Cost Pressures for Fashion Retail Suppliers

What is the biggest issue for suppliers today? What are they really struggling with?

Suppliers are caught between the retailer, because especially for fashion retailers, costs are really important, so there is always a pressure on the supplier to be able to keep the costs exactly the same as the year before and never change them. If they can get them even cheaper, so much the better. So there’s a number pressure from your big customers. It’s sometimes difficult to say no to them, because otherwise you risk losing lots of business.

On the other hand, you have your fabric suppliers that often have very low margins. You can ask them for a discount, in the same way that a retailer asks the clothing manufacturer for a discount, but they have very low margins and they have very little space to move.

The fabric producers, or the young producers, are very much dependent on the price of raw materials, which is something that is not negotiable and it’s something you cannot really do anything about. For example, if cotton or wool goes up, then your fabric will go up in price and there is nothing you can do about it. As a supplier of finished garments, you have to take that increase from the fabric producer. But then that’s no guarantee that Zara will say, okay, I’ll pay you more. Probably they won’t. Therefore, you have to figure out a way of being able to be competitive with a good product. That also links up to what we were saying before where sometimes, sub-contracting comes along, because it might be cheaper to sub-contract production to a second factory that doesn’t have so much capacity at the moment, so they will do it a little bit cheaper than it would cost for you, as a factory, to actually do it yourself.