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Colombian companies are planning to enter Spain. One is Studio F. This fashion retailer will combine four channels in its development in the market: directly operated stores, concessions, multibrand and e-commerce. The first directly operated stores will arrive at the end of 2020, and the company is already looking for opportunities both in shopping malls and on the main street, working with real estate agents. In three years the company plans to have a store network of forty corners and 18 directly operated stores in Spain. Instead of competing with Spanish retailer giants like Zara or Mango, Studio F will bet on positioning itself in Spain in a higher segment and focusing on denim as a differential element. Studio F does not plan to adapt its collections to European styles or its patterns to European physiognomy. The company will land in the Spanish market with its women’s wear offer.
Leather goods specialist Cueros Vélez has similar plans. In recent years, it has diversified with the launch of fashion and footwear collections for men and women. Until now, Latin American fashion companies mostly focused on international expansion within the region. For their approach to the European market, the natural first step is Spain, which is close to their culture and language.
Europe is the preferred destination for international elite shoppers. France is the most popular, followed by the UK and Italy, reveals a study by Global Blue. For the elite, international shopping is heavily weighted towards the high-end, with almost 75 per cent of their spend being made in the luxury or hard luxury categories. Around 25 per cent of the total spend is made in the lifestyle, premium and affordable luxury categories. The top ten per cent of elite shoppers are responsible for 36 per cent of the total elite tax free spend. International elite shoppers come primarily come from five key regions/countries, Greater China, Southeast Asia the Gulf states, the US and Russia.
International elite shoppers – or the top 0.5 per cent of tax free spenders – account for 17 per cent of global tax free retail income. These shoppers travel on an average about three times a year, over approximately 15 days. While Europe accounts for a higher footfall, the country which receives the highest spend per individual elite shopper is Singapore. The UK is Europe’s highest benefactor, with department stores attracting a large share of the total spend. Singapore’s status as the country that attracts the highest spend from elite shoppers is fuelled by luxury watches and jewelry purchasing.
"Brands are investing in digitisation and mapping real-time data. They are also developing demand-led models based on consumer insights, which helps fashion brands cut down on over-production. However, this shift towards digitisation is being adopted by only those brands which can afford to invest in such technologies. Smaller players are yet to digitally capture and leverage such consumer insights"
One can no longer overlook the huge environmental impact of the highly-fragmented garment supply chain. For the last few years, industry leaders have been putting in efforts to increase the visibility of entire garment supply chain. Often small and mid-sized companies operate in a massive supply chain which makes it impossible for them to know the source of their raw materials, their manufacturers and suppliers running their factories.
Brands invest in digitisation and real time data
The garment industry not only aims to address the absence of standardised sourcing but also maintain a traceable and transparent supply chain. Currently, there is a wide disconnect between suppliers, manufacturers and consumers resulting in about 73 per cent of used garments ending up in landfills or being incinerated.
To handle this, brands are investing in digitisation and mapping real-time data. They are also developing demand-led models based on consumer insights, which helps fashion brands cut down on over-production. However, this shift towards digitisation is being adopted by only those brands which can afford to invest in such technologies. Smaller players are yet to digitally capture and leverage such consumer insights.
Besides skill, capability and integrity, brands require a substantial amount of capital to incorporate a sustainable procurement process. Currently, only a few major brands have initiated green reforms on a large scale. A case in point is H&M which plans to achieve to 100 per cent sustainable cotton by 2020. The company addresses this challenge by involving its customers in creating a completely recycled clothing line. This gives their brand a sense of association with the brand’s green initiatives. Another global brand, Adidas, is ramping up its initiative to use only recycled polyester in its shoes by 2024.
Short-term investments for long-term benefits
Though sustainable sourcing involves extra initial costs, these are offset by the long-term benefits of reducing waste and minimising unsold merchandise. Brands like Zara and Bershka are sourcing smaller batches of material to gauge their popularity before deciding on the volume of the production. Brands are also implementing demand-based merchandise using digital marketing tools and AI to make their supply chain agile and flexible.
