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Mauritian SME and Cooperative Minster Soomilduth Bholah has urged apparel exporters to revamp the textile and apparel industry in the country by leveraging the advantages of intelligent networking so that the sector moves towards Industry 4.0. He also urged exporters to make robotics and 3-D printing must an integral part of the industry.
Bholah said this during a meeting with prominent exporters from the sector at the SME Mauritius Coromandel branch office. The meeting aimed to adopt a collective and coordinated approach engaging all stakeholders to respond to the resulting threats and to identify new opportunities to reorient the sector for sustained development following the outbreak of the COVID-19 pandemic.
Mauritius exports textiles and apparels worth Rs 22 billion per year. The sector, which employs around 31,000 people, is now on its knees because of the pandemic. However, some manufacturers are still receiving orders from the main markets—South Africa, the United States and the United Kingdom—despite the lack of visibility of the sector for the forthcoming months.
‘Nirapon’, a platform of North America-based apparel brands and retailers, is restructuring its activities to provide increased technical support with three main areas of focus: safety monitoring, training and helpline. Safety monitoring activities of the organization will include protocols that are part of the day-to-day factory operations, including structural, electrical, and fire safety, as well as the ongoing training of workers on fire and building safety.
Incorporating the feedback from numerous factories, the fire safety training will shift from Local Training Providers (LTPs) to a local, trusted and competent organization. They will work to streamline training and explore online options without compromising effectiveness. The “Amader Kotha” helpline, a model for workers’ reporting – not only in Bangladesh but around the world, will continue to operate and provide workers with a safe and anonymous outlet for reporting issues.
Moushumi Khan, CEO, Nirapon since its inception, will be departing the entity, and a new Chief Safety Officer (CSO) will be named at a later date, reflecting its more technical nature. The entity was launched by 21 global apparel brands along with more than a dozen of former Alliance-signatory members, including Gap, Walmart, JC Penny and VF in March last year
As per International Monetary Fund, due to the lockdown in India and reduced buying by the world’s largest textile importers, such as the European Union and the United States, textile exports by the country have declined 80-90 per cent in April. Overall, these textile exports, which contribute about 25 per cent of total demand, are expected to decline by 30-40 per cent this fiscal owing to the global economic slowdown.
Domestic demand for RMG is also likely to decline on account of lower income levels, postponement of weddings and personal events, and reduced festive activities this fiscal year. Small and medium enterprises (SMEs) command a 30-40 per cent share in the total readymade garment market of about Rs 4.8 trillion. Similarly, demand for the home furnishings segment is expected to decline. However, the segment is expected to recover sooner than garments, on account of the upcoming monsoon and winter seasons.
In home furnishings, the demand for products such as bedsheets, blankets, and towels will be relatively better, compared with discretionary items such as curtains and home decor. In addition, historically better financials (operating margins, gearing and interest coverage ratios) of home furnishing companies, as against other segments of the textile value chain, will also provide relief in these tough times.
Women’s wear fashion brand Max Fashions plans to close 17 stores in New Zealand as it failed to generate any revenue during the COVID-19 lockdown. Max Fashions currently has more than 40 outlets in the country. The clothing chain owned by Chris Grieve, Gary Hitchcock and James Whiting is restructuring and seeking creditor's compromise so it can keep trading.
The company has not paid rent since the end of March and negotiations with landlords have also failed as offers varied significantly. The company is requesting its landlords for a discount in rent in order to avoid its business from being liquidated.
The proposal that Max has sent to landlords says the brand has incurred considerable losses due to the lockdown and it plans to terminate 17 leases by the end of next month. Its shareholders don't have the funds to sustain the company through COVID-19 and the company therefore requests its landlords to take 30 to 40 cut in rents for the 2021 financial year.
Under the deal terms, landlords for most of Max's remaining outlets will receive none of April's rent, and 10 per cent of May's rent, as well as May's turnover. From June this year, the clothing company will pay varying rents based on the compromise, until the end of the lease. The payments will be made to landlords will be calculated as proportion of the base rent and a percentage of sales. For some longer leases, the company has agreed to pay a minimum amount from June 2022.
