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• A total of 1,375 brands from 30 countries exhibited
• Approx 135 brands from 25 countries at ‘CPM Body & Beach’
• Around 22,000 buyers from Russia and the Eurasian Economic Union
• Almost 10 per cent growth among France, Greece and Turkey country pavilions
• Increasing significance of fashion ‘Made in Denmark’
The 34th edition of CPM (Collection Premiere Moscow), the largest tradeshow for men’s, women’s and kid’s wear, lingerie, eveningwear and accessories in Eastern Europe, drew to a close on February 27, 2020. In 15 halls of Moscow’s Expocentre, 1,375 brands from 30 countries successfully showcased to around 22,000 professional visitors from Russia and the Eurasian Economic Union.
Nikolay Yarzew, CPM Project Director Russia and CIS said: “CPM has once again confirmed its status as Eastern Europe’s leading tradeshow platform. In particular we would like to emphasise buyers’ growing influence and high level of interest in collections from Russia itself. After the slight increase in VAT in 2019, order volume is picking up once again. Brands from Belarus, the Ukraine, Moldova, Armenia, Kazakhstan, Georgia and other countries are also becoming popular. Thanks to our cooperation with associations, we can always ensure that new brands are presented at every edition of CPM. Start-ups from these markets are also provided market entry opportunities. CPM is a strong event for the retail sector.”
The next CPM will be taking place from September 1 to 4, 2020 at the Expocentre exhibition grounds in Moscow.
The Coronavirus (COVID-19) outbreak in China has affected India’s cotton yarn exports, exerting pressure on yarn realizations. China accounts for nearly one-third of Indian yarn exports. The performance of cotton spinning industry, has already been severely constrained in the current fiscal year amid multiple headwinds, including demand slowdown in the domestic as well as export markets and unfavorable raw material prices. While the industry was pinning hopes on a gradual recovery in yarn exports from the fourth quarter onwards, aided by the softening of domestic cotton prices, recent developments could prolong tough times for Indian spinners.
The movement in domestic prices contrasts with international trend where uncertainties on demand have resulted in a sharper correction to cotton fiber prices in recent weeks. Even though domestic cotton fiber prices continue to be competitive vis-a-vis international cotton prices, a further correction in international prices could leave domestic spinners uncompetitive in international markets.
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 recent months, have a wider geographical presence in markets other than China, and a focus on non-commodity and value-added products.
The recent international trade fair for the leather goods industry, ILM (Internationale Lederwaren Messe), witnessed a 41 per cent drop in visitors due to Coronavirus (COVID-19). Buyers from big (online) companies such as Zalando or Limango besides smaller retailers from Switzerland, Italy, Austria and the Netherlands, stayed away from the show.
However, none of the exhibitors regretted their participation in the show. Many were also confident about deliveries from the Far East. Supply bottlenecks would not yet be noticeable at this point and the hope that the situation will ease up a bit in the coming weeks is there.
The ILM Offenbach is primarily a specialist fair for all business sectors that have leather goods, bags and accessories in their portfolio. The focus is on international fashion brands, products that embody innovative spirit and contemporary design and meet the most sophisticated standards of elegance, exclusivity and value. A wide range of products from the worlds of sport, travel and work also have their fixed place at the fair - variations on current trends including a selection of fashion collections of small leather items, school supplies, umbrellas, gloves, belts and other accessories.
Bangladesh’s apparel sector is being hit by Coronavirus-related supply chain disorders, with prices for raw materials soaring. As materials from China fail to arrive on time, prices of local stocks of items have gone up by nearly 50 per cent in some cases. Some factory owners have been forced to bring raw materials in by air to meet manufacturing deadlines. And the sector is gearing up for a prolonged crisis as the virus continues to spread worldwide, with fears that destination markets in the US and Europe will be affected. Bangladesh imports some 60 per cent of its woven fabrics from China. Some 15 per cent to 20 per cent of raw materials and 80 per cent to 85 per cent of dyeing chemicals and accessories of the knitwear sector comes from China. And some 40 per cent of raw materials for garment accessories and the packaging manufacturing industry also comes from China every year.
Bangladesh’s apparel sector is the country’s top foreign currency earner. Production in many factories is being hampered by the lack of raw materials. Due to the short supply, prices of different raw materials have increased by between 30 per cent and 40 per cent.
Fast fashion giants could be particularly vulnerable to the spread of the coronavirus.
This depends on a company’s share of sales from China, the total value of products it manufactures in the country, and how quickly inventory turns over. Fashion retailers such as H&M often produce their higher cost items in China, where factories have long developed skill at sewing more complex products such as jackets, while making basic low-cost garments such as T-shirts elsewhere. For H&M, China accounts for about 50 per cent of the total value of products it sells. Inditex, on the other hand, sources just ten per cent of its total value of goods from China, but it has one of the highest rates of inventory turnover, which might normally be an advantage but in this situation could prove a liability. Its largest brand, Zara, can turn a design into a finished product faster than much of the competition and keeps new items streaming into stores. But this also means Zara relies on its supply chain to constantly feed it. Retailers with high stock turnover are likely to be impacted sooner than those with low stock turn.
The virus has forced factory closures all around China, throwing fashion’s supply chain in the country into disarray. Even as factories reopen, many are working at diminished capacity.
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.
