Bangladesh readymade garment exporters have developed the skills to outsource export orders on their own initiative. Skilled human resources, better production, forward linkages, fashion and designing technology and offshore negotiation skills have helped them do this.
Due to this, big exporters prefer free on board ways than cutting and manufacturing. They bypass dealing with buyers and their dependence on buying houses has fallen by 60 per cent over the last three decades. But small and medium exporters rely on buying houses as they do not have enough capacity for offshore dealing and cannot fulfill buyers' requirements. They still pay five to 15 per cent commission to buying houses.
These small exporters’ forward linkage and other backward linkages are not enough to export on a free on board basis. They get export orders on a CM basis and the buying houses manage their buyers from getting orders and shipment so they need to pay the buying houses at different stages.
Three decades back, when Bangladesh just started readymade garments exports, it was completely dependent on buying houses and paid a good portion of the profit to them. It’s expected that within the next five years at least 80 per cent exporters would depend on direct negotiations with buyers.