By Erin Eastburn
FORT COLLINS, Colo -- Economic downturn has forced many Fort Collins store owners out of business. Due to high costs and little sales profit, local entrepreneurs have hit hard times in the Fort Collins retail community.
Fort Collins store owners are adjusting orders and increasing discounts from economic trouble. Seeing the direct impact from previous sales compared to 2010 sales, many store owners look for cheaper wholesale prices.
Store owners are concerned about their loss of sales compared to previous years, but many are shifting their focus on offshore production, creating lower production costs and ultimately creating higher revenues for stores. Due to offshore production, local stores are able to produce items in non-domestic countries, creating cheaper costs and high markup strategies.
According to Dr. Molly Echman, a merchandising economics and globalization professor at Colorado State University, “Fort Collins store owners have been utilizing these off-shore production facilities in primarily China, India, Mexico, and Turkey.”
The United States, including many Fort Collins retailers use the Chinese apparel and textile industry for off-shore production based off their cheap rates and minimum transportation restrictions. Though, for the past several years, the Chinese government has created a fixed exchange rate that keeps prices low for companies who contract business out to them, restricting economic growth in China, according to lectures given by Echman.
For local Fort Collins retailers, vendors and wholesalers, if the Chinese Government were to move towards flexible exchange rates, prices will rise, not only from exchange rates, but from tariffs as well.
By creating flexible exchange rates, the Chinese government would be providing a better standard of living for the Chinese people, in addition to room to grow as a democracy aimed country. From these exchange changes, the countries economic growth could expand, making them manufacturing leaders.
“Today, 70 percent of all apparel and textile companies use is offshore production in non-domestic countries,” said Echman.
Problems arise when countries use the Chinese apparel and textile manufacturing industry for offshore production. If the exchange rate were to rise, US companies have the option to stick with their Chinese partners or move to cheaper countries, such as India.
Kelly Parker, a sales associate at Sole Mates in Old Town Fort Collins, helps with purchasing orders for the store.
Parker said, “Sole Mates works with wholesale buyers and vendors. If we were to switch production location from China to another offshore location, it would be up to the designer of the brand, not us.”
Like Sole Mates, many other local Fort Collins store owners purchase their merchandise through wholesale markets, like MAGIC Fashion Convention hosted in Las Vegas. These wholesalers work with contractors and ultimately have the final say of where to get and produce merchandise to sell.
Parker continued by saying, “But if we had to pay a much higher price on an item, we may drop that brand from our store.”
From this response, wholesalers may be pressured if China were to remove their fixed exchange rate. This would increase the wholesale price, which in-turn would increase the retail price the store would mark their merchandise. From this chain effect, customers may not want to shop there anymore, if the prices were no longer affordable or consistent with the stores target market.
Though still being discussed, if the Chinese exchange rate were to become flexible, the prices for national and Fort Collins retailers could create many merchandise, markup and brand changes.
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