Strong dollar squeezes local product

MELBOURNE: Falling prices for clothing and footwear over the last five years signal downward pressure on local manufacturers of mid-market fashion, a new report has found.

Contrary to the overall Consumer Price Index (CPI) - a measure of the average price of goods and services - which rose 14.5 per cent from June 2002 to June 2007, average prices for clothing and footwear decreased by a staggering four per cent from June 2002 to June 2007. These are the findings of The Clothing and Footwear Consumer Price Index report by TFIA Business Services - a division of the Council of Textile and Fashion Industries of Australia (TFIA).

TFIA Business Services economist Lachlan Caddy cited the strong Australian dollar as a key factor in lower prices, adding that local manufacturers, particularly of mid-market product, would increasingly feel the pinch.

"If you're a local mid-market manufacturer without a strong point of difference and you're competing with importers of substitutable product it's going to be very hard to do so successfully."

Meanwhile mid-market retailers - including Target and Kmart - that imported significant quantities of their fashion product were getting better value for money due to the strong dollar and could afford to keep retail prices low while maintaining margin, Caddy said.

In the five years to June 2007, shoppers benefited from falling prices across most clothing and footwear categories; with men's outerwear down by 6.5 per cent; men's underwear down by 2.2 per cent; women's outerwear down by nine per cent; children's and infants clothing down by 1.4 per cent; men's footwear down by seven per cent; women's footwear down by 6.7 per cent; and children's footwear down by 5.2 per cent. The only exception was women's underwear, with prices up by 3.2 per cent over the period.

Caddy also noted that while local high-end brands with a distinct point of difference were safe from falling prices, a continuing strong dollar would present challenges for any label dependent on the export market.

By Belinda Smart