FW
Textile mills in Tamil Nadu want the hiked VAT on petrol and diesel to be withdrawn. VAT has been increased on diesel from 21.43 per cent to 25 per cent, which has pushed up its price by Rs 1.76 a liter; and on petrol from 27 per cent to 34 per cent, which has pushed up its price by Rs 3.77 a liter.
Mills say the hike is unwarranted since GST is likely any time soon. They feel this would impact the textile industry. The present hike in VAT would have a considerable impact on the transport cost of all items as textile clusters of different value segments are located in different places and with the mill sector using diesel generators to tide over load shedding and tripping it could increase the power cost as well.
The textile industry in Tamil Nadu feels while other states enjoy huge incentives it is already in a disadvantageous position as the spinning sector spends around Rs 6 per kg to procure the raw material from upcountry markets and another Rs 4 per kg to sell the yarn in those markets. Tamil Nadu has some 2,000 textile mills, which are predominantly spinning-oriented.
India’s cotton yarn output may decline five to seven per cent for the financial year 2016-17. Sluggish demand is partly due to the substitution taking place from manmade fibers. However, yarn demand from overseas buyers has revived in the last few weeks. It was sluggish so far since importers withheld orders in anticipation of a price dip. But now they realize cotton prices are not going to come down. So they are booking cotton and cotton yarn.
And with Chinese cotton auction starting at a 25 per cent premium over the prevailing fiber rate in India, Indian exporters are hoping to see a revival in cotton yarn exports. Cotton yarn exports are expected to turn positive this year after a steep decline last year.
Meanwhile cotton yarn demand from domestic mills has also revived. Spinning mills want a two per cent tax benefit on yarns under the Merchandise Exports from India Scheme. For April to December 2016, India’s cotton yarn exports fell by 12 per cent compared to the corresponding period last year. Cotton yarn exports from India rose by a marginal 4.29 per cent in financial year 2015-16 compared to the previous year.
Victoria’s Secret has opened a store in China. Fronted by an iconic pink glass facade, the four-storey Victoria’s Secret store occupies 2,500 sq. mt. This is Victoria’s Secret first store in China. Prior to this, the US brand had only operated concept stores in China, selling branded accessories. By the end of 2017, Victoria’s Secret will open one more store in China and will host a lingerie and underwear show. Almost two decades of breakneck economic growth and increasing prosperity have got Chinese women accustomed to western tastes and fashion sensibilities.
The opening of this store is expected to satisfy Chinese women’s desire to keep up with the pace at the forefront of international fashion. Luxury lingerie and high quality functional products are becoming increasingly popular among Chinese women. International brands see China as a priority to help bolster overall sales given a fairly bleak global outlook. Top Italian luxury lingerie maker La Perla, which has eight stores in China, is planning additional outlets. Germany’s Triumph too is adding stores.
China’s market for women’s underwear is expected to have a retail value of 25 billion dollars by 2017 - double that of the United States - and is expected to grow to 33 billion dollars by 2020.
The garment-making sector in east China’s Zhejiang province is undergoing a difficult time as profits continue to shrink. Some factories have closed due to rising labor costs. Most clothing factories are original equipment manufacturers. In the last two years, with high product inventories and rising competition, many garment producers floundered.
Some have cut their cloth manufacturing business to focus on cloth materials. Some others that used to export women’s clothing to the US and Europe are seeing a dip in profits. A garment factory which primarily makes suits, shirts and business clothes no longer has a cost advantage over competitors in countries such as Cambodia and Vietnam. It exports 40 per cent fewer products than a few years ago and has had to cut the number of workers.
The number of clothing companies in the province has shrunk to 200 or 300 from a peak of about 650. There are more than 1,00,000 garment manufacturers in China employing over ten million people. The country is the largest manufacturer, exporter and consumer of garment products in the world.
There are over 50 garment clusters characterized by product categories all over China. The garment industry is making progress in many aspects such as industrial structure, technology application, brand development, quality control, profitability and exploration in domestic and international markets.
Chic will take place in Shanghai from March 15 to 17, 2017. This is a fashion trade show and acts as a mediator between the fashion industry and the fashion trade. About 1,200 exhibitors will present new trends and tendencies for fall/winter 2017/18.
Chic attracts the powerful network of Chinese fashion industry, complete Chinese retail market, including e-commerce platforms, agents, importers and influential associations for the industry, design and trade. Over 18 nations and regions, apart from mainland China, are participating. Italian participation is one of the largest among international ones with important shoes, clothing and accessories brands for men and women among the exhibitors. French participation comprises a kaleidoscope of fashion brands from ready-to-wear to accessories, shoes and bags. The German participation comprises a product variety from ready-to-wear, fur fashion to bags and shoes.
There will be 20 brands from Turkey specialized in leatherwear, furs, shoes and bags. In addition participants are coming from Spain, UK, Switzerland, Peru, Japan, Taiwan, Hong Kong, South Korea, Canada and Thailand.
Technical progress in the fashion industry will be a topic at Chic. Companies will present innovative software for multi channel solutions and customer centered service systems and 3D garment development technology.
