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Emarsys and the ccinsight.org platform stats show there is a slow but steady recovery across the Italian fashion sector from March 28. There has been a steady climb in orders by 18 per cent and a revenue increase of 13 per cent. Among the fashion items seeing a wider global uplift right now are luxury goods such as handbags and trainers, along with gloves and sportswear and these are all areas in which Italian brands excel.
However, according to ccinsight, business in the sector is still “significantly down” compared to pre-coronavirus levels. Now, as consumer confidence grows, there is a steady recovery in the Italian fashion market.
The ccinsight platform provides an anonymised, daily view of more than 1 billion engagements and 400 million transactions in more than 100 countries.
The IMF expects a 7.6 per cent expansion in Asian economic growth next year on the assumption that containment policies succeed but added the outlook was highly uncertain. The IMF says, Asian policymakers must offer targeted support to households and firms hit hardest by the pandemic, calling also for efforts to provide ample liquidity to markets and ease financial stress faced by small and midsize firms.
Asian countries should focus on preventing small firms from going under to stop a sharp increase in unemployment. Emerging economies in the region should tap bilateral and multilateral swap lines, seek financial support from multilateral institutions, and use capital controls as needed to battle any disruptive capital outflows caused by the pandemic.
Garment exporters will continue to get rebate on central and state taxes on their outward shipments as the government has decided to extend the RoSCTL scheme beyond March 2020 to enhance competitiveness of the labour-intensive textiles sector. The Ministry of Textiles has issued a notification extending the Scheme of Rebate of State and Central Taxes and Levies on Export of Garments and Made-ups (RoSCTL) which was in force up to March 31, 2020.
The RoSCTL scheme provides rebate on all embedded taxes on exports. The Government has decided to continue the said Scheme w.e.f. April 01, 2020 until such time that the RoSCTL Scheme is merged with Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme without any change in Scheme guidelines and rates as notified earlier.
Finance Minister Nirmala Sitharaman had in September last year approved the RoDTEP to incentivise exporters at an estimated cost of Rs 50,000 crore to the exchequer. Exporters get rebate of state taxes and levies like VAT on fuel used in transportation, and embedded State Goods and Services Tax (SGST) paid on inputs such as pesticides and fertilisers.
Meanwhile, the ministry has also decided to ease norms under Amended Technology Upgradation Fund Scheme (ATUFS) during post lockdown period of the COVID-19 outbreak.
A recent survey by the Federation of the European Sporting Goods Industry (FESI), the European sporting goods sector is strongly affected by the COVID-19 outbreak, with 45 per cent companies declaring a loss of turnover ranging between 50 and 90 per cent since the beginning of the crisis,.
The survey conducted among FESI members—companies and national federations—comprised 40 per cent large enterprises, 30 per cent small and medium enterprises and 20 per cent micro-enterprises. The closure of brick and mortar stores all over Europe and internationally, as well as changes of consumers' behavior lead to serious drop in sales.
Many companies—around 35 per cent of FESI members—have exceptionally decided to reorganize their supply chains to help produce medical personal protection equipment and other related products to support healthcare workers. While national governments and the European Union have put in place economic rescue plans to financially support those affected by the crisis, for some companies the support of the financial sector is not yet fully sufficient.
The survey also indicates the current impact of the outbreak on production depends on a wide variety of factors like governments' social distancing measures, the evolution of the virus in each country, order cancellations from other clients and the overall clear lack of short- and long-term visibility for the companies. Regarding e-commerce, the survey found digitalisation is a key driver for the sporting goods industry and companies with efficient omni-channel retail strategies are better equipped to cope with the crisis.
As COVID-19 wreaks havoc across Italy, the country’s premium denim sector has come to a virtual standstill. For over a month, most parts of Italy’s Lombardy region—home to denim players like Berto, Candiani Denim, Hub 1922, Tonello and more—have been under lockdown as the country became the European epicenter of COVID-19 pandemic.
