The rising price of raw materials has put clothes retailers in a quandary. Absorb the cost increases to win customers at the expense of profitability or preserve profit margins and watch customers walk past to cheaper rivals?
Responses, as H&M demonstrated yesterday, have varied. But nobody is quite sure what the answer is or what the fallout will be. After all, for the best part of a generation we have grown used to ever-cheaper clobber as trade liberalisation threw open the doors of factories in the Far East.
So where will we shop now that the tide has turned? Speak to a mid-market retailer and you will detect an element of smugness. Raw materials make up a greater proportion of a £2 T-shirt than a £10 version. Therefore Primark and the supermarkets will suffer most, as consumers register the “price shock” of a £3 T-shirt. The assumption is that if cut-price fashion was born of textile deflation, then inflation must be its death knell.
A discount retailer sees things rather differently. Clothing for these players is fundamentally a necessity. Relative prices are what matter — if Primark is a third cheaper than the Marks & Spencer next door, then M&S has little chance of selling plain white T-shirts.
But broad churches, such as M&S, are not best placed to design their way clear of cut-price competition. There are smaller, nimbler competitors that are better able to cultivate and speak to particular audiences. The answer for the Goliaths of the clothing industry lies in exclusive products and clever marketing (witness M&S’s sweat-free shirts and glitzy television advertising). Neither option comes cheap.
Advertisement
So the discount players are in pole position. But the spoils will not be evenly spread. Fast fashion is becoming harder to do cheaply.
The path has become more perilous for the likes of New Look and Peacocks, attempting to embark on a Zara-style journey from £5 dresses for a Friday night out to £50 leather jackets for the entire year.
The journey from cheap and cheerful to fast fashion may prove impossible without the tailwinds that “Primani”, Inditex and H&M enjoyed earlier in the decade.