The Hong Kong-based sourcing pioneer Li & Fung has asked over 120 employees from its India office to leave at just one month. As per the dismissal letter, employees will get a notice period of less than 4 weeks (27 days to be precise).
The company has also decided to lay off 70 per cent of its employees in Hong Kong. Over the last few weeks, the sourcing giant has been sending dismissal notices to its procurement staff based in Hong Kong. Besides, it also plans to lay off employees from its Shenzhen and Shanghai offices too.
The decision is being taken to help to company battle the crisis created out of the deadly pandemic that has gripped the whole world including India. With nearly 17,000 employees worldwide, the company has more than 250 offices in 40 markets and works with more than 15,000 suppliers across the world.
Experts say, the EU-Vietnam Free Trade Agreement (EVFTA) is expected to provide a host of opportunities to Vietnamese enterprises to bolster exports. However, they must also meet the strict requirements in order to fully capitalize on the deal. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (VITAS), Giang said companies in the sector believe in the prospect of exports to the EU rising after the EVFTA comes into effect, as tariffs will be slashed to zero percent.
However, businesses need to be thoroughly prepared to make use of the opportunities and have a solid grasp of the regulations within the agreement, because the EU is a demanding market with strict requirements on product quality and design. Phi Viet Trinh, General Director of the Ho Guom Garment JSC, said that in order to benefit from the preferential tariffs under the EVFTA, products must have a certain proportion of materials hailing from the EU or Vietnam. Therefore, management agencies and businesses alike must take certain action to maximize the opportunities.
Nguyen Quoc Tuan from Vinh Thong Co, a footwear exporter to Europe, expects the EVFTA to boost exports over the remainder of 2020. Nevertheless, he also acknowledges that the company will encounter a range of difficulties in adhering to the agreement’s rules of origin, as while 60 percent of its input materials come from domestic suppliers the remainder come from elsewhere, primarily China. Updating technology and expanding production scale are also problematic given that the company’s internal resources remain modest.
The net revenue of American Eagle Outfitters’ (AEO) for the 13 weeks ended May 2, 2020, decreased by 38 per cent, to $552 million compared to $886 million for the 13 weeks ended May 4, 2019.
The company’s revenue by brands declined by 45 per cent, following a 5 per cent increase last year, while Aerie’s revenue decreased by 2 per cent, following a 28 per cent rise last year. Its digital demand, as measured by ordered sales, increased by 33 per cent. Aerie rose by 75 per cent and American Eagle increased 15 per cent.
The company experienced buying, occupancy and warehousing pressure due to the sales decline, Yet its customer engagement remained high as digital demand accelerated. The company is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle and Aerie brands.
For clothing brands that cater specifically to American middle class, the ongoing COVID-19 lockdown may turn to be a death sentence as driven by dwindling incomes and rising costs, customers have curtailed retail expenses. They may either opt for cheap fast fashion or go bargain hunting. This shrinking power of the American middle class will further drive retail apocalypse in the country as already profit margins of clothing brands have shrunk by almost 90 per cent since April 2020.
Store closures to affect neighborhoods
This may further force some underperforming stores and brands in the country to shut shop. Already retailers have closed around 9,700 stores in the country, reveals Coresight. Many of these stores may never reopen as these struggling retailers may use the pandemic to cull underperforming locations.
Closing of a store is never an isolated event; it affects the entire neighborhood that houses the store. For instance, JC Penney has 240 stores in 1,200 premium American malls.
Closing of these stores may bring down majority of traffic in these malls. A Credit Suisse report predicts one in four American malls will close by 2022.
Rise of the mall culture
Most of these malls were built between the 1950 and 1980, when Americans living in suburban towns had plenty of discretionary income to spend in these malls. But as most middle-class Americans lost their jobs during the Great Depression, their incomes dwindled and only affluent Americans in New York and San Francisco could spend at these malls.
