Before we go into how inflation effects the fashion industry, first we must understand the meaning of inflation. In summary, inflation is a general increase in prices and fall in the purchasing value of money. The action of inflating something or the condition of being inflated. In economics, inflation is a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. he common measure of inflation is the inflation rate, the annualized percentage change in a general price index.
What causes inflation?
- Growth in the money supply.
- Fluctuations in real demand for goods and services.
- Fluctuation in available supply of products or services. When items are hard to find, price goes up.
- Higher wages.
- And more issues can cause inflationary environment.
There are two primary causes of inflation. The first occurs when demand-pull conditions drive widespread price increases. The second cause of inflation results from cost-push factors. Some people think an expansion of the money supply is a third cause of inflation.
Again, inflation is the increase in the prices of goods and services in an economy over time. Another way to look at it is to think about this is that inflation causes the decrease in the value of your money and purchasing power.
How does inflation effect the fashion industry?
Effect on Businesses: The cost to manufacture, transport, warehouse, and sell clothing increases during times of inflation. When costs increase, companies that wish to stay in business will carefully consider raising prices for their goods or services. Obviously, if a company has to pay more to suppliers, in order to maintain profitability they need to charge more to their customers. If inflation is transitory (temporary), some companies may be able to weather the storm and hold prices at pre-inflation levels. While doing such a thing, they would lose portion of their own profit margin. When inflation persists (when it is not a short term issue), companies will most likely need to raise prices to their customers. Unfortunately, when companies raise prices, that perpetuations inflation.
- Higher input costs = higher output costs.
- Higher costs = inflation
- Inflation = no fun
To make a long story short, clothing companies can either raise prices to consumers or they can squeeze suppliers for lower costing. See how fuel & inflation charges effect the fashion industry.
Effect on Consumers: due to the fact that the cost of products has increased, it is likely that many consumers simply can't afford to purchase as many products. It is very probable that food & gasoline purchases will take priority over many other items. Fortunately for the apparel industry some people consider clothing to be more essential than patio furniture, swimming pools, and a new television. When inflation effects the consumers wallet, clothing & footwear shippers may opt to switch out of designer brands and go with private label store brands. Learn more about private label clothing.
During an inflationary time period, the consumers purchasing power decreases. They have to spend more money to purchase products they bought in the past at a lower price. If their wages have not increased at the same rate as the inflation rate, this becomes a very bad situation.
Here is something to think about.
Minimum Wage Increases - lets say that you own a clothing store in New Jersey and in 2019 you paid your employees $10. per hour. But in 2022, you start paying your employees $13. per hour. In case you are not following, that means that your "cost" (expense) to run your store has "increased". If you want to make the same amount of profit as you did prior to the minimum wage increase, you will need to "increase" the cost of the clothes you sell in your store. Now, every consumer that shops in the store will pay a higher price in 2022 than they did in 2019. OK, now expand that same exact concept to restaurants, gas stations, movie theaters, barber shops, etc. If labor cost goes up, companies need to charge more to customers for products & services. Did the minimum wage increase actual help anyone? The employee that previously made $10 and now makes $13 now "pays more" for food, pays more for haircuts, pays more for gas, pays more for entertainment, pays more for everything... Did that really help the employee?
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