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H&M Group has announced a major initiative, called Treadler, around sustainability and its supply chain with a fairly radical move that will see it offering access to its global supply chain to external companies. The B2B project is part of the Swedish company’s push to make fashion production more eco-friendly and will see smaller brands using Treadler in a wide variety of areas such as product development and sourcing, production and logistics.
Treadler will initially work on a small scale and provide a service that is tailored to suit the need of each client. The move is the first big announcement under new group CEO Helena Helmersson, but continues a sustainability focus that has run throughout the group’s operations in recent years.
Helmersson meanwhile added that the fashion industry as a whole hasn't been sustainable enough and that in order to future-proof it, companies have to transform their supply chains. H&M has been working on this and has realised that the output of its efforts can be valuable for others too.
In 2019, the number of GOTS certified facilities globally grew by 35%, from 5,760 to 7,765 located in 70 countries. The number demonstrates that GOTS successfully serves as sustainable solution. The required certified organic fibres protect the climate by absorbing CO2 and every processing step - from field to fashion - has to meet stringent social and environmental criteria before a finished product is allowed to carry the GOTS label. This huge leap forward was seen in both, production and consuming regions. Countries with largest growth in GOTS-certification in percentage in 2019 are: Netherlands (73%), Bangladesh (73%), Spain (71%), and Turkey (65%). In terms of total numbers of certified facilities, the highest increase is reported from Bangladesh (+505), followed by India (+438) and Europe (+396).
The top ten countries in terms of total numbers of GOTS-certified facilities in 2019 are: India (2411), Bangladesh (1194), Turkey (858), Germany (565), China (448), Italy (444), Portugal (301), Pakistan (276), USA (147), and the UK (75).
“The enormous growth shows that GOTS successfully serves as sustainable solution from certified organic fibre to finished product. With more and more GOTS certified operations and products we altogether substantially contribute to sustainable development.” Claudia Kersten, GOTS Managing Director.
GOTS certification helps to ensure compliance with each of the 17 UN Sustainable Development Goals. More than 3 Million workers working in GOTS-certified facilities were reported in 2019 by the 17 accredited independent Certification Bodies. 2019 was also a GOTS revision year resulting in the new GOTS Version 6.0, due to be released in spring 2020. In the past five years, local exporters and international organisations have heavily invested in improving environmental and social conditions in Bangladesh. Bangladesh showed one of the highest growths this year with a 73% increase in GOTS certified facilities. The high level of interest in the GOTS Bangladesh Seminar 2019 is also reflected in the number of certified facilities. India has been at the top position with highest number of GOTS certified facilities since 2008. This year, there was an increase of 438 GOTS-certified facilities in India. “With the whole supply chain from farm to retail, along with suppliers of GOTS Approved Chemical Inputs, India has a unique position in the organic textiles industry.
More than 10 Indian brands are offering GOTS labelled goods in Indian retail, while few others are using GOTS as a risk management tool and may start labelling in the future,” Sumit Gupta, GOTS Representative in India & Bangladesh.
Criticising brands like Athleta or Uniqlo for their delayed adherence to sustainability should not be the focus instead, they need to be supported and their initiatives need to be highlighted to the general public.
Embedding sustainability into operations
Today, many brands have to embedded sustainability practices into their collections and day-to-day operations. A prominent example is brand Everlane which has launched a collection made from recycled fabrics and plastic water bottles. Similarly, French footwear brand Vejas has provided the source of all its materials on its interactive website whereas LA-based brand Reformation partnered re-commerce site ThredUp to both shop and recycle with a more eco-conscious mindset.
Pioneers of the trend
Though a relatively new trend, some brands have been advocating sustainability for a long time. These include
Patagonia, Volcom and Eileen Fisher who have created some of the most sustainable production practices, sourced eco-friendly fabrics and upheld safe and ethical factory conditions. Their initiatives are being carried forward by their successor brands Everlane, Vejas and Reformation who are enlightening consumers and competitors about sustainability through smart designs, sharp storytelling and easy-to-understand definitions of fabrics, processes and production models.
One ways brands can make a positive impact is by adopting standard practices like enforcing recycling, not using plastic bottles, etc, is to create a company policy to support a direct action organisation. For this, they need to focus on purpose as much as profit and aim to become a Certified B Corporation. They can also evaluate their company’s performance in accordance with Sustainable Development Goals. This will enable them to eliminate the burden of climate crises from future generations.
The coronavirus outbreak in China has not spared India’s cotton yarn exports either and has started exerting pressure on yarn realisations, which have corrected by ~2-3% since the beginning of February 2020.This follows a brief recovery seen in India’s cotton yarn exports in the month of January 2020 when the exports touched an estimated ~100 million kgs., in line with India’s historical monthly average, following a weak performance for nine consecutive months earlier.
