LISBON / DHAKA (Reuters) – Clothing retailers in Europe and America are running out of surplus stock and are cutting back on spring orders. Buying agents are dealing with late payments. Garment factories in Bangladesh are on the rack.
The global apparel industry, reeling from a punishing 2020, sees its hopes for recovery pierced by a new wave of COVID-19 lockdowns and patchy national vaccinations.
Some major retailers are still supplying last year’s clothing, which would have been on sale at normal times. For example, UK chain Primark told Reuters that it housed about £ 150 million ($ 205 million) of spring / summer 2020 stock and £ 200 million from fall / winter.
As an indication of the magnitude of the backlog, consulting firm McKinsey says the value of unsold clothing worldwide, in stores and warehouses, ranges from 140-160 billion Euros ($ 168-192 billion) – more than double the normal level.
British Marks & Spencer and German Hugo Boss said they had placed smaller orders than usual for this year’s spring collection.
Ron Frasch, former president of Saks Fifth Avenue, who is now an operating partner at private equity firm Castanea Partners, which works with a number of apparel brands, says retailers are keeping volumes low and turnaround times tight.
“Most brands are pretty tight on shipping right now and the factors are very tight. I think everyone was very conservative with their purchases, ”he said. ‘I know that many pay slowly. That’s for sure.”
Indeed, Hong Kong-based purchasing agent Li & Fung, which operates more than 10,000 factories in 50 countries for retailers, including global players, told Reuters some retailers had requested later payment terms but declined to provide details.
FACTORIES FEEL THE PAIN
The pain consequently flows to major garment production centers, such as Bangladesh, whose economy depends on textile exports. Factories struggle to stay open.
Fifty factories surveyed by the Bangladesh Garment Manufacturers and Exporters Association said they had received 30% fewer orders than usual this season as the blockades in much of Europe before Christmas, followed by a new crackdown in January, pushed their businesses hit hard.
“Orders usually arrive three months in advance. But there are no orders for March, ”said Dhaka-based factory owner Shahidullah Azim, whose customers include North American and European retailers.
“We run at 25% of the capacity. I have 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 the Star Network, an alliance of manufacturers in six Asian countries and owns four factories in Bangladesh, is facing similar problems.
“Right now I should have been completely full until March at least, and looking at a healthy amount for fall / winter already coming in. It’s slow across the board, ”he told Reuters from the capital Dhaka.
“Brands buy less from fewer people.”
Asif Ashraf, another factory owner in Dhaka who makes clothing for global retailers, said it was difficult to customize. “We have produced the fabric and we are ready to sew the garments, but then they say the order has been delayed.”
‘WEARING PUBLIC PJ’S AGAIN’
As store closings threaten to continue through the summer, some retailers are trying to sell as much of their surplus inventory as possible before placing new orders, textile recycling company Parker Lane Group told Reuters.
CEO Raffy Kassardjian said his company has grown from processing an average of 1.5 million surplus garments per month to more than 4 million in January, its busiest month on record.
Last year was terrible for the clothing industry, which according to Euromonitor saw sales fall by about 17% compared to 2019. And the future is uncertain.
Estimates for 2021 range from pessimistic forecasts of a 15% drop in sales by McKinsey to an 11% recovery by Euromonitor.
So are there any bright spots? Well, a lockdown pajama tree provides some minor relief.
“If you want to know what the British public is doing – it’s wearing pajamas again,” Steve Rowe, CEO of Marks & Spencer said last month, while Hugo Boss alluded to the same phenomenon, saying that “it had streamlined our range of classic business attire. and expanded the range of casual wear ”.
But that’s cold comfort for some factory owners.
“The demand for pajamas is high for life,” admitted Ali in Dhaka. “But not everyone can make pajamas!”
($ 1 = 0.7325 pounds; $ 1 = 0.8315 euros)
(This story corrects an omitted letter in Raffy Kassardjian’s name.)
Reporting by Victoria Waldersee in Lisbon and Ruma Paul in Dhaka; Additional reporting by Melissa Fares in New York, Anneli Palmen in Düsseldorf and James Davey in London; Editing by Vanessa O’Connell and Pravin Char