Brands hiking prices to offset rising input costs

Premium clothing brands such as Van Huesen, Arrow, Izod, US Polo and Kimaya Fashions are set to hike prices by up to 10 per cent to offset higher input costs. What’s driving this move is the rise in cotton prices that have increased by almost 30 per cent in three months, while yarn

prices have gone up by 20 per cent. Experts say top brands are facing a dilemma if they should increase prices that may impact sales in a recovering market or absorb the 25-30 per cent jump in prices of yarn and cotton. In fact, some brands such as Wills Lifestyle, Marks & Spencer, Reebok and Benetton plan to absorb higher costs to keep their sales growth intact.

The increase in prices of cotton and yarn in India is a reaction to the global prices and it has directly affected textile prices. R Satyajit, COO, Allen Solly explains, “Cotton prices have shot through the roof. Also, due to the effect of inflation on fuel prices, input costs have gone up by almost 40 to 50 per cent over the last two years. This has led to an increase in prices.”  In fact, many brands are pushing up the prices of premium segment. Arvind Brands for example, is looking at a 10-15 per cent price hike across its products by January-February next year.

Kimaya, the designer apparel brand, is also looking at increasing prices by about 5 per cent. However, Pradeep Hirani, Chairman, Kimaya Fashions feels that the price hike is marginal and retailers can now take advantage of the improved economic scenario. He says, “Immediately after the recession brands had reduced their margins to increase uptake but with the improved scenario they have the liberty to get back to their original profit margins.”

After spending most of last year wooing buyers with lower prices and cutting costs as sales slumped, should the increase in prices see a change in consumer behavior? Hirani is optimistic it will not change. “Since the spurt is uniform I don’t see the price hike affecting my brand in any way. The price hike would not lead to a decrease in the customer base because the increase is marginal. In fact, retailers are testing waters. Right now demands are outstripping supply. Therefore, they can afford to increase prices. Though the price hike is going to be in all segments it’s more evident in the premium segment.”
Satyajit adds, “It’s a double-edged sword. But the market is waking up, it’s getting a little more robust and there’s a general feel-good all over.” He feels A Rs 150 rise over a period of two seasons is not really too much. But if a brand suddenly raises prices by 25 to 30 per cent, they are in trouble. Also, to justify the hike brands are trying to differentiate their products either through the designs or fabrics or through some value addition.