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On the back of demand from Western brands operating in the neighboring country and closure of some small- and medium-scale factories garment exports to India soared 66.41 per cent in the first six months of the fiscal year between July and December last year. Garment shipments to India fetched $111.33 million, reveals data from the Export Promotion Bureau, Bangladesh.
The reason for the spike, is global retail giants like H&M and Walmart have started sourcing apparel from Bangladesh for Indian consumers. The shuting of a horde of small and medium factories all over India for their failure to maintain strict compliance requirements and pay higher wages over the last two years also played a part in the surge in shipments from Bangladesh.
Abdul Matlub Ahmad, President of India-Bangladesh Chamber of Commerce and Industry says the cost of importing garment items to India from other countries is high, due to which Western retailers have started sourcing apparel from Bangladesh in big volumes. Siddiqur Rahman, President of the Bangladesh Garment Manufacturers and Exporters Association says apart from Western retailers, some Indian retail giants have also been sourcing garment in big volumes from Bangladesh.
Although the majority of Bangladeshi goods enjoy duty-free benefit in the Indian market, garment exports to India did not rise much over the last few years due to the imposition of 12.5 per cent countervailing duty on items from Bangladesh. Bangladeshi exporters also face provincial taxes and non-tariff barriers in India, which has an apparel market worth nearly $40 billion. Nevertheless, garment exports to India have shown signs of pickup compared to 2017.
The government of Egypt has announced a plan for the construction of the largest textile and garment city in Egypt which will cover an area of 3.1 million sq. mt. in Sadat City, located in the Monufiya governorate. Trade and industry minister, Tarek Qabil, recently announced the project, which will begin from this March and include 568 factories with a paid-up capital of $2 billion, 87 per cent of which is foreign investments, while the remaining 13 per cent is local investments.
The $2 billion will be pumped in over a period of seven years and the city would provide direct employment to around 1,60,000 people, with a total annual production valued at $9 billion. The city is one of the major projects planned in Egypt and will include all necessary services and a training school on the latest technology in the spinning and weaving industry, said Qabil.
The project will be implemented in five stages and the first phase is planned for 2020 and includes 57 factories with total investments of $230 million. The fifth phase of the project will be completed in 2024. Egypt's President Abdel Fattah al-Sisi expressed their willingness to participate in financing the project by 50 per cent and that the project implementation period would be reduced from seven years to one and a half years. The number of factories registered in the region were 632 with a total investment of £24.5 billion in the sectors of spinning, weaving and building materials such as iron, steel, ceramics, porcelain, glass, chemical industries, engineering industries such as electrical appliances, automotive components and food industries.
Cinte Techtextil China will be held from September 4 to 6, 2018 at the Shanghai New International Expo Centre. Cinte Techtextil China is Asia’s leading biennial trade fair for technical textile and nonwoven products. China is the world’s largest producer of manmade fibres. In 2016, the country’s output of manmade fibres was 49.44 million tons, accounting for over 70 per cent of global output.
Cinte Techtextil China covers 12 areas of application which comprehensively span the entire gamut of potential uses of modern textile technologies. At Cinte Techtextil China 2016, 59 per cent of buyers were from the technical textile manufacturing sector, representing strong purchasing potential for textile raw materials.
China, the leader in manmade fibre industry China currently accounts for 65 per cent of world market share of manmade fibres, with demand in the wider Asian region expected to grow due to growing populations and rising living standards in China and emerging Asian countries. The key drivers are not only clothing, but also new applications such as the filtration, construction, protection and transportation industries.
With increasing competition from Bangladesh and Vietnam, textile and garment companies, which are labour-intensive, are looking at incentives such as additional allocation to upgrade technology and interest subvention (subsidy) in the forthcoming Union Budget. The Apparel Export Promotion Council has sought a number of interventions from the government which include more incentives, continuation of the duty-free import of speciality fabric up to 1 per cent of export value of garments, round-the-clock customs clearance, withdrawal of GST on air-freight and duty-free import of samples.
The export of garments and textiles, which contributes 13 per cent to the overall shipments, fell by 3 per cent in December 2017 to $2.99 billion although in the April-December 2017 period it recorded a growth of 2 per cent at $26.13 billion. While apparel exports have grown at a slow pace following severe competition, yarn exports also remained tight due to the fall in demand from China including India losing market share in the Chinese market.
