Apparel, shoes, other lifestyle products become costlier amid supply crunch
Apparel, shoes, other lifestyle products become costlier amid supply crunch.
New Delhi: Lifestyle products such as shoes, perfumes, apparel, cosmetics have either become costlier or are set to get pricier as these are seeing a supply crunch due to port congestion, closure of global manufacturing hubs, higher fuel costs, and labour shortages. According to a report in the Economic Times, this has led to inflation in freight and procurement costs, which has already started being reflected in higher price tags at a time when demand for these goods is rising.
Apparel has already become 10-15% more costly and there will be another 10% price increase, the publication mentioned citing people with knowledge of the matter. Footwear has not seen price hikes yet but will become 8-10% dearer, they said, adding that cosmetics will see a 10-15% increase.
The supply issue in lifestyle categories is similar to that of cars, smartphones, laptops, televisions and refrigerators, which saw a shortage of semiconductor chips and components, apart from logistics disruptions that are expected to persist until the June quarter. Some see an earlier resolution.
“More than supply chain constraints, the bigger issue is freight cost that has gone up substantially,” the financial daily quoted Devarajan Iyer, CEO at Lifestyle International as saying.
“At an industry level, it has affected mostly categories that are dependent on imports such as home care, furniture, footwear and cosmetics,” he said. “We expect the situation to resolve by February next year as soon as the Chinese new year is over.”
Companies said they are stepping up domestic production or resorting to pricier shipment alternatives to offset the constraints.
“There is an overall pressure in the global supply chain across categories including ours. It is a challenge but we see it as an opportunity for the government to promote the Indian manufacturing ecosystem, in turn reducing dependence on other countries,” the publication quoted Puma India managing director Abhishek Ganguly as saying. “Indian manufacturers have enormous opportunities in the sporting goods industry to cater to domestic as well as global demand.”
Footwear has been one of the worst-affected segments after Vietnam, a crucial supplier, imposed a mandatory shutdown of factories that halted production for several weeks between July and October due to Covid. At their last earnings calls, most global brands, including Estee Lauder, Nike and Skechers, highlighted that global supply chain headwinds are challenging manufacturing and movement of products around the world, the publication mentioned.
“We have faced a lot of issues due to infrequent cargo flights which delay our requirements. The rates of the cost, insurance, and freight (CIF) has drastically gone up approximately from 4% to 8%,” the ET report quoted Adi Shroff, chief operating officer at AP Group as saying. AP Group sells Swarovski, Rado and Tissot besides distributing brands such as Guess, Esprit and Just Cavalli.
With transit times nearly twice those of pre-pandemic levels, many brands said they are switching to air freight or signing long-term contracts with container firms to get priority shipment slots.
“Right from forecasting the global challenge well ahead in time to increasing orders in advance and even shifting to air freight for faster delivery, we are ensuring we have adequate stocks as demand has risen too,” said Tushar Ved, president of Major Brands, which sells Aldo and Bath & Body Works products.
Companies said pricing is an issue especially for apparel after cotton yarn prices surged over 60% in a year. Factories have been holding on to raw material to hedge against future increases.
Due to steep raw material inflation, most apparel companies and retailers have already increased prices by about 10-15%.
The government’s decision to increase the GST rate on apparel, textiles and footwear from 5% to 12% from January 1 will affect sales of merchandise currently priced below Rs 1,000, the business daily mentioned citing analysts.
“With persistent inflation and this added increase in GST rates, a further 15-20% price hike in the upcoming season can be expected which has the potential to disrupt the recent recovery seen in consumption in these categories, especially in the economy and mid-segment price,” said a recent Yes Securities report.