On March 21, Italian Prime Minister Giuseppe Conte issued a mandate to shut down all nonessential manufacturing activities in the country—including businesses in the denim supply chain. To tide over this crisis, some denim companies diversified their production but others like Gnutti are awaiting orders to resume normal operations whenever that may be. Denim brand, Blue of a Kind, felt the pressure as some of its wholesale customers changed their orders. As a result, the brand decided to hold back deliveries until retailers have a clearer idea of how things will unfold.
Smart strategies to complete orders
“Made in Italy” garment finishing technology firm Tonello is focusing on completing prior commitments and guaranteeing employees all necessary safety
measures. All departments not linked to Tonello’s production have adopted a “smart working” strategy and are continuing their work activities from home. The office of Italian denim brand HUB 1922 also followed instructions, restrictions and measures issued by the Italian government. The team relied on technology to stay connected with clients, though roadblocks remain. PG Denim stays connected with suppliers and clients mainly by phone and testing new finishes and trends by emailing clients photos.
Slowdown due to contraction in orders
According to Tonello, there is likely to be a “significant slowdown” in the denim industry and a re-evaluation of supply chains. The company hopes in the recovery, people, consumers, will have a positive momentum to start again with new ideas and greater values.
Blue of a Kind plans to continue manufacturing in Italy. But the brand anticipates many challenges ahead for the denim industry. The brand expects to see significant reduction n receptivity from the market in the future.
The outbreak has forced companies to hit pause. According to De Conti, Head of Rudolf Hub 1922, the pandemic has made the supply chain stronger. He hopes more empathy and understanding across the value chain once the pandemic is over .
Domestic manufacturers to grow
According to Paolo Gnutti, PG Denim Founder and CEO, this is the time to produce with care and responsibility instead of prioritizing quantity and price. He expects Italy to come out of this pandemic with a newfound love for local independent businesses, domestic manufacturing and quality over quantity.
As companies are being forced to think proactively about their future rather than being reactive, De Conti hopes the denim sector maintains the pace at which it was innovating—and perhaps come out with greater ideas supporting each other in crisis. De Conti also expects companies to re-evaluate some prior procedures of how they do business. According to him, the crisis proves that remote interactions can be efficient, are fast and definitely cheaper than flying. Gnutti urges the industry to use digital tools to stay in touch online. He views the denim community needs to support each other—both psychologically and also in terms of business.
According to the McKinsey & Company survey across 38 countries to understand the impact of COVID-19 on consumer sentiment, more than 75 per cent consumers across the world expect to feel the impact of COVID-19 for more than two months, and about 50 per cent expect this duration to last for more than four months. Around 90 per cent Chinese and the US consumers also expect this impact to last for more than two months before routines go back to normal, while 50 per cent expect their finances to be impacted for more than four months. Around 60 per cent European countries expect this financial impact to last more than two months. In contrast, almost 100 per cent of consumers in Japan and South Korea expect disruptions to their routines to last more than two months.
As governments and organizations across the world step up efforts to contain the COVID-19 pandemic, consumers have already begun to feel its economic effects. With most countries moving through the contagion curve, consumers are pulling back their discretionary spending. Though their expenditure on online shopping has increased, this is not enough to offset their overall reduction in spending.
To track the changing consumer sentiment during these times, McKinsey & Company recently conducted a survey across 38 countries to understand the impact of COVID-19 on consumer sentiment. These surveys conducted online and repeated weekly or bi-weekly depending on the region. Their results are weighted on a country basis for representative balance of age and income/socioeconomic status.
Less optimism in European consumers
The surveys indicated European countries, hard hit by COVID-19, are considerably less optimistic compared to their counterparts in Africa, Asia, and theAmerica. Optimisim amongst Chinese consumers increased 53 per cent over the past week.
Consumer income to decrease
Between 30 and 50 per cent consumers globally expect their household income to decline over the next two weeks, while few expect it to increase. Most optimistic among these are Chinese consumers, 30 per cent of whom expect salaries to increase however, 37 per cent still expect a decrease. Around 49 per cent consumers in most European countries, United States Japan, and India, expect their income to decrease. More than half of consumers in the final tier of countries—Brazil, South Africa, Germany, and Korea expect their incomes to decrease.
