Trying to hide price hikes with trends, fabrics

Font Size

Print

Feedback

Email

Discuss

Related Articles

Citigroup shares drop to 13-year lowCitigroup liquidates its CSO fund: ReportHP sees stronger-than-expected 2009GE Capital plans to cut costs by $2 bn in 2009

How do manufacturers or retailers mask a price increase these days? They bury it amid talk of high-tech fabrics, better quality clothes or the latest hot brand or product.

Executives attending the Reuters Consumer and Retail Summit in New York this week said the surging costs of doing business have become too high to swallow, and they have already begun passing along price increases to their shoppers.But to make those higher prices less evident, executives are marking up prices more than usual on newly introduced merchandise, hoping a product’s trendiness or new fabric will be a hit and more easily command that higher price.“It’s not the same pair of pants that you bought last year that you get the 12 percent (price) increase,” said Francisco Gonzalez-Meza Hoffmann, vice president of strategic initiatives at Perry Ellis International Inc .

Instead, he said, “It’s more the new, special shirt.”Retailers and manufacturers are finding that what previously worked to keep prices low is no longer working.China, a former safe haven for retailers seeking cheap labor and manufacturing, is facing rising labor and energy costs, which are driving up the price of Chinese-made goods.“We’re at the end of that sourcing curve and I don’t know what the next low-cost provider country is going to be,” said Paul Rosengard, group president of Perry Ellis International’s premium brands.Meanwhile, skyrocketing energy prices are hitting companies on multiple fronts. It costs more to keep factories running, from turning on the lights to powering machines. With diesel prices surging, the cost of trucking goods from a distribution center to a store is also up, while surging fuel prices have made air freight a more expensive proposition.

“Nothing comes to mind that doesn’t have inflationary pressure right now across the economy. That includes diapers,” said Toys R Us Chief Executive Jerry Storch.Companies have tried to combat these increased expenses with cost cuts, but many said they have hit the wall, and internal moves are not enough to offset climbing costs.

“Oil hit $140 a barrel today, which is just breathtaking,” Isaac Larian, CEO of MGA Entertainment, known for its Bratz fashion dolls, said at the summit on Monday.