COVID-19's Ongoing Impact on Supply Chains and Costs of Goods
As if there was not enough tough news with the ongoing pandemic, there has been a confluence of events that have snowballed into a worldwide increase in costs that have affected every facet of production of clothing. Here are Dave’s, we are doing our best to balance increasing costs of goods and increasing prices. We wanted to shed some light on why things are changing. It boils down to increases in costs of raw materials, manufacturing, transportation, and labor that coincide with a decrease in production capacity, supply, and logistical solutions to create price increases across the board. Even in the face of these changes, we at Dave’s will always work to provide quality products filled with functionality, utility, and durability, and present them at the greatest value to our customers. We hope that we can shed some light as to what is going on in the clothing industry.
First and foremost we are thankful that we can still remain open and operate our business. There are many small businesses that were never able to reopen and many people were left in a very bad situation. But being open has only been half the battle; there have been more ramifications that continue to cause issues that make a “return to normal” seem even further away.
We feel that when a customer walks in the door and is looking for items that we normally stock, we should have it on-hand and ready. However, as supply chains reach every corner of the world, and as disruption has reached every corner of the world, there have been ongoing issues for well over a year.
We wanted to share a bit of what we see so that you know what is going on in the world of apparel, sourcing, supply, and pricing. A lot of this information has been gathered in our conversations from our brands and suppliers.
The first factor that we see is a great imbalance between supply and demand. Due to ongoing manufacturing issues (as a result of COVID closures and political & trade issues), brands have entered into a manufacturing super-cycle. They are trying to catch up from time that was lost, they are trying to prepare for the season ahead, and they are all vying for space in factories and raw materials. However, factories are having a hard time finding help, and they are limited in their ability to produce more than they have in the past. Before the pandemic global supply chains were already stretched to the max on capacity. This has created a fight for factories, and brands are paying more to get products made, and especially to be made first in line. This has increased costs for manufacturing, upwards of 30%. This is just the cost to get things made.
The second factor we have seen is an increase in demand for raw materials; specifically cotton. Cotton is used by every one of our suppliers, and as they are trying to play catch-up, there is a greater need for it. However, there has been a global ban on the supply of Chinese cotton, which accounts for 25% of the world’s supply. An over-demand of raw materials and a cut in supply has also made the manufacturing costs rise between 10-20%.
The third factor is logistics. Logistics of international supply chains are carefully planned and coordinated, but right now there are breaks in every part of the chain. Due to imbalance of imports and exports, there have been issues supplying containers for finished products. There is such a big demand for finished goods that brands are competing for space on freighters (increasing costs). That is only the beginning of the journey. When the goods are finally getting to the US, ocean-freighters are backed up and cannot come to port and actually unload the containers. The next step continues to slow the process; the shortage of truck drivers and commercial delivery services are causing 10-week delays to get from ports to warehouses. Lastly, the increase in end-user delivery (like UPS and FedEx) has caused increased delays to get to our store (or to your home). These increases in delivery have caused another 5-10% increase in costs per unit.
Combining all of these factors, we are left with a very tough reality; price increases are coming and some are coming sooner rather than later. It seems like every day we are receiving letters from all over the industry regarding impending changes in cost. When we read letters like these, we find it tough striking a balance between what costs can be absorbed and what costs make it necessary to raise our prices. We believe that every product should be based on the value it provides. We believe in consistency, fairness, and making sure that we can deliver the quality products at a great value. We appreciate your support and your understanding in some price increases that you may see on items in our store and on our website. No matter what challenges the store or the industry face, we promise to always do our best to serve those who work hard every day.
Adam, Dave's New York