The complexity in supply chains is being reduced through nearshoring. They are increasingly working with garment manufacturers in locations closer to their consumer-base to cut down lead times and counter rising labor costs in traditional outsourcing destinations. For instance, US brands now prefer Mexico as a garment manufacturing hub rather than China.
Sustainability leads to increased transparency
Today, customers aim to make informed decisions about purchases. They avoid making purchases that would adversely impact the environment. Sustainable brands are now aiming for a greater level of transparency by investing in RFID and blockchain technologies. They are likely to share the list of suppliers with customers besides informing them about the ecological footprint of the product.
To consolidate operations, brands are reducing the number of suppliers they work with. One of the key differentiating factors deciding these partnerships include the social and sustainability scores of suppliers which is leading manufacturers to refine their own sustainability practices.
The garment supply chain can be transformed by making sustainable sourcing an integral part of a company’s culture. To be known as sustainable, a brand needs to redesign its corporate culture, create accountability and foster cross-functional collaboration. A thoughtful product development, co-investment and long-term planning, along with robust measurement and management of performance, will help the garment industry achieve a sustainable supply chain.
The first phase of the Sino-US trade agreement has been greatly helpful for the textile and apparel sector. Tariffs for products worth $250 billion will sustain at 25 per cent and the tariff rate for goods worth $120 billion will be reduced from 15 per cent to 7.5 per cent.
Export orders for textiles and apparels are likely to grow with the downward adjustment of tariffs but the growth may be limited. Not all the additional tariffs are being removed. For the goods worth $250 billion covering chemical fibers and some textiles, the additional tariff is maintained at 25 per cent. Tariffs have not been totally removed, especially in textiles and apparels made of chemical fiber.
The first phase of the Sino-US economic and trade agreement covers nine chapters including preamble, intellectual property, technology transfer, food and agricultural products, financial services, exchange rates and transparency, expanding trade, bilateral assessments and dispute settlement, and final clauses. The two sides have also reached an agreement that the US will fulfill its relevant commitment to phase out the imposition of additional tariffs on Chinese products. The optimism lies in the improvement of mindsets and an expectation of a suspension of the Sino-US trade war.
Unilever has rolled out an initiative to improve the livelihoods of a million apparel workers in Bangladesh and enhance their overall health and well-being. Unilever is the largest fast moving consumer goods company in Bangladesh. Specifically the aim is to ensure good health and well-being for all ages, ensure availability and sustainable management of water and sanitation for all, and ensure sustainable consumption and production patterns. In addition, Unilever will make its products available inside factory premises at special prices exclusively for workers.
The garment sector, being the bulwark of economic growth for Bangladesh, has been making a crucial contribution of approximately 11 per cent to the gross domestic product. With more than 4.4 million workers employed in the sector, about 60.8 per cent of whom are women, the growth of the garment industry has far reaching implications for the economy.
Unilever is one of the world’s leading consumer goods companies, making and selling around 400 brands in more than 190 countries. Thirteen of the world’s top 50 brands are owned by Unilever. Its business activities span a complex, global value chain. Its products are distributed to 25 million retailers. Unilever is also the second largest advertiser in the world.
The Renewal Workshop’s circular model for renewal and re-commerce not only drives sales and customer engagement for brands but also has significant environmental impact. Based in the US, The Renewal Workshop is a provider of circular solutions for apparel and textile brands. The company is organised around the idea that businesses have multiple responsibilities for generating positive, lasting value.
The apparel industry’s take-make-waste cycle is turning circular with the rise of re-commerce. This is changing the game for brands who see their products resold on third-party sites. The Renewal Workshop enables brands to be a driving force in this transition, with a complete solution that not only manages the collection, renewal, and quality of a brand’s damaged or used garments, but also the back-end of the brand’s own re-commerce site. This allows brands to engage directly with customers in their own branded second-sale channel. The Renewal Workshop operates a zero-waste circular system that recovers the full value out of what has already been produced. Brand partners receive impact data on the amount of water, carbon, and chemicals that are saved through their partnership. To date, over two hundred thousand pounds of apparel have been diverted from waste in this system.