The domestic cotton spinning industry is highly dependent on exports, particularly to China, with ~30% of the cotton yarn produced in the country being exported, and China accounting for nearly one-third of the exports in recent years. The outbreak of the coronavirus in China and the consequent lockout in parts of China has resulted in a shutdown of production units in the country, trickling down to lower demand for the yarn. The resultant correction in realisations, even as cotton prices have remained relatively stable on the back of scaled-up market interventions by the Cotton Corporation of India Limited (CCI), are expected to contract spinners’ contribution margins again, vis-a-vis the previous three months. Movement in domestic cotton prices contrasts with the international trend wherein uncertainties on demand have resulted in a sharper correction in cotton fibre prices in recent weeks.
Commenting on this, Mr. Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, said, “Even though domestic cotton fibre prices continue to be competitive vis-a-vis international cotton prices at present with a price spread of ~4% (reduced from 9% in Feb-20), a further correction in international cotton prices amid demand-side uncertainties could render domestic spinners uncompetitive in the international markets, similar to the situation which was witnessed in H1 FY2020.”
As for the performance of the Indian cotton spinning industry, it has already been severely constrained in the current fiscal amid multiple headwinds including a demand slowdown in the domestic as well as export markets and unfavourable raw material prices. While the industry was pinning hopes on a gradual recovery in cotton yarn exports from Q4 FY2020 onwards, aided by the softening of domestic cotton prices, the recent developments could prolong tough times for the domestic spinners.
“With no meaningful recovery in sight and continued uncertainty on the extent and duration of the impact of the coronavirus outbreak, ICRA is maintaining the ‘Negative’ outlook on the cotton spinning sector assigned in August 2019. There has been a visible weakening in credit profile of domestic cotton spinners in the current fiscal, corroborated by a credit ratio (upgrade to downgrade) of ~0.6 times in YTD FY2020,” Mr. Roy added.
The impact on contribution margins over the next few months could be lower for companies that have built-up adequate cotton reserves at low prices in the recent months, have a wider geographical presence in markets other than China and a focus on non-commodity, value-added products. Having said that, as per ICRA estimates, operating profitability for the domestic spinning sector in FY2020 is expected at multi-year lows, closer to the level last witnessed in FY2012, when most players suffered sizeable losses on inventory due to a steep unexpected correction in cotton prices.
In contrast to the spinning segment, other segments of the domestic textile value chain are not highly dependent on China and other affected regions, for export demand. Nevertheless, some impact on production could be seen in segments such as fabric and apparels that are dependent on these affected regions for getting raw material supplies such as man-made fibres/ yarns, colours and dyes, chemicals and trims/ accessories such as zippers, buttons and needles. Besides potentially affecting production for companies that do not maintain sizeable inventories, this could exert cost-side pressures with companies having a limited flexibility to pass-on increases, amid a subdued demand scenario. Having said that, the downstream segments, particularly apparels could, in fact, benefit from the increased demand in the export market over the medium to long term, as large customers look at geographically diversifying their supply base. No immediate benefit is, however, expected owing to time required to scale up capacities and get approvals, as well as liquidity crunch which the sector is currently experiencing amid delays in clearance of export incentives.
The Coronavirus (COVID-19) outbreak may trigger a global economic recession. A huge vacuum has been created in global trade due to limited supply of manufactured goods, raw materials and intermediate goods from China. World growth has become increasingly dependent on China's performance in the last two decades. This may lead to companies making irreversible decisions such as wholesale shifts in supply chain, distribution channels – supply chain broken, especially in certain sectors. China, which is the hub of manufacturing and the epicenter of global production, has put a hold on its production activities. There are limited supply chains that may stand across the globe without any dependence on China for sourcing. It is estimated that China’s GDP growth will slow down to five per cent this year.
Supply shortage of inputs that go into the manufacturing of a wide range of products will likely be the first indicator of the disruption. This would also translate into shortages of finished products, a steep fall in production but also a contraction in product demand resulting in falling future product prices, hence, a global economic crunch. In the last two weeks, international prices of major commodities have evidently declined except for gold which proves to be a safe investment tool in the time of uncertainty.
Target’s comparable sales grew by 1.5 per cent in the fourth quarter. Comparable digital sales grew 20 per cent. Revenue grew by 1.8 per cent. Full-year sales increased 3.6 per cent, reflecting a 3.4 per cent increase in comparable sales combined with sales from non-mature stores. Revenue for the year grew by 3.7 per cent compared to last year, reflecting sales growth of 3.6 per cent and a 6.3 per cent increase in other revenue.
