Manufacturers and Importers Predict Challenging 2011 Holiday Season for Retailers and Consumers
August 31, 2011
Capital Business Credit Survey Identifies Rising Raw Material and Production Costs Which May Result in 10 -15 Percent Consumer Price Increase
NEW YORK – August 31, 2011 – A new survey of consumer goods manufacturers and importers shows that the dual trends of weak inventory sales and rising prices paint a dark picture for the upcoming holiday season. As of July 31, 2011, during which time most holiday orders are placed:
• 83 percent expect prices of consumer goods to rise this holiday season, with one-third saying prices could rise as much as 10-15 percent
• To deal with the rising cost of goods and the gloomy economic outlook, 89.4 percent expect retailers to rely heavily on discounting to move merchandise
• 64 percent of manufacturers and importers reported that retail orders are the same, or less, as compared to last year (2010)
• 30 percent of respondents reported that the increased costs to manufacture and ship goods will be passed along to consumers as compared to only 20 percent of respondents passing increased costs along to the consumer six months ago
“Inflation is coming and the era when retailers and manufacturers absorb price increases to protect consumers is over. Our manufacturing clients are telling us that prices for clothing, bedding and other soft goods will rise this holiday season. However, all hope is not lost, as one-third of those surveyed believe that despite current market challenges, retailers will increase inventories this holiday season,” said Andrew Tananbaum, executive chairman of Capital Business Credit. “Santa may hit a couple of speed bumps, but there will still be a holiday shopping season.”
Additional findings of note:
• Nearly three-fourths (73 percent) of respondents expect sales this holiday season to be the same, or weaker, than last year
• 60.5 percent believe that an increase in the cost of goods will be spread across consumers, retailers and importers
• Half (53 percent) cited that due to the increase in raw materials and logistics costs, retailers are asking for longer payment terms during the holidays indicating that suppliers are forced to become more flexible with respect to payments and contract terms
These changes will affect margins across the board, as an overwhelming 95 percent of respondents indicated that their margins would be affected in some way.
The Global Retail Manufacturers and Importers Survey, conducted by Capital Business Credit LLC (CBC), a global integrated financial products and services company that serves the retail sector, surveyed 80 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. The survey was conducted the week of August 1, 2011.
Almost all (95 percent) of respondents saw an increase in the cost of raw materials over the last 12 months. To combat the increased cost of raw materials, 33 percent will be replacing some of the cotton content in their products with rayon (60 percent) or Lycra (40 percent). More than a quarter (26.7 percent) of those who have high-cotton content products will vary the cut or design of their products to use less raw material. Respondents also noted that cotton prices will directly affect consumer prices this holiday season.
Approximately 44 percent of survey respondents plan to move some or all of their manufacturing out of China due to the increased cost of labor. Almost three-fourths (71.4 percent) of those respondents are considering relocating some of their production to Vietnam.
The CBC survey also identified that the increased cost of logistics – due in large part to the rising cost of oil – is a major cost concern (92.2 percent) for importers and manufacturers. Almost two-thirds (66 percent) of respondents said that logistics costs have increased by more than five percent in the last 12 months with nearly 58.3 percent of respondents citing an increase of five percent or more due to the current cost of oil.
“The rising costs of raw materials, labor and logistics only magnifies the existing problems facing manufacturers, importers and retailers. On a bright note, looking forward to the Spring season, we anticipate prices to decrease at retail, due to forward looking data on the decline in cotton prices,” commented Tananbaum.
About Capital Business Credit
Established in 1988, Capital Business Credit LLC (www.capitalbusinesscredit.com) is a global integrated financial products and services company. 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.
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