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Learn to Alleviate Price Uncertainty
By Christopher Ruvo

Absorbing The PainSoaring costs of cotton, labor, electricity, oil, dyes and transportation were among the factors that caused Wearables readers to name price increases their number-one challenge to selling wearables in 2011. What does 2012 hold in store for apparel prices? The outlook is hopeful, but decidedly mixed, suppliers say. “Next January when we launch our 2012 full-line catalog, you should expect some prices still rising with other prices decreasing,” SanMar (asi/84863) President Marty Lott wrote in a letter to clients. “Our guess is more down than up.”

The good news is cotton costs have retreated from their historic highs; December cotton futures were at $1.10/lb, a far cry from March’s $2.29 price. “It’s hard to say yet how many, which products, or even the magnitude,” says Lott, but we are aggressively working with our vendors to roll back some of the increases we took last year.”

Distributors anticipate a net increase in sales of tees, but polos, caps and outerwear in the months ahead, more than half also suspect margins will remain flat.

Faced with price hurdles this past year, distributors took proactive steps that helped them keep business flowing and profitable. At Pro Specialties Group Inc. (asi/299725), client education played a central role in successfully passing along inevitable price increases, a move that spurred margin growth in a year where other distributors experienced erosion. Drawing on strong client relationships that had been cultivated over time, Pro Specialties carefully explained market conditions that were driving the hikes. “Our clients knew we were giving them the best price under the circumstances,” says Marvin Mittleman, director of corporate sales.

Pro Specialties also helped clients – and increased sales and profits – through a proactive buying initiative. Aware that significant price increases were in the cards, the San Diego-based distributor convinced clients to preorder apparel or risk suffering sticker shock later. After leveraging buying power with suppliers to secure excellent prices, Pro Specialties stored the apparel at no charge until clients needed it. This step not only earned considerable sales; it also positioned Pro Specialties for future earnings because appreciative clients viewed the distributor as a trusted partner. “In the heat of the increase, we saved clients $1,000 to $5,000 per order because we had them buy in advance,” says Mittleman. “We’ll absolutely continue to do it because of the uncertainty over prices.”

Price HikeSavvy buying combined with customer care kept apparel orders rolling at Moore Exposure (asi/276255). The Fayetteville, NC-based distributor often shopped for specials and closeouts, identifying blockbuster deals from which clients benefitted. In one case, Moore connected a small school with shirts made from recycled material. The shirts hadn’t sold well and were available at a great price on closeout; the school loved them for the look, feel, price and because they were environmentally friendly. “We then went to other schools with the shirts too,” says Owner Jean Moore, who also frequently shopped for the most affordable (and capable) embroiderer and screen printer. “We were able to offer several customers incredible deals on overstocks.”

At Shumsky (asi/326300), profits were up 10% in 2011 as of press time. Increased internal efficiencies helped the Dayton, OH-based distributor achieve that feat. For example, Shumsky reps use a CRM system that enables them to be “more efficient about approaching and gaining new business,” says CEO Michael Emoff. Not only can that help generate promotional ideas faster, but reps also have access to a special electronic catalog, which enables them to connect clients with products more quickly. The catalog was built by The PeerNet Group, an association of North American distributors (to which Shumsky belongs) that have banded together to support sales growth. Indeed, belonging to PeerNet has increased Shumsky’s buying power, ensuring the distributor stays highly competitive on price. PeerNet has also provided Shumsky with allies that exchange best practices, leading to greater success for all. “If a distributor can engage with a group like this, it can benefit you,” says Emoff.

Taking such proactive measures could certainly help distributors prosper, regardless of the uncertainty over apparel prices. “I’m a ridiculous optimist,” says Moore. “I think next year will be better.”

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