Tracey Samuel’s designer romper suits and sweaters have a celebrity following: the offspring of chef Jamie Oliver and film star Gwyneth Paltrow have been pictured in outfits made by her trendy kids’ label Bonnie Baby.
But this year Samuel is worried that her products will have a celebrity price tag to match as cotton prices surge to record highs. For the first time since she started the business five years ago, the entrepreneur has been unable to pin suppliers to quotes without placing an order. Like thousands of other small clothing businesses, the Hove-based company is being buffeted by a global storm that has already seen high street chain Next react by raising prices 8%.
"The prices [suppliers] are quoting are making me fall over," said Samuel. "They are 30%-40% higher than last year… We have been unable to confirm the [garment's] price until the day we put our order in. Suppliers say: ‘this is today’s price’."
In the past Bonnie Baby, whose products are sold in high-end department stores such as Harrods and Harvey Nichols, could get an accurate price three months in advance for its twice-yearly collections. But the higher cotton price means a cotton babygrow in Samuel’s winter’s collection could cost up to £5 more, coming in at £25.
Next’s boss, Simon Wolfson, has been warning for some time that the era of cheap fashion was coming to an end and his words are now echoing along the high street. Last month, the company behind the fast-growing Superdry clothing brand sent its shares into a spin by warning that margins could be hit by the cotton price, as resurgent demand coupled with supply disruption created a short-term squeeze. The pressure increased this week over fears that Australia’s harvest will be hit by the country’s worst floods in half a century.
All of which is a nasty shock for the retail industry‘s customers, who have grown accustomed to being able to spend £2 on a T-shirt and £4 on a pair of jeans. Retail analysts Verdict Research says that clothing inflation ran at 4.8% last year, and the firm is predicting a further hike of 3.8% this year. These rises come after clothing prices decreased by an average of 2.3% per year between 1996 and 2008.
Verdict’s Neil Saunders added: "The clothing sector will see inflation until at least 2014. The price rises have been down to the cotton price as well as the natural end of the cycle of discounting. That pace couldn’t keep going. Retailers needed to rebuild their margins."
Meanwhile, market watchers also suggest that the make-up of products will change – perhaps by manufacturers substituting cheaper man-made fibres or lower-quality cotton into T-shirts, or by retailers ordering less intricate designs. Fashion stores may also attempt to cut costs by clubbing together with retailers in other countries to buy the same T-shirt and claiming a discount from the manufacturer for the larger order size.
Sally Bailey, chief executive of clothing retailer White Stuff, said its buyers were having a "nightmare" trying to get suppliers to match previous prices, with some asking up to 50% more for repeat orders. "We have to look at every garment on its merit and consider how much consumers will be prepared to pay for it," she said. "If the price of a plain white vest goes up 10%, customers don’t see the value. My fear is that people will put prices up, but then have to discount."
But some believe the spike in prices may be shortlived. Société Générale analyst Dylan Grice argues that the real price of cotton has been trending down since the 1820s – excluding a large spike when Confederate leaders embargoed exports during the US Civil War. "There is one very good reason not to invest in the commodities themselves," Grice wrote. "Their expected long-run real return is 0%."