Besides income, the tastes of these consumers also shifted. The strip mall emerged as a popular option for shoppers to pick up groceries and browse for shoes on the same trip. Millennials increasingly shopped online, preferring newer brands like Everlane and Reformation.
As a result, luxury sales in the country dwindled. A 2017 report from Credit Suisse reveals luxury sales in the country declined to $86 billion in 2019 and are further expected to decline to $56 billion in the next five years.
Retail landscape to change post COVID-19
Besides offering a mix of fast fashion and luxury brands, malls in America also offer other facilities like a Nickelodeon-themed amusement park, restaurants and a three-story candy department store to attract customers. However, post pandemic, even these may prove insufficient to attract crowds as customers will prefer to stay indoors and shop online.
In future, developers may convert many of these dead malls into entertainment centers, office space, e-commerce warehouses, health care centers and even community college campuses, many of these may simply end up as vacant lots.
Boston Consulting Group forecasts due to the COVID-19 pandemic, global luxury sales could plummet almost 35 per cent in 2020 compared to 2019. According to Abhay Gupta, Founder and CEO, Luxury Connect, a luxury brand management firm, India’s luxury market could take an even bigger hit than the global average as sales could drop almost 50 per cent. The Indian luxury market is much smaller than that of the US and China. April report of Statista notes this market will be worth $7,956 million in 2020 and grow annually by 10.6 per cent CAGR between 2020-23, with cosmetics and fragrances forming its largest segment.
Cecilia Morelli Parikh, Founder, Le Mill, a Mumbai-based luxury concept store feels, the phenomenon of revenge buying which helped the luxury sector to rebound in China, may play out in India too since consumers will not be able to travel for leisure—earlier, lower duties and taxes made purchases abroad attractive. However, Gupta believes it will have a different impact on different categories. Beauty and wellness category will the first to see sales surge as people are missing going to salon for self-care and wellness.
However, people are likely to become more conscious of the quality and quantity of clothes they buy especially luxury apparels. They may not prefer to invest in luxury fashion
without a tactile experience.
Luxury shopping becomes subdued
Just like in China, India’s luxury shoppers may display a demure, classic and refined trend which was popular in the last few seasons as they might not have as much money and will think hard about what they want to buy. Rather than flashy or ostentatious clothes, they will opt for more neutral colors and smart silhouettes offered by brands such as Jil Sander, Loewe and Phoebe Philo. Conscious consumption will replace conspicuous consumption amongst these affluent consumers.
Another trend that is expected to rise amongst these shoppers is the preference for online shopping. To satiate this need, retailers like Le Mill plan to launch their own website. The retailer is already selling 70 per cent apparels through whatsApp and home deliveries.
Emerging shopping trends
Besides going online, some luxe retailers also plan to implement appointment-based shopping once the lockdown is relaxed. Also, only 60 per cent of staff will be present in a store on a given day.
Similarly, Collective-one of India’s largest luxury retailers, plans contactless delivery system for the first month and a half. For this, the retailer will send out a few selected items for customers to pick and choose. This system can be availed by everyone, though it might work better for retailer’s existing customers.
Dolce & Gabbana will return to the Camera Nazionale della Moda Italiana (CNMI) this year. Since 1998, when the Milan-based label left Italy's highest fashion authority due to disagreements with the organisation's leadership at the time, the brand has hosted its runway shows outside of the official fashion week calendar. Now the label has revealed that it will participate in the first ever Milano Digital Fashion Week with a show scheduled for 15 July.
In light of the current circumstances, both the audience and the number of pieces on show will be limited, but the runway will be livestreamed via the online platform of the digital fashion week, which is being hosted by CNMI from 14 to 17 July. As for the presentation of the brand's Alta Moda couture collection, Dolce & Gabbana will release its own video.
The label notably participated in the organisation's recent "Italia, we are with you" initiative, which provided Italian defence forces with respirators and medical material during the Covid-19 pandemic.