Serai, a platform belonging to the HSBC Group, helps apparel companies in Bangladesh to build networks they know and trust, paving the way for transparent and sustainable supply chains. The whole concept is a network of interested parties who gain value from interacting with each other. Serai allows companies to showcase their capabilities, find new connections, and build new / strengthen existing relationships. The Serai platform is currently by invitation only. Over time, there will be other proprietary and third party solutions on the platform ranging from insurance, accounting, freight forwarding or procurement, logistics and more to serve the needs of Serai customers.
Serai looks at changing how companies build relationships and transact. The focus is beyond banking – it’s looking at helping businesses successfully navigate the waters of international trade. It is developing non-banking applications and products that serve the needs of this segment. The aim is to be a platform which provides a canvas for companies all over the world, independent of size, independent of sector, independent of geography, to build connections, to build relationships, and start trusting each other. Serai hopes to be the platform of choice for businesses when they are looking for trusted and credible partners to do business with and wants to deliver innovative trade solutions that further the good of domestic and cross border trade.
Garments account for 78 per cent of Vietnam’s export turnover. Export turnover of Vietnam’s garment and textile industry is the third highest after China and Bangladesh. The middle class in Vietnam is expected to account for 50 per cent of the population by 2030. As of now the industry has to import 60 per cent of fiber materials.
Vietnam has not mastered and developed production stages such as dyeing, manufacturing high quality fabrics, high-quality materials and accessories. That is the reason why value added has not been high. One target set for the industry is to create brand names, at least 30 of them by 2030. This is expected to bring long-lasting benefits for the country and future generations. By 2030, the goal is to have an export turnover of $100 billion.
The difficulties being faced by Vietnam’s textile industry include: rising costs of raw materials from China and lower prices demanded by foreign buyers. Vietnam is losing its low labor cost edge over other countries even as its use of technology in production remains limited, leading to reduced competitiveness. Vietnamese textile manufacturers are seeing orders decline, with buyers moving to other, cheaper developing countries. Normally, by the end of a year, manufacturers have enough orders for the whole of the following year. But this year many do not have enough orders for 2020, with some reporting a 20 per cent drop in orders from last year.
The Philippines garment and textiles industry roadmap has projected that Philippines will become one of the top 10 global players with annual exports growth of 45 percent. This should be made possible with the elimination of the popular “ukay-ukay” (used imported clothing) and focusing on increase in the utilization of natural and synthetic textile fiber by 5-10 percent.
As per the roadmap, government was urged to address smuggling and proliferation of “ukay-ukay” by strictly implementing RA 4653. The government must also reinstate the SGS pre-shipment inspection and to cancel business permits related to trading of used clothing.
Incentives to the industry are also pushed in the short term for the innovative product processing that promotes sustainability and green environment. Reduction of the 12 percent value added tax was also pushed.
For the long-term, an annual 45.8 percent annual increase in garment exports is attainable by 2026-2029. The Philippines is well-known for its affordable daily wear global brand as the industry has already upgraded to original brand manufacturer with homegrown Filipino labels. Textile manufacturing in the country can fully support garment producers offering a more diverse range of products both for the local and export market.
Garment and made-up exporters in India have yet to avail of benefits under the Merchandise Export from India Scheme (MEIS) and the Rebate of State and Central Taxes and Levies (RoSCTL).
The RoSCTL is aimed at keeping exports zero-rated, as per best international practices, while the MEIS is intended to help exporters deal with several infrastructural bottlenecks, including exorbitantly high logistics costs. While MEIS gains have been held up since August, benefits under the RoSCTL have never been extended since its introduction in March. This has exacerbated a liquidity squeeze for exporters, who typically factor in such incentives while firming up deals. Their ability to honor fresh contracts on time ahead of Christmas has been impaired. This is the most critical season for western apparel buyers.
Benefits worth Rs 5,000 crores are stuck under the schemes at a time when the flow of bank credit remains muted and exports have dropped for months. Overall exports have contracted for four months in a row through November. Most of the country’s garment exporters are small and medium units, with very limited ability to raise resources. They fear that unless the issue gets resolved expeditiously their business will go to new competitors like Vietnam, Cambodia and Poland.
