The news: Consumers could see higher prices for apparel starting this fall, as brands and manufacturers pass through higher energy, production, and transportation costs related to the war in Iran and other disruptions, according to a Bloomberg report.

How we got here: War-related disruption in the Strait of Hormuz has added to apparel companies’ existing heap of supply chain pressures. Input costs are rising as raw material prices soar, forcing brands to adjust sourcing, rethink designs, or otherwise hike prices to protect their bottom lines.

• “There’s not a single input cost that hasn’t gone up, whether it’s polyester yarns, cotton yarns, dyes, chemicals, oil, or gas,” Mohit Jain, executive vice chairman of textile maker Indo Count Industries, said on a recent earnings call.
• China’s polyester prices are near a four-year high, while cotton prices have also surged due to concerns about harvests and rising demand from brands searching for an alternative to petroleum-based materials.

What it means: The situation could be particularly painful for mid-range apparel brands, many of which are already struggling to compete in an environment that favors either low-cost retailers or upscale labels. For these companies, raising prices risks pushing customers to cheaper competitors, but not doing so means rising operating costs will stress margins.

Recommendations for apparel brands: Brands have options for responding, but all come with their own set of challenges.

Diversify sourcing. A large and flexible supply chain gives brands more opportunities to minimize disruption related to war, tariffs, extreme weather, and other events. But not every company has the resources to widen their manufacturing and sourcing base, especially when other brands are looking to do the same.

Rethink design. Companies reluctant to raise prices can cut costs by simplifying patterns and using cheaper materials. However, doing so could erode consumers’ perceptions of brand quality, opening the door for competitors to steal sales.

Raise prices. Being transparent with customers about the need to raise prices could keep shoppers from feeling blindsided by the change. Alternatively, brands could introduce apparel upgrades in addition to higher prices, such as better-quality fabrics or interesting design details, to bolster perceived value.

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