Budgetary allocation for the Technology Upgradation Fund (TUF) Scheme was cut by 23 per cent to Rs 2,013 crore in 2017-18 as against Rs 2,610 crore in 2016-17, much lower than 2014-15 period. Subsidies under the TUF scheme are key drivers for investment in the textile sector. Hence, lowering the allocation constrains the pace of capacity addition.
Analysts say a higher allocation for TUF scheme for 2018-19 would prop up investments in the downstream segments, facilitate value addition and result in a higher contribution by the sector to the country's GDP/forex. Apparel exports can go up significantly if raw material and intermediaries that are currently being exported get processed further into apparels. This has the potential to double the cotton-based apparel exports and increase total textile exports from the country by 50 per cent in terms of value, analysts noted.
Researchers at the University of California, Berkeley are striving to make the process of making blue jeans greener by engineering bacteria to produce the indigo dye responsible for jeans’ characteristic hue. John Dueber, a professor of bioengineering who co-led the research, recently published in the journal Nature Chemical Biology informs, “Indigo dying for denim is unfortunately a pretty dirty process.” The vast majority of jeans are dyed with synthetically produced indigo which is similar to the colour of the dye extracted from the Indigofera plant.
However, synthesising indigo dye requires a number of toxic chemicals, including formaldehyde, the dying process also follows suit. This creates a hydra headed monster which create enormous amount of pollution. In some parts of the world, ‘denim blue rivers’ contaminate and kill fish and affecting the health of the rivers/workers/residents. With production of over 40,000 tons of indigo each year, this is a major issue.
John and his team wanted to create an indigo that requires fewer chemicals to synthesise and doesn’t need to have as many chemicals added to it during the dying process. “In order to do that, we took inspiration from how plants actually naturally synthesise indigo,” he revealed. The team engineered a strain of E. coli bacteria to become a chemical factory and produce an indigo precursor. The precursor is stable and can be stored and used as and when needed.
Unlike traditional synthetic indigo, which requires chemical treatment to reduce and solubilise the indigo so it can crystalize in the cotton fibre, the E. coli-produced precursor only needs the addition of an enzyme. The final result is identical to traditional synthetic indigo dying, John disclosed. “We feel pretty confident that we could scale the process to larger volumes,” Dueber says. “But there’s always work to be done going from the lab scale to an industrial scale.”
Some eco-minded manufacturers are returning to natural indigo dye, which needs fewer chemicals but has not been used due to cost and scale constrains. In Tennessee, a company called Stony Creek Colors is encouraging farmers to grow indigo instead of tobacco, in hopes of a natural indigo revival.
"Retailers need to give an ever-increasing thrust on product development, differentiation and value addition, to break the cycle of low margins and costs, and the associated problems with it, finds a recent report by Kurt Salmon Associates, ‘From cost focus to true value creation’. Heavy discounts, markdowns plague the retail industry today, and the industry needs to focus on product, supply chain, quality, instead of always looking for the lowest cost producer."
Retailers need to give an ever-increasing thrust on product development, differentiation and value addition, to break the cycle of low margins and costs, and the associated problems with it, finds a recent report by Kurt Salmon Associates, ‘From cost focus to true value creation’. Heavy discounts, markdowns plague the retail industry today, and the industry needs to focus on product, supply chain, quality, instead of always looking for the lowest cost producer.
Product innovation
In markets with an abundance of brands and less and less differentiating products, product development and sourcing capabilities move back into the strategic focus of fashion retailers. It's the key enabler for differentiation in the competitive environment. Access to deep technical expertise and unique handwriting of product groups that are critical for brand building as well as curated supplier portfolios with the true ability to drive innovation, evolve to an indispensable asset to drive top line as well as markdown and margin performance.
Time to market
Speed of trends and innovation has tremendously increased over recent years and consumers are adopting market impulses from option leaders, celebrities, and bloggers at high pace. This requires being closer to consumer needs with critical seasonal milestones on concept, design, and development for adoption of trend impulses as well as buying decisions to ensure market right products and quantities. Sourcing plays a critical role in enabling differentiated seasonal calendars based on individual product needs and a balanced mix of near shore and Far East sourcing destinations.
