A McKinsey study states, Bangladesh, Vietnam, Cambodia may soon lose their competitive edge in the global garment industry as manufacturing and marketing advances may make it easier for US and European garment importers to produce garments closer to home. The study says that by 2025, around 25 per cent of global sourcing executives would source 50 per cent of their imported ready-made garments near Europe and the US. Forty-two per cent of the respondents believe that over 30 per cent of these imported garments would come from sources near Europe and America by 2025.

However, this may also cause a significant loss of business and employment for many Asian countries.

Shift in fashion influencers and trends

Earlier, when designers created new designs, brands would wait for 30-60 days before launching the final product. This would help them to evolve their consumers’ demands. Now, this demand is influenced by celebrities and social media personalities. The fast-paced fashion trends launched by these celebrities benefit small-sized, and internet-based fashion brands who are able to quickly transform a concept to a finished final product.

Earlier, cost-consciousness amongst fashion leaders helped Asian garment manufacturers to win many new orders. However, since the last two decades labor costs in Asia too have been increasing. It is already higher in China than in Mexico. Hence, it makes sense for manufacturers to bring manufacturing closer to destination markets.

Reduction in production costs

In future, automation, robotics, and artificial intelligence will dramatically reduce manufacturing costs and time lead times. New sewing technologies will help brands automate sewing for complicated clothing items like a collared shirt or a pair of fancy-dress pants. Automation of warehousing, fabric handling during sewing, shipping, and storing of readymade garments will also reduce their production costs.

Near-shoring will benefit countries like Turkey, Mexico, Morocco, and several South American nations and islands. However, it may harm labor intensive Asian garments powerhouses like China, Bangladesh, and Vietnam. The concept can be beneficial only if it reduces the cost of garments sourcing by 70 per cent. However, this scenario is around 10 to 15 years away, view experts.

Garment automation does not indicate an export collapse for Asian manufacturers like Bangladesh or Vietnam. These countries can start exporting their clothes within the Asian markets of Bangladesh and Vietnam. However, automation may create major challenges for the employment sector of countries like Bangladesh. Hence, these countries would have to find alternative modes of employment for the displaced laborers; else they may lead to huge geopolitical and economic consequences.

The Italian textile machinery association ACIMIT has reported a decline in orders in the first quarter of 2020 for the sector.

The index of orders intake for textile machines drawn up by ACIMIT for the period from January to March 2020 fell by 31 per cent compared to the same period of 2019. The index value stood at 72.2 basis points (2015 = 100).

Orders intake was negative both on foreign markets and in Italy. In the foreign markets orders declined by 26 per cent, while in the domestic market they declined by 57 per cent compared to the first quarter of 2019.”

ACIMIT represents an industrial sector that comprises roughly 300 manufacturers (employing around 12,000 people), which produce machinery for an overall worth of around 2.3 billion euros, of which 82% are exported. Creativity, sustainable technology, reliability and quality are the hallmarks that have made Italian textile machinery worldwide leaders.

As part of its active engagement in the fight against COVID-19, Archroma, a leader in color and specialty chemicals, has announced a collaboration with Soorty for a new collection combining eco-advanced colors with hygiene and protection technologies.

The denim collection will be introduced by Soorty under the brand SmartCare+ and will include denim fabric, garments and, coming soon, masks. The products will be introduced shortly to major denim brands and retailers, to be made available to consumers around the globe in the coming weeks.

Such technologies were developed and selected by Archroma for their compliance with The Archroma Way: safe, efficient, enhanced, it’s our nature. The approach finds its origin in Archroma’s deep belief that it is possible to make the textile industry sustainable.

Flipkart-owned fashion marketplace Myntra said it is launching trending Work-From-Home wear from its private brands in the Middle-East market capitalizing on the consistent need of shoppers amid the COVID-19 pandemic. The fashion etailer has entered into a strategic partnership with UAE’s ecommerce platforms, Noon and Namshi, to sell athleisure and casual wear to shoppers in the region which is said to have high internet penetration and growing popularity of online shopping due to the coronavirus outbreak.

