LISBON / DHAKA (Reuters) – Clothing retailers in Europe and America are running out of stock and reducing spring orders. Outsourcing agents face payment delays. The clothing factories in Bangladesh are in danger.
The global clothing industry, reeling after a painful 2020, is seeing its hopes of recovery shattered by a new wave of COVID-19 blockades and irregular national vaccine launches.
Some large retailers are still selling last year’s clothes, which would be sold at closeouts in normal times. British network Primark, for example, told Reuters it was housing around 150 million pounds ($ 205 million) in spring / summer 2020 shares and 200 million pounds in autumn / winter.
In an indication of the scale of the backlog, consultancy McKinsey says the value of unsold clothing worldwide, in stores and warehouses, ranges from 140 to 160 billion euros ($ 168 to 192 billion) – more than twice the normal levels.
British Marks & Spencer and German Hugo Boss said they placed smaller than normal orders for this year’s spring collection.
Retailers are keeping tight volumes and tight delivery times, according to Ron Frasch, former president of Saks Fifth Avenue who is now an operating partner at private equity firm Castanea Partners, which works with several apparel brands.
“Most brands are now very tight on shipping and the factors are very restricted. I think everyone was very conservative with their purchases, ”he said. “I know that many have been paying slowly. That’s for sure.”
Indeed, Hong Kong sourcing agent Li & Fung, who manages more than 10,000 factories in 50 countries for retailers, including global players, told Reuters that some retailers requested further payment terms, but declined to provide details.
FACTORY FEEL THE PAIN
Consequently, the pain is flowing to major clothing manufacturing centers like Bangladesh, whose economies depend on textile exports. The factories are struggling to stay open.
Fifty factories surveyed by the Bangladesh Garment Manufacturers and Exporters Association said they received 30% fewer orders than usual this season, as prenatal blockages in much of Europe followed by another crackdown in January hit their businesses hard. .
“Orders usually arrive three months in advance. But there are no orders for March, ”said Dhaka factory owner Shahidullah Azim, whose customers include North American and European retailers.
“We are operating at 25% of capacity. I have some requests 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 manufacturers in six Asian countries, and himself has four factories in Bangladesh, faces similar problems.
“At this point, I should be fully full by March, at least, and looking for a healthy amount for the fall / winter season. In general, this is coming slowly, ”he told Reuters in the capital Dhaka.
“Brands are buying less from less people.”
Asif Ashraf, another owner of a factory in Dhaka that makes clothes for global retailers, said it was difficult to adjust. “We produced the fabric and are ready to sew the clothes, but they say the order is on hold.”
‘PUBLIC WEARING PJs AGAIN’
With store closings threatening to hit the summer, some retailers are trying to sell as much of their excess stock as possible before placing new orders, textile recycling company Parker Lane Group told Reuters.
CEO Raffy Kassardjian said his business went from processing an average of 1.5 million surplus clothing items per month to more than 4 million in January, its busiest month of all time.
Last year was a terrible year for the clothing industry, which saw sales drop by about 17% compared to 2019, according to Euromonitor. And the future is uncertain.
Estimates for 2021 range from pessimistic forecasts for a 15% drop in McKinsey sales to an 11% recovery for Euromonitor.
So, are there bright spots? Well, a blocking pajama bar is offering a little relief.
“If you want to know what the big British public is doing – they are wearing pajamas again,” said Steve Rowe, CEO of Marks & Spencer, last month, while Hugo Boss alluded to the same phenomenon, saying that “it has simplified our range of clothing business classics and expanded the range of casual clothes ”.
But that is cold comfort for some factory owners.
“The demand for pajamas is on the rise,” acknowledged Ali in Dhaka. “But not everyone can make pajamas!”
($ 1 = 0.7325 pounds; $ 1 = 0.8315 euros)
(This story corrects discarded letters in the name of Raffy Kassardjian.)
Reporting 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