Why $2 Cotton Could Be the Best Thing To Ever Happen to the Industry
Warren Shoulberg -- Home Textiles Today, 2/27/2012 2:00:00 AM
Yeah, I know you're loving that headline, right? You're sitting there and remembering back to the insanity of the cotton crisis this time a year ago and wondering what in the world I'm talking about. (I wonder the same thing myself, not to worry.)
But, look at it this way: Suppose the industry had a price increase and the consumer never noticed? Wouldn't that be something?
Well, in a way, that's exactly what happened to the home textiles industry over the past 12 months. After a price deflation spiral that stretches all the way back to the mid-1990s when Wamsutta cut the price of Supercale by a few bucks, the industry was finally forced to raise prices last year. Doubling and tripling of cotton raw material costs made it impossible to hold price points anymore and some of the most sacred rules of home textiles retailing - all ending in the number 99 - quickly came tumbling down.
And guess what: The world did not end. There are some anecdotal stories about sales dropping on some key core products when the price increased, but frankly there are just as many reports that say the opposite, that sales did not decline on many products where prices jumped a buck or two, or even three. After all these years of retailers telling vendors they had to have lower prices or they weren't going to play nice, stores quietly and swiftly accepted higher prices without putting up much of a fight. Buying teams that tried to go direct to sources in Asia discovered their American supplier "partners" were not feeding them lies, the new higher prices were the price. And this was largely nonnegotiable.
If you look at any measure of business last year - and HTT's own numbers are as good as anybody's and better than most - they show business went up a couple of ticks last year. That was probably not so much unit sales as it was average tickets, reflecting some of these new higher prices.
Now, as the industry gets ready to gather for its semi-annual us-versus-them main event - commonly called market week - the big question is will suppliers and retailers understand that indeed the American consumer will pay a little more for most of the products they make and sell and that there isn't this insane need to drop prices.
It's not so much who is going to blink first as it is whose eye sight is better.
The industry found it impossible to raise prices until it had absolutely, positively no choice. Now, with cotton returning to manageable price levels, it has a choice again.
We'll find out soon enough what it will choose.
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