Both Noon and Namshi are part of the Emaar group, a conglomerate located in the UAE. Noon is a horizontal ecommerce platform with products across categories, and Namshi is a vertical platform, focussing primarily on fashion in the premium segment.

On Noon, Myntra has listed brands Dressberry, Mast & Harbour, Moda Rapido, Here & Now, Sztori and HRX. Namshi will list Wrogn alongside Dressberry, Mast & Harbour and HRX over the next few weeks. Myntra will be putting up 500 styles on each platform. Both the companies will work closely to track new consumer needs in order to tweak styles and collections for the market.

This move comes a year after Myntra conducted a short-term pilot with Walmart Canada to test the international waters. As part of the pilot, consumer research data highlighted the Middle East and South East Asia as top markets with high internet penetration, densely populated shoppers of Indian origin and matching fashion choice.

German sportswear brand Puma said that coronavirus pandemic has hit its second quarter sales and profitability.

The brand’s second-quarter sales fell a currency-adjusted 30.7 per cent to €831 million and earnings before interest and taxes slumped to a loss of €114.8 million from €80.3 million a year earlier in what Gulden called "the most difficult quarter I have ever experienced.

Sales lagged an average analyst forecast for €815 million and the EBIT loss was steeper than the analyst forecast of -€113 million.

The company focused on ensuring financing and liquidity to survive the crisis and banked on more e-commerce although that was not sufficient to compensate for losses elsewhere.

In May, it secured a revolving credit facility of €900 million, including €625 million from state-owned German bank KfW.

The second quarter started with a 55 per cent decline in sales in April and 38 per cent in May. By the end of June, there was a relative improvement, with sales only down 6 per cent and with 85 per cent of Puma's owned and operated stores open again.

L Brands Inc. is eliminating 850 corporate staff as it works to stabilize its business. The 15 percent headcount reduction is part of the Ohio company’s efforts to drive $400 million in annual cost savings by retooling its management structure and labor model.

L Brands will also collaborate with suppliers to find areas to rein in costs and maximize margins for Victoria’s Secret, which it’s still planning to spin out into a separate, standalone business.

The company said Victoria’s Secret’s spring inventory receipts were down 45 percent versus a year ago, while fall receipts are projected to tumble 50 percent from last year.

Meanwhile, L Brands is continuing the process of closing 250 Victoria’s Secret stores this year, while also negotiating with landlords for rent breaks. And overseas, L Brands is working to reduce operating losses in the company-owned businesses in the UK and China.

Over 10 leading apparel brands sourcing from India have either filed for Chapter 11 bankruptcy recently or are planning to do so soon.

JCPenney, LOFT, Ann Taylor, True Religion, J Crew, Lucky Brand, G-Star, Muji (in the US), Men’s Wearhouse and few more apparel giants have either filed for Chapter 11 bankruptcy recently or are in the process for the same.

The major concern for Indian companies is top players like Ascena Retail Group and JCPenney, used to place huge orders and shared long-term business relations with India. Though the sourcing of JCPenney had already been reducing from India in recent years, the company still used to source apparel and home furnishing (combined) worth Rs. 1,600 crore. On the other hand, Ascena Retail Group’s (Ann Taylor, LOFT) annual sourcing from India was around Rs. 2,000 crore till last year and it used to source from at least 67 Indian factories, while at the global level, it was associated with around 600 facilities.

Chapter 11 has also become a tool for a few companies to utilise their money and turn their accounts healthier. While some existing suppliers strongly believe that these brands and retailers still have good potential and can revive in future, others feel that it is too early to comment on the same. A lot of things depend on the support from the US Government, which is yet to be announced.

Recovery in the textile and apparel sector in Q2 FY 21 is likely to be led by increasing demand in the domestic and overseas market, says India Ratings and Research (Ind-Ra) report. It estimates volumes in both segments will reach 80 per cent over September 2020. Both man-made fibers and cotton segments will benefit from low raw material prices in the third quarter. Ind-Ra will continue to monitor demand recovery in domestic as well as export markets of the US, Europe and China.

