The impact of cotton prices on fashion sourcing

The fact that an extra few pounds on the cost of a pair of new jeans may be directly attributed to worldwide weather patterns is a reality that may have passed many consumers by. But the worldwide cotton crisis is a very real fact for apparel buyers in the UK as they explore an alternative supplier base in an effort to keep costs down. Michael Page Fashion examines the background to the rise of cotton prices, and what this means for UK-based apparel sourcing.


China, India and Pakistan, (three of the four largest global cotton producers), have decreased levels of output over the last couple of years. China's problems have been drought-related, with their cotton harvest in 2010 dropping from eight million metric tonnes two years previously, to 6.5 million tonnes. Pakistan was hit by floods, that in addition to a devastating loss of life and infrastructure, exacerbated the cotton shortage. On top of the weather related impact on these two countries, India has restricted exports to protect its own domestic supplies and price levels.
Coupled with the fact that these nations are also amongst the world's largest cotton consumers for textile production has meant increased imports to meet domestic needs, consequently a significant rise in demand and price for the commodity globally. As all are also major suppliers for cotton-based apparel products for export globally, the end result is decreased availability and increased price for UK fashion buyers.

Reaction from retailers

Fashion retailers in the UK, particularly those on the more affordable end of the high street market, have been left in a catch-22 situation. Is the solution to absorb price hikes to protect consumer confidence, or is it to raise prices to regain margin and profits, at the risk of alienating consumers in a market newly buoyant as the UK emerges from recession?
Some, like Swedish headquartered H&M have absorbed the rising import prices rather than pass them on to the consumer. Next took the decision to increase its prices to account for the rising cotton costs. But both organisations and others like ABF-owned Primark and Marks & Spencer saw profits fall at the beginning of 2011 as a direct result of the changing conditions for raw materials sourcing.

An alternative supplier base

The issue with inflated cotton prices, and consequent difficulties in sourcing similar fashion products at like-for-like prices of the last few years, has seen UK retailers investigate alternative suppliers. Diversifying the supplier base is now necessary as the sourcing spotlight is shone on new geographies. The traditional powerhouses of China and India will clearly remain predominant suppliers of cotton-based apparel products to the UK, but larger retailers have the scale and bargaining power to consider and capitalise on different solutions.
Countries that are gaining in consideration for UK-based fashion souring include Mexico, Bangladesh, Tunisia and Morocco and South East Asian countries like Vietnam, Cambodia and Indonesia. European suppliers like Turkey and Greece are also gaining prominence.

The impact for UK-based fashion buyers

Accuracy is particularly crucial for UK-based fashion buyers as they keep a close eye on quantities and orders. The cost of additional ordering is sharply on the rise, so attention to detail is needed in an effort to maintain budgets and cost bases.
While negotiation skills have always been key to a successful fashion buying career, they are being tested in this challenging sourcing environment. Those buyers who are able to broker deals and arrangements on the most favourable financial terms are increasingly valued.
As a job seeker within the fashion buying industry an excellent network and a wider sourcing track record are attributes in demand from Michael Page Fashion's clients.
For more advice on your fashion career, please get in touch.