Like Cheap Clothes? Great News. The sweatshops are MORE open for business!
Flood of cheaper clothes on its way
By SUE STOCK / Raleigh (N.C.) News & Observer
04/11/2005
If 30 percent off your next pair of jeans seems like a good deal, here's how to get it: Do absolutely nothing and wait a few months.
Recent changes to the way clothes are made and distributed all over the globe will eventually have ramifications on store shelves throughout the country.
The quota system that limited the amount of clothing and other textiles that retailers and importers could buy from low-cost manufacturers in some developing countries was lifted Jan. 1.
Those countries, particularly China, then flooded the clothing pipeline with mass volumes of merchandise in January and February.
China's apparel imports rose 47 percent in January. Imports of some items increased dramatically: women's slacks were up 1,081 percent and nonwool coats were up 3,070 percent from January 2004.
The sudden influx of inexpensive clothes should result in prices taking a nosedive, up to 30 percent by some estimates.
However, it will take almost a year for those items to reach store shelves and the prices to come down.
"There's going to be a lot of shifting and figuring it out on the part of retailers," said Laura Jones, executive director for the U.S. Association for Importers of Textiles. "This system really delayed many things. "[Retailers] don't want to ship fabric all over the world. Now that the quotas are gone, they're looking for a place where they can streamline."
The end of the quota system means changes for the U.S. retail industry. It already imports between 60 percent and 90 percent of its goods and has seen retail prices dropping over the past several years because of competition and tough economic times.
A study released in June 2004 by the U.S. International Trade Commission concluded that the removal of import quotas would result in increased demand for goods and a decrease in prices for retailers .
But the difference in costs could be much greater, some experts say. Typical quotas have been estimated to add anywhere from 11 percent to 20 percent to an item's cost.
"Frankly, the situation is very fluid," said Margery Myers, spokeswoman for Talbots, which imports roughly 70 percent of its merchandise. "All retailers are expecting this to come back to the consumer in some way."
Some retailers play down the impact.
"There are plenty of countries other than China that produce excellent products," said David Ullman, executive vice president of men's store Jos A. Bank Clothiers, which bought three-quarters of its inventory from overseas in 2003. "[The changes] certainly help in terms of the cost of production, but it's hard to quantify."
Among those who will see fewer changes will be those who import few goods, and smaller boutiques and independent stores that don't have huge global distribution chains.
Concern over the sudden boom of Chinese imports may spur restraints or price setting by either the U.S. or Chinese governments. The Bush administration is discussing capping the number of new goods that China can ship into the United States at no more than a 7.5 percent increase annually. And the Chinese government may lay down restrictions, too, if wages in China don't rise to reflect the increase in production.
WHAT MAY HAPPEN
Some stores, especially discounters such as Wal-Mart, are expected to PASS THE SAVINGS ON to consumers, driving down prices and profits for competitors.
Others stores are expected to MOVE TOWARD HIGHER-QUALITY merchandise. Instead of 200-thread-count sheets, customers will be able to buy 400-thread-count sheets for the same price.
Still other retailers, such as J.C. Penney, have said they will use the extra profit to REINVEST IN STORES - either in customer service, new merchandise or renovations.