Topline to decline by 15 per cent

As per Ind-Ra, in Q1 FY21, cash flows in the textile sector were impacted by weak profitability and supply chain disruptions. Though the moratorium announced by the Reserve Bank of India (RBI) under COVID-19 relief package provided adequate liquidity support, the agency expects topline of textile players to decline 15 to 35 per cent year-on-year(Y-O-Y) and operating profits to decline 20 to 50 per cent Y-O-Y.

In August 2020, textile prices across the globe staged a broad recovery from the lows of April-May 2020. International cotton prices (US) recovered by 4 per cent month-on-month (M-O-M) in August 2020 while Indian cotton prices increased by 5 per cent M-O-M. Plant utilization of pure man-made fiber and yarn manufacturers was badly impacted. Prices of fiber and yarn remained steady though discounts were offered to boost sales. Cotton yarn and blended yarn prices largely remained flat, despite demand recovery. Moreover, cotton season procurement was at about 10 per cent higher prices with operating utilizations still remaining below optimum levels.

Discounts, loans bring relief

Quick supply restoration led to a decline in fabric and apparel prices in August 2020. From July-August 2020, industry players not only offered discounts to boost sales but also generated internal liquidity. They were relieved by the disbursement of COVID-19 bank loans, promoter-led infusions and the ability of apparel prices to remain modest in 2HFY21.

From June-July 2020, readymade garment exports recovered significantly, says Ind-Ra. Supported by restocking at global retailers and global sector consolidation, order book buildup remained strong in August 2020 Large apparel and readymade garment manufacturers were able to resolve labor mobility and availability concerns as they benefitted from the shift in market share to India, it adds.

Though COVID-19 has moderately impacted the global demand for home textiles , the US-China trade war has provided a strong impetus to home textiles exports from India. This demand for home textile exports is likely to sustain in 2HFY21 at healthy levels, says Ind-Ra. The agency also expects Indian players to increase their market share in terry towels and bed linens.

The South African Department of Trade, Industry and Competition(DTIC) has unveiled four masterplans, including one for the clothing and textiles industry, said Minister Ebrahim Patel at the recent Budget Veto Session. These masterplans aim to increase the country’s production and jobs.

Patel informed that from July 2019, the South African Revenue Services (SARS) has seized 550 shipping containers of illegally-imported and undervalued clothing and footwear, to protect local industries and entrepreneurs. The department has signed an agreement with the UK to maintain access for South African products in its market after Brexit.

South Africa is well-positioned to become a major supplier of industrial goods and value-added services to the continent. It has built the African Continental Free Trade Area as the foundation for a long-term growth.

To prepare for the post-COVID world, the South African government will strengthen efforts around reconstruction and recovery, including broader pacts with workers and businesses, focused on saving as many firms and jobs; identifying new opportunities; embracing digital technologies to recover and change; addressing economic inclusion with greater urgency, said Patel.

Morocco plans to increase taxes on import of Turkish textile and clothing to 36 per cent instead of 27 per cent. The tax is a part of the amended 2020 Finance Bill approved by the Moroccan government and Parliament earlier this month. With this decision, Morocco aims to promote local production, especially during the COVID-19 pandemic. The country also hopes to limit imports of textile products, which have strongly competed with domestic products.

The new tax will support the domestic Turkish textile industry. Some of the Turkish companies that the new tax rate will directly affect include clothing brands LC Waikiki, Koton, and DeFacto.

Morocco and Turkey signed a Free Trade Agreement in 2004. The agreement took effect two years later, in 2006. Since then, Morocco’s trade balance with Turkey has been largely in deficit as the country loses $2 billion annually in its trade deal with Turkey. The Turkish textile industry also caused Morocco a loss of around 44,000 jobs in 2017 alone.

At the start of 2020, Morocco and Turkey had decided to review their Free Trade Agreement. However, the countries suspended the negotiations due to the COVID-19 pandemic.