Commodity Chaos

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Whether you are buying or selling design these days hold onto your hats! Things could be about to get crazy.  Last month, Dick Gentry of  Wesco Fabrics foreshadowed what is to come with this great post on his blog, Gentry Connects. If you’re not a subscriber- become one. He always has insightful comments,  really understands fabrics and the fabric market; plus I love his musical suggestions sprinkled into his posts! I ‘ve added a couple of my own comments and spottings at the end of the post.

On January 28, 2011 Gentry Connects post said:

I’ve never witnessed anything like the price hikes of the past few months. We have received multiple price hikes monthly from suppliers in the last six months. Holding prices for a 6 month catalog becomes a near impossible task. It has been totally nuts! Why is it happening now?

We will see a bump in prices this year from everything from barbecued ribs and coffee to clothing. Manufacturers, wholesalers and retailers must raise prices because of escalating commodities, or raw materials. Commodities like corn, cotton, wheat, coffee, sugar, and cocoa surged last year as severe weather crippled many crops, while increased domestic demand from China and India continue to explode. We are faced with the perfect storm of supply and demand.

COTTON futures skyrocketed 92% in 2010, thanks to floods in Pakistan and heavy rains in China that damaged crops. MAN-MADE FIBERS like polyester have jumped in price. Growing worldwide demand has impacted textile commodity prices. Currency issues and speculators have adversely affected markets as well.

SILK pattern “Wes Eternal City.”

SILK pattern “Wes Life Experience.”

I have an unabashed love of silk fabrics and have sourced from Indian companies for years. In the past year we have been hit with large silk price increases. India sources the majority of their silk yarns from China. They have seen a doubling of yarn prices in 2010! Increased domestic demand for silk in China and India has helped drive up prices. During our visit to Heimtex in Frankfurt we talked with many suppliers about the volatile situation. Though we still bought beautiful silks for our future Fall 2011 line we were shocked at many of the prices! We have to carefully edit our selections as never before! Many Indian suppliers are now creating new constructions of silk mixed with polyester, linen, and cotton for more affordable price points.

An important factor affecting textile commodity pricing is the growth of domestic demand in China and India. These are gigantic markets and just a few upward demand clicks influencing pricing pressure.

China is the world’s second largest luxury market after Japan and will be number one very shortly. Years ago shopping in Paris we would see throngs of Japanese tourists flooding Chanel and Gucci boutiques. Today you see Chinese travelers buying like crazy in those high-end stores!

We all wish for the simpler times of the past. Obviously it is a much more complicated and interconnected world today. I remember once visiting weavers in Bago, Burma, and marveled at how they worked their ancient hand looms. Even they are paying more for their yarns.

Our mission for the past 65 years remains the same at Wesco Fabrics. We constantly strive to provide interior designers beautiful fabrics and window coverings that excite their customers. Our passion for excellence is steadfast. Thank you for all your interest and support!

As gas prices are about to hit $4.00 a gallon in Chicago, I find myself spotting more and more products affected by the ” commodity chaos”  Dick talked about.   Leaving Paris the end of January we saw LONG VAT lines  of Chinese and Japanese tourists with bags of luxury goods  in the Air France terminal, a testament to the growth of these markets.

On the fiber front, Cashmere prices are set to soar after a harsh winter in Mongolia wiped out a quarter of the country’s wool producing goats. Experts say the lack of supply and increased demand could drive up prices by as much as 40 percent.

Fragrances are not immune to this either. The bad news  is that natural aphrodisiacs commonly used in fragrances, are facing shortages. In economic terms, this lays bare the fragility of supply chains in a globalised market.  Fragrance brands are absorbing the costs for now, but if commodity prices remain high they will have no choice but to pass these on to the consumer. This 5.9 billion global industry relies on a complex network of suppliers from every continent to provide the myriad spices and essential oils that go into the perfume used in fine fragrances and household products. In recent years, freak conditions have disrupted this volatile ecology and sent prices soaring.

“Like fine wines, fine fragrances use natural ingredients affected by microclimates in local growing regions and perfumers are used to sudden change changes in these conditions,” says Lisa Hipgrave, director of the International Fragrance Association UK. “However, there have never been this many strange weather conditions simultaneously causing shortages all over the world.”

UPDATE:

In doing some fashion research, I came across this article in the Wall Street Journal that echos Dick’s sentiments. If fashion designers are already revamping collections because of prices you know that interior collections are not far behind.  I hope jobbers and manufacturers do not trim updates, stylings and collections any  more than they have. Just when we though we were coming out of the woods- the industry could crawl back under it’s rock.  Hmm.. High Point could be interesting.

Materials Girls: Designers Trim Hemlines, Costs

Runway Fashions Get Revamped as Cotton, Wool, Leather and Silk Prices Rise

When dreaming up her fall collection, designer Nanette Lepore says she imagined herself floating on a cloud in a celestial fantasy. Then fabric prices brought her crashing back to earth.

Ms. Lepore and some other designers are removing bows, switching to less-expensive fabrics and changing linings among other steps because commodity prices are increasing so quickly. These materials costs are most acutely affecting the tier of luxury designers just below the high-end brands.

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