LISBON v DHAKA (Reuters) – Clothing retailers in Europe and America are subject to excessive inventory and are reducing discounts on spring orders. Supply agencies face late payments. Bangladesh’s garment factories are on the shelf.
The global clothing industry, which is moving away from a punitive year in 2020, sees its hopes of recovery overwhelmed by a new wave of COVID-19 blockages and uneven vaccine launches.
Some large retailers are still breastfeeding last year’s clothes, which would have been sold in liquidation sales in normal times. The British chain Primark, for example, told Reuters that it houses about 150 million pounds ($ 205 million) in the spring / summer 2020 stock and 200 million pounds in the fall / winter.
In an indication of the extent of the arrears, McKinsey consultancy says that the value of unsold clothing worldwide, in stores and warehouses, varies between 140-160 billion euros (168-192 billion dollars) – more than double the normal levels.
Britain’s Marks & Spencer and Germany’s Hugo Boss said they have placed smaller orders than usual for this year’s spring collection.
Retailers keep small volumes and deadlines, according to Ron Frasch, former chairman of Saks Fifth Avenue, which is now an operating partner of private equity firm Castanea Partners, which works with a number of clothing brands.
“Most brands now are quite strict in terms of transport, and the factors are very strict. I think everyone has been very conservative in terms of procurement, “he said. “I know many have paid slowly. That’s for sure. “
Indeed, Hong Kong sourcing agent Li & Fung, which operates more than 10,000 factories in 50 countries for retailers, including global players, told Reuters that some retailers have requested subsequent payment terms, but have declined to provide details.
FACTORIES FEEL PAIN
As a result, the pain is flowing to large garment production centers such as Bangladesh, whose economies are based on textile exports. Factories are struggling to stay open.
Fifty factories surveyed by the Association of Garment Manufacturers and Exporters in Bangladesh said they received 30% fewer orders than usual this season, as pre-Christmas blockades in much of Europe followed by another cut in January , hit their business.
“Orders usually arrive three months in advance. But there are no orders for March, “said Dhaka plant owner Shahidullah Azim, whose customers include North American and European retailers.
“We operate at 25% capacity. I have several orders to run the factory until February. After that, I don’t know what the future holds for us. It is difficult to say how we will survive. ”
Miran Ali, who represents Star Network, an alliance of producers in six Asian countries, and himself owns four factories in Bangladesh, faces similar problems.
“At this point, I should have been completely full by at least March and look at a healthy amount for the fall / winter that is already coming. Everywhere, this is happening slowly, “he told Reuters in the capital Dhaka.
“Brands buy less from fewer people.”
Asif Ashraf, another Dhaka factory owner who manufactures clothes for retailers worldwide, said it is difficult to adapt. “We have produced the fabric and we are ready to sew the garments, but then I say that the order is pending.”
“PUBLIC BEHAVIOR of PCs again”
As store closures threaten to be shipped in the summer, some retailers are trying to sell as much of the excess stock as possible before placing new orders, Parker Lane Group told Reuters.
CEO Raffy Kassardjian said his business has gone from processing an average of 1.5 million oversized garments a month to more than 4 million in January, his busiest month.
Last year was tough for the garment industry, which saw sales fall by about 17% from 2019, according to Euromonitor. And the future is uncertain.
Estimates for 2021 range from pessimistic forecasts of a 15% drop in McKinsey sales to an 11% recovery from Euromonitor.
So are there light spots? Well, an arm of closed pajamas provides a slight relief.
“If you want to know what the big British public is doing – wearing pajamas again,” Marks & Spencer CEO Steve Rowe said last month, while Hugo Boss alluded to the same phenomenon, saying it “simplified the range.” our classic clothing business and expanded the range of casual clothing ”.
But this is a cold comfort for some factory owners.
“The demand for pajamas is at an all-time high,” Ali of Dhaka acknowledged. “But not everyone can make pajamas!”
(1 USD = 0.7325 pounds; 1 USD = 0.8315 euros)
(This story fixes the lowercase letter on behalf of Raffy Kassardjian.)
Report by Victoria Waldersee in Lisbon and Ruma Paul in Dhaka; Additional reporting by Melissa Fares in New York, Anneli Palmen in Duesseldorf and James Davey in London; Editing by Vanessa O’Connell and Pravin Char