Retailers are facing rising shipping costs, high labor costs as well as port delays.
Consumers may be faced with rising clothing prices as the holiday shopping season begins.
According to NRF Chief Economist Jack Kleinhenge, the US is facing an uptick in cotton prices as production is affected due to drought in the US.
This is a repeated trend, according to Kleinheinz, who noted that cotton prices climbed a decade ago when there was “a significant drought affecting world production.”
As a result, retailers were forced to use artificial fibers as an alternative to cotton, Kleinheng said.
“The last time this happened, it added about $1.50 to $2 to a cotton T-shirt,” he said, noting that “retailers will try to hold the line at higher prices so as not to lose store sales.”
However, due to a spike in inflation across the board, that is no longer the case, said Brian Yarbrough, senior analyst at Equity Research for Edward Jones.
Companies won’t be able to recoup the costs as much as they once could, which means consumers are going to feel the impact at the cash register — if not already, according to Yarbrough.
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“Unfortunately, for consumers right now… for retailers and manufacturers, it [rise in cotton prices] Not the only issue,” Yarbrough said.
He added that retailers are facing rising shipping costs and high labor costs which are accompanied by port delays.
“I think all those things are going to factor into higher prices for the consumer,” he said. “And we’re hearing it across all of our retail companies.”
In the past, companies have tried to cut costs by moving production overseas.
“They may raise prices a little bit, but now you’re seeing it in cotton, you’re seeing it in transportation, you’re seeing it in the supply chain, you’re seeing it in labor… across the board,” Yarbrough said.
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With increasing pressure, “retailers don’t have enough ways to offset these price increases.”
On top of that, most retailers, due to supply chain problems and strong consumer demand, are running “awfully lean” on products, meaning consumers aren’t getting a lot of discounts, according to Yarbrough.
“Between that and rising prices, I think consumers are definitely going to feel the pinch when they go holiday shopping and look forward to next year,” he said.