WORLD MARKET UPDATE

---

In general, retailers around the world are working with historically high skin prices established during last year’s auction season. This is reflected in higher garment prices of which some markets are dealing with better than others. This higher price trend of four consecutive years has forced many manufacturers and retailers to get creative in offering their customers fur in a variety of different types, styles, and combinations in order to keep price levels reasonable. Most of these retailers now believe that they have reached the limit of their price range and are heavily dependent on cold weather to attract new customers. With the exception of a few markets, the weather has been unseasonably warm to open up the retail season. This is not the jumpstart that we had been looking for especially in the enormous China market.

Looking at the specific markets, we have received mixed sales results from Russian and Eastern Europe. Sales have been good on both the top end and the lower end merchandise up to this point. Russians have expressed that they are quickly losing the middle class consumers due to the economy. A small percentage rise to wealthy status while the majority struggle to make ends meet. The wealthy continue to love fur and buy at only the high-end stores with price being less of a factor and style and branding having more influence in the purchasing decision. For the rest of the trade, Chinese imports made with Chinese domestic mink have made considerable inroads and are offered at a lower price point filling the utilitarian need of a warm coat. Hats, which are domestically produced in Russia, are heavily dependent on cold weather and were experiencing a slower than normal start due to a late arriving winter. The Greek and Turkish manufacturers are major suppliers to this region and their sales are reflective of the Russian demand. Depending on quality and brand, some manufactures are experiencing a much better year than others.

The China market has dominated the global sales for fur for several years now. Expansion into new regions and a raging domestic economy have been the driving factors in the price increase at auction level. Last year was an exceptional year as a record cold winter and a late Spring Festival (Chinese New Year) created a perfect selling environment for fur garments. Unfortunately, this year is off to a slower start due to a number of factors. Contributing to a slow start in the retail season are: higher garment prices brought on by the high skin prices, a general feeling of a slowing economy (a predicted growth rate of 7.5% is exceptional for most markets but in China it feels weak), expansion of retail outlets that may finally have outpaced actual demand, government anti-corruption crackdowns have officials spending less on luxury products and, most importantly, cold weather has been spotty and so consumers are not forced into the stores as they were early last year. With an earlier Spring Festival this year, retailers were counting on a strong start to clear their inventory by this retail cutoff date. Chinese New Year is treated much like Christmas is here in North America and garments will be heavily discounted afterwards. If the Chinese back off in their purchases this year, so goes the overall market price level at auction as they have been so dominant in past years.

The Korean market seems to be off to a reasonable start. The Korean trade has been major buyers in our auction room on better qualities for decades now. The prices on their key purchases have risen at a modest level keeping them within the framework, albeit at the top end, of their consumers’ budget.  The Korean market is also an established market, so they haven’t undergone expansion like the Chinese but have kept it at a conservative pace.

If we do see a price adjustment this year, it will give a lot of other regions an opportunity to participate in the auctions and ultimately the retail sale of fur. Japan, North America, and Western Europe are all ready to take on more inventories but have been priced out of being big consumers over the recent years. Even Russia can take on substantially more product, but high prices continue to curb their appetite for bigger quantities. With the big increase in global production (70-80 million mink this year) and another substantial jump in Chinese production next year, we foresee a bigger price spread in qualities this year. Commercial types have a lot more competition and we are already starting to see drastic price cuts in Chinese mink offered for sale. Quality skins and branded mink like Blackglama and American Legend will continue to be in demand as retailers try to separate themselves from the inferior quality garments flooding the market.

There remains a lot of retail selling to be done this year and cold weather will be the biggest single factor leading us into another auction season.

http://www.alcbusiness.com/world-market-update/