Against the Wall
September 19, 2005,
Memo to the kids in the R&D department: The home textiles industry desperately needs you to invent “the new resin” — a malleable, chameleon of a substance that's also lightweight and inexpensive. One small request: no petroleum, please.
If ever there were a time when the industry needed some fundamental, base-level innovation, this has got to be it. The price of many of the basic ingredients used in home textiles has ballooned — and it doesn't look to deflate anytime soon.
True, the industry lamented roughly 20 months ago when cotton prices jumped. Suppliers howled; retailers publicly maintained that they would stand firm against any price increases. In the end — in most cases — they forged a compromise. Pricing on in-line programs remained the same, and retailers took a slight hike on new programs.
But there are three key differences this time around — the first being that when there's a shortage of cotton pushing prices up one year, there's often a surfeit of cotton the next year to push them back down. As yet, humans have not devised a way to whip up a bumper crop of oil.
More troubling, few oil industry pundits expect a return to $40 a barrel oil, let alone $30 a barrel oil. In mid-August, CNN interviewed a Houston-based oil economist who predicted oil would hit $100 a barrel within the next 12 months — and that was before Hurricane Katrina sailed into the gulf.
Second, during the mini cotton crisis, suppliers and manufacturers were the ones taking it on the chin. Now, retailers are also feeling the pinch in the form of higher transportation costs and utility charges. Compromise is unlikely to come as easily.
Third, the raw materials producers have already imposed their price hikes. And they keep on coming.
Out in there in SUV land, consumers have begun giving consideration to their holiday budgets. (Hint: toy retailers are planning to keep their inventories extremely lean.)
So what's to be done with home textiles? Build better products. Irresistibility has got to be the order of the day. Because let's face it folks, there's no margin in commodity items anymore.
A retreat to opening price points and “safe” merchandise isn't going to fatten anybody's wallet in the coming months. And until the kids down in R&D come up with some new, inexpensive synthetic materials, we're going to have to let the kids in the design department do their stuff.
Something's gotta give.