The company, a general merchandise retailer, has more than 1,860 stores in US and employs more than 3,50,000 people. Target has had eleven consecutive quarters of positive comparable sales growth, driven by healthy performance in both its stores and its digital channels. Target has built a sustainable business model that drives strong topline growth and consistent bottom line performance. In the fashion department, it has refreshed stores to make individual brands look more like their own mini boutiques, with more mannequins and table displays showing off merchandise. It has launched dozens of in-house apparel brands over the past three years. Target sources a variety of products from India and works with around 100 Indian exporters like Radnik Exports, Orient Fashion Exports, Richa Global Exports, Shivalik Prints, Trident and Vardhman.
J Crew’s profit climbed 15.4 per cent in 2019. Revenue went up by 2.3 per cent. Thanks to the strategy carried out throughout 2019, the company has created a stronger and more efficient operational base.
American group J Crew has been an institution since 1983. It is renowned for its fresh, luxurious take on everyday staples. America’s favorite basics store J Crew is known for its lace jogging pants, skirts, tank tops, tees, dresses, fine Italian cashmere sweaters, sequin and lace-detailed skirts and playful jewelry. The brand was always interested in quality, often focusing and investing on small details. But then it came into competition with a new class of trendy fast fashion retailers who operate at lightning speed. Also, design details such as nicer buttons and richer colors are less apparent on the internet. J Crew is now trying to compete without marking everything down by 40 per cent every other week. It has created an analytics team to research and optimize the cost of each item. It also plans to switch up its supply chain beyond China. J Crew is the owner of the brand Madewell whose sales increased by 14 per cent in the last year.
As more customers are shopping online, Australian retailers are focusing on smaller stores with more localised ranges. A smaller offline apparel market means brands will need to rethink the way they reach their customers. Brands are becoming less reliant on being stocked in bricks-and-mortar stores and focus more on direct-to-consumer sales. It’s about a collection of 18 pieces that change every month and about not having stock in-store. There are possibilities and opportunities for small brands to be more nimble and respond to the market than with more stock. Emerging designers may be best placed to thrive in this changing bricks-and-mortar landscape because many of them are already questioning traditional ways of selling. Several Australian designers have returned to making products to order, which not only suits a smaller bricks-and-mortar footprint, but is also more sustainable.
Questions remain whether one-off factors have driven retail sales higher over the past two months, but recent economic data, particularly around the labor market, new car sales and tourism, has been strong. And Australia’s population is currently growing far quicker than what many previously thought. These are all factors that would generally support retail sales growth, and with consumer confidence also edging higher, it suggests that perhaps the outlook for retailers is not as bad as expected.
Toni Ruiz is the new chief executive officer of Mango. Previously he was general manager at Mango. He joined the fashion brand as head of finance in 2015, and has been part of the executive team for nearly five years. He rose to general manager two years ago in a move that saw him assume overall responsibility for managing the business.
With an economics degree and an MBA, Ruiz spent many years at Leroy Merlin, part of Adeo, as finance chief for the Spanish market. He was also in charge of international control and planning.
Founded in 1984, Mango is a Spain-based brand. Sales in financial year 2018 were up 1.8 per cent on the previous year. But losses remained quite high, marking a third consecutive annual loss. The business is hoping to return to profit in financial 2019. Mango has an international presence in over a hundred countries. Although the group is committed to directly controlling its online operations, in 2019 it began to franchise its platform in distant countries, where it does not have its own structure, with relevant local partners. Mango centralizes all its logistics in Spain, but it has seven satellite stores that service online operations, located in the United States, Germany, China, Russia, Turkey, Mexico, and South Korea.
Apparel Sourcing Week will be held in Bengaluru, June 18 to 20, 2020. The three day show will present opportunities for networking, knowledge and will feature 100 leading manufacturers from India, Bangladesh, Vietnam and Sri Lanka, showcasing a diverse portfolio of products and latest collections on one platform. Also present will be 50 manufacturers and suppliers of innovative fabrics and accessories. Knittech which specialises in flat knit shawls and stoles will be there. Knittech’s products are noted for their flexibility and elasticity in weaving. Its entire collection is in tune with international trends, with the best quality yarn, best possible infrastructural facilities and unique designs.
Star a provider of fashion apparel across a broad range of product categories including women’s and men’s woven garment, cut and sew knits and intimate apparel will be there. They provide customers comprehensive design services, product development resources, such as fabric sourcing and trim development and in-house value-added services such as garment washing and embroidery. Liva stands for high quality fabric made using natural cellulosic fibers of the Aditya Birla Group, delivered through an accredited value chain. Unlike other fabrics which are boxy or synthetic, Liva is a soft, fluid fabric which falls and drapes well. Anuma Fashions produces woven garments, specialising in shirts, blouses and shorts for children.