Demand and supply responsiveness
A significant part of end-of-seasons stock and related markdowns stems from buying and production volumes being insufficiently aligned with actual consumer demand on the shop floor and online during full price selling period. Leading retailers and brands currently make significant investments to drive end-to-end planning integration along the value chain across retail, product merchandising, material management, and sourcing/production. Main objective is to act vertical while typically not owning the different stages of the value chain down to production.
Differentiated supplier capabilities must be leveraged and developed in close collaboration along the entire value chain, from planning, through design and development, material management, costing, down to logistics. Intensified collaboration will also mean more common standards, definitions and KPIs. An integrated cloud-based database provides end-to-end transparency and control, internally as well as with third party suppliers. Furthermore, it allows a dynamic access to big data across the entire value chain and enhances predictive analytics for an improved merchandise planning, production capacity planning. etc. In re-shaping the fashion value chain, technology will prove to be the key enabler to provide the tools for analytical optimisation. Data transparency and the smart application of Artificial Intelligence will give retailers and brands the power to drive true value.
Product quality and sustainability
Product quality compliance and unified standards, e.g., with regards to fit and construction, are gaining increasing significance with online growth being unbroken. Returns from mismatch of expectations with regard to quality, size, and fit are a significant cost position, which is difficult to effectively avoid without aiming for these root causes. While this usually means not choosing the short term minimal cost option, these levers have strong power to drive better sell-through rates, stock turns and a reduction of leftovers hence, positively impacting markdowns and ultimately improving gross margin. This certainly compensates for higher production cost, and this does not even account for the top line sales potential from brand uniqueness and better differentiation vs. competitive offerings.
Sourcing portfolio optimisation
The shift from one sourcing country to another won’t be a long-term answer, as almost all current sourcing countries are getting more and more expensive. Looking at current markdowns of often 15-25 per cent of net sales this is a very powerful source of gross margin improvement. Each percentage point of markdown reduction immediately translates into an equivalent in realised margin.
Ministry of Commerce and Industry records show that import of yarn, fabrics and made-up articles in December 2017 went up by 20 per cent as against the corresponding month of ’16, however, apparel exports fell by 0.3 per cent between April and Dec. 2017 and 8 per cent in December. Sanjay Jain, Chairman, Confederation of Indian Textile Industry, was concerned over the issue as export data of Bangladesh showed India imported garments worth $111.3 million during July-December 2017 from Bangladesh, which was 66 per cent higher when compared to the same period of previous year. Imports of knitted apparel from Bangladesh were valued at $20.6 million in July-December 2016 and rose to $36.5 million between July-December last year. Despite the fact that total export of textile and apparel rose 2 per cent between April and December 2017 over the first nine months of 2016-17, apparel exports dropped by 0.3 per cent during the same period and 8 per cent in December.
A top garment exporter blamed the decline in exports to the revision of duty drawback rates, “Once an international buyer enters into a contract with an Indian supplier, the rates are fixed and might only go down in the future, however, cotton and yarn prices are going up in the domestic market. Further, the government has reduced the duty drawback rates. After GST, we do not know yet what refund we will get on duties paid on exports.”
Jain is of the view there is a need to impose safeguards such as Rules of Origin, Yarn Forward and Fabric Forward rules on nations such as Bangladesh and Sri Lanka that had free trade agreements with India and China. “Garment manufacturers in India have to pay duty on imported fabrics, while Bangladesh can import fabric from China duty-free, convert it into garments, and sell to India duty-free,” he said in a statement.
The wool market has been fighting a losing battle following downward spiralling of demand post infiltration of high-tech fabrics in the outerwear market for many years. In fact, Australia, growers have increasingly chosen to use their land more profitably. A new light on the horizon has risen hopes Australian wool ‘manufacturers’ as new markets have emerged from nascent cocoon that has helped enhance —Australian Wool Innovation (AWI), the marketing arm for wool growers — consumer use of wool. New styles such as Adidas AGs Ultra Boost, Allbirds and athleisure lines have helped wool footwear grow in women’s fashion footwear category in Fall 2018. Bayton, Dr. Scholl’s, Seychelles and Timberland are some of the other brands adding wool uppers to their fashion collection.