Increased spending amongst Asian consumers
The optimism of Chinese consumers’ is likely to result in a net increase in expected future spending, a situation also observed in Indonesia, Nigeria, and India. Other countries, including Brazil, Japan, and Portugal also expect to increase their spending whereas European consumers expect to spend less.
Consumers halt discretionary expenditure
Consumers are universally pulling back their expenditure on discretionary items. Some categories where consumer expenditure has declined considerably include restaurants, apparel, footwear, accessories, travel, and entertainment out of home. Chinese consumers are spending more across categories including pet-care services and fitness and wellness. Their shopping behavior after the COVID-19 peak resulted in more than 30 percent lower traffic but larger basket sizes for food purchases, and depressed traffic and consumption for apparel and department stores. In South Korea and Indonesia, food takeout and delivery is showing positive momentum.
COVID-19 impact to last long
More than 75 per cent consumers across the world expect to feel the impact of COVID-19 for more than two months, and about 50 per cent expect this duration to last for more than four months. Around 90 per cent Chinese and the US consumers also expect this impact to last for more than two months before routines go back to normal, while 50 per cent expect their finances to be impacted for more than four months. Around 60 per cent European countries expect this financial impact to last more than two months. In contrast, almost 100 per cent of consumers in Japan and South Korea expect disruptions to their routines to last more than two months.
During this period, most consumers expect to spend less time working and more time consuming entertainment, including digital and video content, news, and social media. On the contrary, Chinese consumers plan to spend more time back at work.
G B Aras, Director Textile Engineering Group, ATE
“One inherent advantage Indian textile industry has is that we are fully independent as far as the supply chain is concerned. Compared to other industries like pharmaceutical, electronics etc, their supply chain is dependent of global suppliers including China. So the industry that can really take advantage from global market with sustainable increase in exports is textile. If the government realizes this and gives proper support the industry will bounce back faster and increase its export share.”
What challenges is the Indian textile and garments industry facing right now? How can they be overcome?
The textile industry was already under a financial stress for entire 2019 and the sudden event, known as the ‘Black Swan Event’ when suddenly things like this happens was not expected. There will be a long term impact on individual business and the country’s economy. The industry was ailing and this came as a big blow. Most industries are not operating right now but whenever the lockdown ends and manufacturing starts, it will be very gradual for few reasons. One, there will be a lot of financial or liquidity cash crunch for textile makers. They will have to pay salaries and working capital will be required. Moreover some global buyers have cancelled their orders and held back orders which means whenever factories start they don’t know what to produce. Therefore, it will be a challenge for people to start.
Secondly most migrant workers have gone back home and no one knows when they will be back or will if they will ever comeback; moving to full production will be a challenge. I also believe recovery will be slow as there will many after effects mainly because during this period, workers will also have to be paid their salaries. Ours is a low margin, high working capital industry, given this scenario people are starving for cash and the pandemic came at wrong time. It will break the backbone of our industry. Bouncing back will take long.
The government announced certain packages and incentives for the industry. What are your expectations from the government towards the textile industry to overcome this challenge?
The government has already announced the first fiscal stimulus but I feel a larger one is yet to come The first one was about 0.8 per cent of the GDP, and the expectation is the next one should be at least 2 per cent of the GDP, which means a good amount of money will come in support of both the industry and the economy. Obviously, a large part will come to the industry. Apart from that some companies have taken bank loan and in the current situation many will not be able to return them in time hence, there will be more defaulters. The banks and the financial institutions should be instructed by the government to give a moratorium or at least be softer because the textile industry is working on low margins and high working capital, so they will always be starving for cash. Repaying loans in this situation will be a serious issue. Secondly, besides fiscal stimulus a lot of claims have not yet been recovered by the industry from the government or incentive pertaining to MEIS or ROS , CTL and GST. Money is stuck with the government which is due to the industry, if this money is released some financial stress will be relieved.
Since the textile industry is the second biggest employer, with high export potential and high employment potential, no government can afford for this industry to collapse. Hence some support measures are required from the government.
