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Yarn Market
Jim Phillips, Contributing Editor

Price Versus Performance: Missed Opportunities?

Jim Phillips, Contributing Editor

A s mentioned in previous columns, escalating prices for raw materials, particularly cotton, combined with an inability by many spinners to pass the full degree of increases through to customers, has caused alarm bells to go off in a number of companies.

 

One solution, suggested by one well-placed textile executive, is to begin separating out the various value-adds created in textile and apparel products.  "People take for granted on the retail level today that they are not going to have to pay for the latest and greatest," he said.  "Certainly, they are willing to pay for style and fashion - but they do not expect to pay for those properties that are manufactured into a product."

Said another:  " think about the last time I went into a car dealership.  Looking at the window sticker for a new car, in addition to all the luxury items like leather interior and premium sound, I see upcharges for engineered value like special paint, sealants, tinted glass and so on.  Yet, in textiles and apparel, we lump all of our value adds together and don't separate them out for the customer to see.  I would love to see us charge one price for a basic product and then have other cost options for products with performance properties.  That way, end customers would know exactly what they are getting and would be able to select apparel based on the specific properties they want.  Just like at the car dealership, they would come to expect to pay a different price for the basic, no-frills item and the souped-up, luxury special editions."

One observer close to the textile industry agrees:  "The industry tends to lump all features into one product and market it that way. The consumer, then, doesn't see the value of these attributes in the same way they would if these features were separated.  As the industry continues to develop innovations, we need to find a way to get the value of these innovations back."

What these same spinners are unsure of is whether customers would be willing to pay for the value-differentiated products.

"Fashion, not performance, rules in our industry," said one spinner.  "We would have to be very clever to get customers to pay different prices for two like-branded items that look the same but feature different levels of performance."

2008 Prospects

For much of 2007, spinners, particularly ring spinners and those that produce commodities, were waiting on the influx of business that many had forecast to begin in the fourth quarter.  By and large, with a few spikes here and there, it never materialized. As they began looking toward 2008, again there was reason for optimism for the first quarter.  Yet again, the orders have not materialized for many spinners in the quantities they had hoped for.


"We had reason to believe the fourth quarter would be really strong, but it didn't happen," said one ring spinner.  "It's gotten a little better, but is still well below our forecast.  We see things picking up a bit in the first quarter and even more so in the second.  But we've said that for five quarters now. We'll just have to wait and see."

For those in highly specialized markets, it continues to be business as usual  - such as strong orders and good margins.

"We have several niche markets where we specialize and have increased capacity to run a number of specialized fibers and blends," said one North Carolina spinner.  "Coupled with the capacity for quick-turnaround, we are positioned to meet our customers' demands with a quality product on a timely basis.  Business continues to be strong and we don't anticipate a downturn in the next quarter.  Our biggest concern for the moment remains the cost of raw materials."

As 2007 comes to a close, several spinners were asked what would be the ideal present in their holiday stockings.

Common answers included stable prices, a level playing field and higher margins. But the most popular answer was summed up succinctly by this Southeastern spinner:

"More business, plain and simple - and I'd be willing to take it just about any way I can get it."

December 11, 2007  




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