AWIs monthly ‘Market Intelligence Report’ notes, “Demand has been driving the wool market. More consumers across the world are looking for wool and not just in cooler months. The advent of merino wool as a superior fibre worn next to skin for leisure and for sport has seen steady growth in recent years. Global companies such as Adidas, Nike and New Balance all use merino wool in their ranges now and this is trend can also be seen in outdoor companies such as Mountain Designs and The North Face over the past decade.”
AWI assessed wool continues to defend its traditional markets in men’s suiting and women’s fashion, “a market where wool had lost significant ground in recent decades.” Increased affluence in traditional markets such as China and growing demand for wool in athleisure wear together with limited supply to create a “perfect storm” for wool, says AWI, which represents 24,000 growers in the country that supplies roughly 90 per cent of the world’s apparel wool.
A new feature at this edition of Texworld USA is the ‘Explore the Floor’ series which features tours for participants to walk the show floor with industry experts. The aim of these tours is to permit participants to gain knowledge of different exhibitors that are relevant to what they need and be able to ask questions in an open format.
Texworld USA, which is being held from January 22 to 24, simultaneously with Apparel Sourcing USA at the Jacob K Javits Convention Center in New York, also offers three days of seminars and speaker line ups on trending industry topics including sustainability, Spring/Summer 2019 colour, fabric trends, and more. ‘Textile Talks’ returns with three days of discussions organised by StartUp Fashion and Lenzing Fibers Inc. Texworld USA’s trend showcase will take place for the Winter 2018 season. It is created by Texworld USA Art Directors Louis Gerin and Gregory Lamaud.
Highlights from the Texworld USA seminars include a session ‘Fashion 101: How to Start a Fashion Line,’ by Mercedes Gonzalez, Founder and Director of Global Purchasing Companies. A seminar dedicated to ‘Supply Chain Traceability & Transparency + Explore’ will be held by Jeff Wilson, Senior Business Development Manager of sustainability at NSF International. Other speakers will be Edward Hertzman, Founder and Chief Executive of Sourcing Journal; Leonardo Bonanni, Founder and Chief Executive of Sourcemap; and Megan Meiklejohn, Sustainable Materials and Transparency Manager for Eileen Fisher Inc. ‘Spring/Summer ’19 Trends for Women’s & Junior Markets’ will be presented by Trend Council. The importance of a circular economy for the future of fashion will also be discussed.
Siddiqur Rahman, President-Bangladesh Garment Manufacturers and Exporters Association (BGMEA), says the RMG sector in Bangladesh is facing a hard time but the picture will change soon and the situation will improve gradually. Rising production costs, lower prices from buyers and decreasing international demand have resulted in the readymade garment sector not being able to meet expected growth targets. BGMEA says the cost of production has increased nearly 18 per cent since the last two years.
During this period, the prices of two markets in Europe and the US fell by around 7 per cent. Last year, clothing prices in the EU fell by 4.77 per cent, and in the US, 3.71 per cent. A recent study by the World Trade Organisation (WTO) reports global apparel consumption has slowed down in the last two years. The global market for garment products came down to $444 billion in 2016, from $450 billion in 2015, while consumption in the US decreased by 5.23 per cent.
Although consumption and prices are on the decline, Bangladesh is seeing an increase in the cost of production, for which the mid-range entrepreneurs are just able to sustain operations, smaller players are beginning to shut down operations. Industry insiders say the cost of electricity increased around 15 per cent, gas price 7.44 per cent last year and the cost of clearing and forwarding (C & F) has risen about 40 per cent.
Numerous apparel traders have appealed to the government to improve transportation facilities, including improvement of sea port facilities to reduce production costs. They claim they often lose export orders from buyers as they cannot supply on time due to transportation issues. Sources within the BGMEA reveal they have cancelled membership of 550 factories due to lack of regular production after 2013. Besides, some 500 factory owners listed with the BGMEA or BKMEA have shut down their factories for not being able to keep pace with income and expenditure.