There is a positive fall out of Covid-19 as in future, many global buyers will increase their buying from countries like India, shifting partly from China and India can be one of the beneficiaries if we play our cards properly. If we build proper infrastructure, proper capacities in textile and eco system a lot of orders can come. India can take advantage of this situation and try to increase its textile exports.
One inherent advantage Indian textile industry has is that we are fully independent as far as the supply chain is concerned. Compared to other industries like pharmaceutical, electronics etc, their supply chain is dependent of global suppliers including China. So the industry that can really take advantage from global market with sustainable increase in exports is textile. If the government realizes this and gives proper support the industry will bounce back faster and increase its export share.
Have we learnt a lesson not to depend on one sourcing country? Are we ready to produce volumes to become the next sourcing hub? Will we be able to match their pricing?
It is not only about pricing but also about quality. Costs in China had gone up in the last few years but their share in world trade has not fallen drastically. One of reason is quality. They have focused a lot on quality. So while cost is important quality is equally important. Unfortunately for India, two or three factors are really not in our favor right now. We are in the lower segment of the market and not in the high value segment where we compete with countries like Vietnam, Bangladesh so this is due to costing only. If we have to come up, then we have to play a quality game like China. We have made high quality goods for exporting.
I also think cost is a big problem in India therefore, after the pandemic there will be a shake-up in the industry. Companies that have strong sustainability in terms of finance, quality culture, good leadership, good management, will not only survive but also prosper in future and those that are weaker, particularly in the small segment will find it difficult to survive or even reopen. So, bigger players have a lot of responsibility now. They have the capabilities to build further capacities, give the best quality at an affordable rate because once you have mass production costs will come down.
Our problem is the industry is fragmented logistically. Cotton is grown in MP Gujarat and Central India but spinning mills are in Tamil Nadu so cotton is transported all the way. For weaving and knitting it goes to some other place and for finishing it goes to Ahmedabad, Surat and Mumbai, then it goes to garmenting centers. The whole value chain becomes very inefficient and costs are added at every stage. If industry’s leaders realize the need to have big integrated units from start to finish goods don’t have to travel and a lot of will reduce.
The Textile Ministry has to work closely with the industry, not only spinning, weaving, fabric forming, processing or garmenting and we have to build huge capacities. If we build huge capacities then we can effectively bring down the cost and fight competition with costs also. Moreover India makes limited products, mainly cotton based for exports. Now we have to diversify our basket to synthetic and blends and it has to be done fast because we are losing a lot of market because of this. Once we have synthetics and blends we will have a larger product basket.
India’s growth engine is not garments it is mainly textiles that is home textiles etc. In home textile India’s position is very strong, though there are temporary hiccups with exports to US and Europe but I am sure that they will regain market as they are well entrenched but in garments we are lacking and therefore Bangladesh, Vietnam, China are scoring.
Garment is highly labour oriented and costing is critical. There are still some states in India which have low cost if big garmenting hubs are put up there, we can manufacture at a low cost, comparable to that of Bangladesh. Everyone needs to change according to situations. We can’t work in old ways then we will remain with 5 to 5.5 per cent of market share only. This is a great opportunity and India should put all its cards together to increase global market share.
Many industry stakeholders feel small players should move to making technical textiles like masks and PPEs. What is your take?
Indians have herd mentality and short term view of business. Now that this opportunity is coming everyone wants to jump into this. One thing is sure, demand for PPEs will continue for quite a long time because the fear of virus is not going go easily but we have limited capability right now. The mask that is actually recommended is a three layered one called SMS that is melt blown and spun burnt. Spun burnt India produces but melt blown there is only one manufacturer. So we have to see if we have capacities to produce these because somebody has to invest in this technology and in surgical gowns also there are people.
Everybody wants to jump in because people already active are facing difficulties due to high demand. Now those who are already in this business and have good experience of this trade can expand faster. Indeed India needs to invest in such things but every country will do the same and it should not happen that there is a work capacity for all this because world over everyone is enquiring about masks and gowns etc.
At present people are thinking of short term but we have to evaluate whether we have the requisite raw material, equipment available. The main raw material for WHO approved mask is melt blown and that is not available in India, we should first put up factories to produce the raw material and then move to producing masks.
