Petrol and beyond

A friend of mine is trying to sell his jeanery on the NSW Central Coast. He's been in schmuttas for long enough, he says, and wants to follow his passion in a totally different kind of business.

Although the asking price of just over  half a million for the business and freehold of the shop - which includes upstairs offices, storage, and a car park at the rear - seems cheap, he is not being bowled over by takers.

One of the issues is potential profit. Because jeans and accompanying tops have largely become commodity products whose prices have not nearly kept up with inflation, (in actual fact they've gone backwards) the margins for both wholesaler and retailer have gown skinny.

That's the problem with cheapness. While the public doesn't appreciate that the advent of imports has kept basic clothing prices more or less stagnant, low prices are emptying the cupboard for retailers and their suppliers. The result is that the major suppliers of jeanswear can't afford to fiddle about with small independent retailers.

And that's how it was before petrol prices headed north. Now the plight of the independent jeanery is even worse because the economy of reps on the road does not compute. My friend might now see a rep once in six months, not every week or two back when conditions were different. This also applies to regional boutiques that have been used to frequent visits from reps on the road.

If you want jeanswear supply you have to go looking for it by leaving the nest, or rely on stock service for which you must consult the internet to see any new lines. My friend says this is an okay method if you're happy to buy safe stuff, but then you limit your margins and dent your reputation for excitement.

He has high praise for the Icon Clothing Group (nee Yakka) with brands like Lee, Wrangler and Mustang. He says it has stock service down to fine art, seeming to be able to supply and deliver just what is wanted, without effort. Yarra Trail is also good for a bit of variety.

Done with jeanery talk, he then spent some time discussing the ramifications of the petrol price, high now and surely going higher. This time, it seems as though oil is not going through a speculation phase but a demand driven price rise that has no end in sight. How will it affect apparel?

We've covered the cost of putting reps on the road. From there we move to increased costs of all logistics, from international freight to local deliveries. Wool and cotton aside, most textiles are oil-based, so they will become dearer. China, our major supplier, is going up in price partly in sympathy with oil price rises. Adding all this together, apparel prices are set to rise - unless, of course, the government decides to lower the rack rate import duty from the current 17.5 per cent to, say, 10 per cent. That would help Chinese prices until the mooted free trade agreement cuts it down to nil.

However, several significant supply countries like Bangladesh are already on a nil duty, so they won't go lower. My point is that the lowering of imported apparel prices is going to bottom out and will be dragged back up by the oil price.
So much for the supply end, but what about the consumer?

Last week, when I was filling the tank of my Thank-the-Lord-Yaris, I commented to the service station cashier that his turnover must be rising with the price of petrol. Yes, petrol is pushing it up, he acknowledged, but people were not buying their usual add-ons of sweets and drinks, and that's where the profit of the business is. "They've got to have the petrol but not the lollies," he said. This translates into the difference between the essential purchase (petrol) and the discretionary purchase (the sweets and drinks).

Now, we have to ask ourselves, how essential is clothing? In past bouts of misery I've been known to contend that the vast majority of Australian consumers could go a year without buying one item of clothing. In my case, being somewhat addicted to buying several colours in a garment I like, I could go for at least five years without buying and, even then, I'd only need a few basics to see me through to my waiting coffin.

If there is any message for survival here it is that we've got to forget about cheap bodily covering and concentrate on emotion. Brands and fashion statements are becoming our ticket to the future. Without incurring the wrath of current affairs programs, we have to bait our traps with irresistible change, making the new look cool and last season's stuff just this side of obscene.  It's survival time.

By Fraser McEwing