A received wisdom about retail is that, in tough times, shoppers trade down and the cheapest retailers win. With the war in Iran closing its fourth week and Europe facing higher inflation and worries of slowing growth, that logic should be taking hold. But one corner of the market — low-priced fashion — may be less of a beneficiary this time.
War not only drains consumer confidence but increases the cost of anything with a supply chain tied to oil. Freight rates carrying shipments between Shanghai and Rotterdam, for instance, are up a fifth since the conflict began, according to the WCI Shanghai to Rotterdam container freight rate index, and air freight prices between South-East Asia and Europe are up by a quarter, according to Freightos data.
Then there’s the impact on low-end, polyester-heavy players in apparel. About 70 per cent of polyester production costs are linked to oil-based feedstocks, according to intelligence provider ICIS. A 40 per cent rise in crude over the past month therefore translates into polyester fibre costs over a quarter higher.