It is a great opportunity but how long it will remain, how much competition will be there one does not know but players who are already into this have the opportunity to expand as they have business knowledge and are better placed than anybody else. The technical textile industry is getting support from the government and now there will be a new norm in hygiene. Now PPE (Personal Protection Equipment) will become compulsory for hygiene workers. Therefore, within our country there will be a huge demand for this. This is an opportunity to diversify business.
As for garments, sale will happen more through online now. Circular economy is also an important aspect that is picking up in Europe and the US where people don’t want to consume more but repair and reuse the same thing. Trends will change and there will be less consumption.
How is ATE facing this challenge?
We have formed teams for different things and are in touch with all our employees to keep their morale high. We are fully operating from home. We have regular conference calls and reviews and our first plan is prepared for post-lockdown and how to survive because what will happen to the machinery is that investment in machinery will be the last thing which will be on the mind of customers when the lockdown opens. It will take a lot of time to buy machines and for companies like us to earn. So we have to be prepared for a longer lull for our segment of business.
Cash management is extremely important and we are focused on how to manage the cash and reserve. First and foremost we take care of our employees. We have a dashboard which is updated if anyone is sick. Then we support the infected person and his family. We are also training our employees online on digital marketing, using software as business tools. Employees are updating their manuals normally they don’t get that much of spare time and to utilize this time to prepare a list as to how to restart the machines once we reopen as there are many processes involved for restarting machines which we will circulate to our customers.
As and when the lockdown opens we will have access the situation and have a separate blueprint to deal with it. But one thing is clear, the next two quarters will be challenging for the industry and for ATE also. We will first focus on business continuity. We also have to get back to customers to help them. We have asked our people to be in touch with customers and principals to enquire about their well-being and whereabouts regularly so that there is no discontinuation in business relationship.
What is your advice to the industry?
It is most important to keep positivity and be motivated. Read good books and articles because positivity is important. When we reopen also only people with a positive mindset will bounce back faster. We have to learn our lessons and can’t be complacent. There will be extremely difficult situations for the next two quarters and the first priority for everybody should be to survive. We also have to see that there are less layoffs because that is the first fear people have in their minds which is not possible without the government’s help. In the long term the industry is going to gain provided we change ourselves according to the situations and take advantage.
Following the announcement of the offer published in September 2019 for Freudenberg’s planned acquisition of Low & Bonar PLC, the formal application for approval under the EU Merger Regulation (“EUMR”) from the European Commission (“Commission”) was submitted in March 2020 following extensive preliminary discussions and in agreement with the Commission. A decision on the application was received on April 17, 2020.
The Commission has granted an unconditional Phase 1 clearance under the EUMR. Completion of the acquisition remains subject to the satisfaction or waiver of the remaining conditions to the offer, including the sanction of the scheme of arrangement by the Scottish Court. Given the current disruption due to the COVID-19 pandemic, it is not yet possible to establish a definitive timetable for completion of the transaction. Further announcements will follow as appropriate.
Taken together, there are 768 companies running in red, accounting for 48.72 percent of all the dyeing and printing companies, considered in a statistical study, a large increase by 16.15 percentage points over the corresponding months last year. The total loss of money in these red bottom-line companies added up to 1086 million Yuan, up by 46.41 percent.
From January to February, the beginning of the year 2020, production of dyed and printed fabrics was reported to have touched 4913 million meters, a two-digit reduction by 22.42 percent, and further drop by 29.88 percent for sales income that totaled 24.706 billion Yuan from 1560 dyeing and printing companies, in the size of the companies considered above a designated size. Much more jaw-dropping is the fact that profits had a freefall by 101.8 percent while the export were down by 23.9 percent as opposed to the same period in 2019.
Normally, the swim or sink of a corporate profit rests with many factors, but financial cost, management cost, and the sales cost are the big three cost factors critical for any company’s bottom line that appears in red or in black. These big three cost factors take up a lion-share of an average of 85.64 percent of the business income in dyeing and printing industry. In the dyeing and printing sector, these big three costs, increased by 9.39 percent in the first two months of 2020, whereas, sector wise the increase for cotton fabrics was by 8.87 percent, and for fabrics made from man-made fiber, it was 14.08 percent.