Bangladesh’s export earnings declined 4.49 per cent year-on-year in February. Receipts for the month were 21.49 per cent less than January. The amount was also 9.64 per cent lower than the monthly target, February receipts from garment exports were 5.64 per cent lower than target. However, overall exports in July to February increased 3.22 per cent.
Apparel shipments went down due to a fall of the euro against the dollar as well as Brexit, the US elections and a decline in consumption in the West. The UK is the third largest export destination for Bangladesh. But garment shipments to the UK declined 5.19 per cent in the first half of 2016-17.
Jute and jute goods sector was one of the top export performers in the July-February period, with shipments rising 15.28 per cent year-on-year. Shipments of leather and leather goods were up 9.95 per cent year-on-year.
Furniture exports rose 16.84 per cent and exports of pharmaceuticals rose 9.94 per cent. Home textile exports increased 3.16 per cent and plastic products exports rose 39.87 per cent, riding on the back of a ten per cent cash incentive on shipments. Bangladesh’s export target for this fiscal year is eight per cent higher than the receipts in fiscal 2015-16.
The Alliance for Bangladesh Worker Safety – a platform of North American buyers – has announced that another six garment factories, which supply products for its signatory brands, have completed corrective action plans. So far the number of companies stands at 68. In addition, Alliance has dropped seven new factories from its compliant list, bringing the total number of factories suspended to 134.
Alliance is a grouping of 26 North American apparel companies, buyers and retailers. Alliance also continues to uphold accountability measures for factories that fail to prioritise remediation. Alliance performs independent inspections on structural, electrical and fire safety of all factories from which its members source their products. Based on the findings of inspection, it prescribes corrective action plans for factories to declare them compliant.
The issue of safety came under the spotlight following the factory collapse at Rana Plaza that killed over 1,135 people and injured over 2,500 workers. The incident raised question about workers’ safety and safety in workplaces. In the face of huge pressure from rights group and global trade unions from home and abroad, global retailers formed Alliance and Accord on Fire and Building Safety in Bangladesh to improve safety standards in the readymade garment sector.
"Hong Kong is getting ready for the annual Prime Source Forum from March 13-14, 2017 at the The Langham Hong Kong. Some 350 senior executives from the global fashion supply chain from raw materials to e-retail are expected to attend the two day forum."
Hong Kong is getting ready for the annual Prime Source Forum from March 13-14, 2017 at the The Langham Hong Kong. Some 350 senior executives from the global fashion supply chain from raw materials to e-retail are expected to attend the two day forum.
Since its debut in 2006, Prime Source Forum (PSF) is perceived as one of the most beneficial and effective promotional channels for the global fashion industry. Held annually in Hong Kong, PSF brings together some 400 senior executives from more than 20 countries to discuss the challenges and opportunities that manufacturers, suppliers and retailers are facing in the apparel supply chain. Perhaps, this is called a forum and not a conference as delegates involvement are an important element of its success. Prime Source Forum (PSF) is not limited to sourcing and supply chain alone it also is a valuable source of information for the fashion industry.
“Sourcing managers in my or senior levels no longer visit local and overseas trade fairs to look for new products nowadays. We consider new suppliers by existing connections, selected referrals or find them at high-end conferences. Ideally, new suppliers are coming to us and display their innovations so that we can make decisions here immediately,” explains M Lo, Sourcing Manager, Far East one Europe’s top three apparel retailers. This is why PSF is still serving the industry even after so many years.
The line up in this edition Year 2017 is shaping up to be a pivotal year for fashion industry. Topical themes and how the industry should respond to it will be covered. The keynote address will be by Colin Browne, President, Global Sourcing, Under Armour. The first session ‘Global trade – what is the regulatory landscape going to look like’ will offers suggestions to hedge against the geo-economic uncertainties in the new sourcing landscape and where we are heading with global trade will be discussed in this session. This will be followed by CEO dialogues on how digitising quality control helped Quiksilver increase supply chain transparency, supplier collaboration and employee engagement would offer industry best practices. Bart De Meirsman, MD, Quiksilver Asia Sourcing and Stephane Boivin, Co-founder, President & CEO, Pivot88 will be the main participants. Session 2 will throw light on survival under global political frictions and economic uncertainty – How we can navigate an uncertain future. Debate on ‘Sourcing 2020, what does the future fashion sourcing landscape hold?’ would help in brainstorming strategies for future. CEO Dialogue will be on ‘The future consumer; sourcing in future’ by Anson BAILEY, Principal, Business Development, KPMG.
The second day will start with a keynote address by Arkebe Oqubay, Minister and Special Advisor to the Prime Minister, the Federal Democratic Republic of Ethiopia. The following session will offer insights on the challenges and opportunities of developing the fashion supply chain in Africa as well as CEO Dialogues on sourcing responsibly in Africa. It will be followed by World Fashion Design Award Ceremony. Apart from this, there will be sessions on changes on fashion supply chain management in prevalence of e-tailing; business advancement – key to survive in the disruptive era and engaging CEO Dialogues on SAC's vision 2020 on transparency By Jason Kibbey, CEO, Sustainable Apparel Coalition. Day 2 will also have a session on ‘Changes on fashion supply chain management in prevalence of e-tailing’.
