raw materials, 88.9 percent will be replacing some of the cotton content in their products with rayon and others with Lycra (11 percent).  More than a quarter (27.8 percent) of those who have high-cotton content products will vary the cut or design of their products to use less raw material. The increased cost of raw materials will effect all points of the retail supply chain as more than half (57.1 percent) of those surveyed said that manufacturers, importers, retailers and consumers will all be absorbing the price increases.

Logistics

The CBC survey also identified that the skyrocketing cost of logistics – due in large part to the rising cost of oil – is a major cost concern (80 percent) for importers and manufacturers. 62 percent of respondents said that logistics costs have increased by more than 5 percent in the last 12 months and over half (54.2 percent) cited oil as the cause of increased logistics costs of 5 percent or more.

To deal with the increased cost of logistics, 35.9 percent of manufacturers and importers are absorbing the cost, 28.2 percent are passing along this cost to the retailer/customer and 35.9 percent are absorbing some of the cost as well as passing some of the cost along.

“The rising cost of logistics will have a significant effect on manufacturers, importers, retailers and consumers. Margins will be cut and prices will increase, causing stresses and cracks along the entire supply chain. Current events will only amplify these already existing problems,” commented Tananbaum. “The findings of the CBC survey reveal that there has been a fundamental shift in the marketplace and that this will have a direct impact on the everyday consumer. The increased costs of logistics and raw materials have created the perfect storm whose elements will be visible this spring and summer.”

About Capital Business Credit

Established in 1988, Capital Business Credit LLC (www.capitalbusinesscredit.com) is a commercial finance company specializing in providing creative supply chain financing solutions.  The Company’s service offerings include: full-service factoring; accounts receivable management services; inventory lending; asset-based lending; and international financing.  CBC Trade Finance, a division of CBC, provides trade finance solutions for U.S.-based importers working with Asia-based suppliers (exporters). Capital Business Credit is based in New York, with offices in Hong Kong; Shanghai, Los Angeles; Charlotte, NC; and Ft. Lauderdale, Fla.