Taken together, there are 768 companies running in red, accounting for 48.72 percent of all the dyeing and printing companies, considered in a statistical study, a large increase by 16.15 percentage points over the corresponding months last year. The total loss of money in these red bottom-line companies added up to 1086 million Yuan, up by 46.41 percent.
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| Dye & Print Fashion amid Pandemic |
China Dyeing and Printing Association (CDPA) issued its annual report in late March 2020 for the economic performance in dyeing and printing sector (Annual Report 2019), stating that the twelve months 2019 witnessed 0.83 percent increase in business sales income totaling 283.153 billion Yuan, a drop by 2.15 percentage points, and the profit increased by 6.49 percent, but growth rate had a considerable downslide by 11.44 percentage as compared with 2018 due to the increase in the big three costs to amounting to 15.835 billion Yuan.
The number of companies running at a loss amounted to 309, representing 18.92 percent of the total companies included in the statistical study, up by 9.76 percent to increase by 21.24 percentage points higher over 2018. The year of 2019 saw an increase in international trade for $29.144 billion by 7.34 percent, resulting in trade surplus for $25.689 billion, up by 10.4 percent.
Speaking of the import, the eight big categories of dyeing and printing textiles, including the dyed and printed cotton or manmade fiber or their blended fabrics in different textures of weaves and knits, as per CDPA’s own standards for identifying the product lines in the sector, were registered for 878 million meters for $1727 million, 12.62 percent down in volume and 10.94 percent drop in value, about 1.97 dollar/meter on average, up by 1.92 percent.
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| Blue-print Fashion Town in Keqiao, Shaoxing city of Zhejiang Province |
The export of the eight big categories from January to December in 2019 amounted to 26.823 billion meters, and to 27.417 billion dollars, enjoyed an increase in volume by 12.83 percent and in value by 8.75 percent, but the average unit prices of sales decreased by 3.62 percent and decreased 1.02 dollar/meter in terms of weighted average.
In the report, CDPA predicts that the global pandemic impacts will slow down the world economic growth as it is the severest challenge since the financial crisis in 2008, and will weaken the support force to the market recovery. The dyeing and printing industry will bear even greater pressure in sustaining a continually smooth run and a more arduous task for reshaping the industry for better development.
And sure enough, if the opening two months of 2020 and pandemic thereafter is to be looked at, China’s Dyeing & Printing Industry is far away from being termed as a “good beginning” is “half done”.
Contributed by Mr. ZHAO Hong
He is working for CHINA TEXTILE magazine as Editor-in-Chief in addition to being involved in a plethora of activities for the textile industry. He has worked for the Engineering Institute of Ministry of Textile Industry, and for China National Textile Council and continues to serve the industry in the capacity of Deputy Director of China Textile International Exchange Centre, V. President of China Knitting Industry Association, V. President of China Textile Magazine and its Editor-in-Chief for the English Version, Deputy Director of News Centre of China National Textile and Apparel Council (CNTAC), Deputy Director of International Trade Office, CNTAC, Deputy Director of China Textile Economic Research Centre. He was also elected once ACT Chair of Private Sector Consulting Committee of International Textile and Clothing Bureau (ITCB)
Ermenegildo Zegna Group, the Italian menswear label has reopened its facilities in both Italy and Switzerland to produce protective medical suits for hospital staff in the Piedmont region and Canton Ticino, with a production goal of 280,000 units. Zegna’s relief efforts are made possible by a partnership between the Zegna Group, Fondazione Zegna, the Piedmont region in Italy and Canton Ticino, Switzerland.
The medical suits produced are made from a non-woven fabric produced by Pratrivero Spa in Biella, Italy. The Zegna Group is proactively collaborating with the Piedmont Crisis Unit and Canton Ticino relevant authority to speed up the production process in an effort to meet the pressing need for vital medical supplies.