Strong line up
PSF offers ample opportunity for delegates to network with their peers, mingle with expert panelists and exchange ideas with their peers and competitors alike on issues of mutual interest. The speakers are industry leaders and key decision makers. No. of estimated registrants: Some 350 senior executives of the global fashion supply chain from raw materials to e-retail The speaker line up have names like Arkebe Oqubay, Minister and Special Advisor to the Prime Minister, the Federal Democratic Republic of Ethiopia, Phan Chi Dung, Director General, Light Industry Department, Ministry of Industry and Trade, Vietnam, Anson Bailey, Principal, Business Development, KPMG, to Brice Berrard, MD, TeamWorld, Eram Group, Anne-Laure Descours, Global Director, Sourcing Apparel, Puma, Mark Green, EVP, Global Supply Chain, PVH among many, many others.
Prime Source Forum (PSF) was initiated by APLF in 2006 to address the issue of quota elimination in the apparel industry. After its staging in the industry for eight years, PSF is now organised by YEH SHEN under licence of APLF. APLF is a joint-venture between UBM Asia and the SIC Group of France. For over two decades, Hong Kong-based APLF has been providing the global leather and fashion industries with its most important meeting and trading places. Josephine Ching, person in charge of PSF under the organisation of UBM Asia from 2007-13, is now Event Director of YEN SHEN which has been incorporated in Hong Kong since 2006. Starting from October 2013, PSF is organised by YEH SHEN under licence of APLF.
"Indeed with a global supply chain, international talent pool, dependence on new wealth creation, upward socio-economic mobility et al, fashion has benefitted greatly from globalization. But with a new political order it stands to suffer with new curbs on free movement of people, products, and uncertainty at a time when many consumers are already feeling less secure, feels Alexander Betts, Leopold Muller Professor of Refugee & Forced Migration Studies, Oxford University."
Indeed with a global supply chain, international talent pool, dependence on new wealth creation, upward socio-economic mobility et al, fashion has benefitted greatly from globalization. But with a new political order it stands to suffer with new curbs on free movement of people, products, and uncertainty at a time when many consumers are already feeling less secure, feels Alexander Betts, Leopold Muller Professor of Refugee & Forced Migration Studies, Oxford University.
TPP: Fashion industry Trumpified
With Donald Trump becoming the President of the US a sense of uncertainty has gained ground. One of his first moves was to pull out of Trans-Pacific Partnership, a 12-nation agreement, designed to encourage trade between a block of countries by reducing import-export duties. Meanwhile Trump has also warned about punitive tariffs or the ‘Border Adjusted Tax’ and quotas to restrict import of goods from countries like Mexico and China.
Focusing on ‘Made in America’, he believes reshoring production would enhance competitiveness. But the West — after losing ground to Asia for decades — currently lacks the skilled labour pool and modern equipment necessary for mass garment manufacturing. What’s more, the high cost of labour in the US and Europe would also eliminate profit margins and make it impossible for companies to maintain prices.
For fashion, the most drastic consequence of the political shift in the US is the resurgence of protectionist trade policies. Many businesses have spent years building global supply chains and outsourcing their production to China, Vietnam, Bangladesh and the like. As per American Apparel and Footwear Association, nearly 97 per cent of clothing and 98 per cent shoes sold in the US are imported from overseas.
Brexit impact on business
Meanwhile with the Britons voting to withdraw from the European Union the value of the pound tumbled. With uncertainties prevailing around Brexit, Britain’s imports of garments were affected. Take for example Bangladesh, garment shipments to the UK, Bangladesh's third largest export destination, declined 5.19 percent in the first half of 2016-17 in what can be termed as a harbinger of the Brexit fallout, expected to take effect in 2019. Between July and December last year, Bangladesh's garment exports to the UK stood at $1.53 billion, according to data from the Export Promotion Bureau. And experts believe garment exports to the UK will face further challenges in the near future as British consumers are facing rising inflation and weakness of the pound.
British clothing retailer Next for example recently warned about a tough trading year ahead. UK, being a developed country and a major consumption center, imports a variety of textile and apparel products from the world. Textile and apparel export is also predominant in total merchandise exports of India to UK vis-à-vis EU. Textile and apparel exports accounted for more than one fourth of merchandise exports to UK while it has a share of 21 per cent in the total exports to EU during 2015-16. In short, Brexit will have negative implications on UK’s textile and apparel imports due to the devaluation of the Pound.
In fact, global suppliers are full of trepidation, fearing exports could face hurdles in the US, UK and European markets some of the biggest importers. For Vietnam US is one of the biggest export market with 50 per cent of its total textile and garment exports going to the US. From January to November 2016, Vietnam’s textile and garment shipments to the US edged up 4.7 per cent from the previous year. The TPP would have eliminated 17 per cent tariff on imports of garments from Vietnam. However, even in the absence of TPP, Vietnam’s economy is well positioned to continue growing, with various other trade deals giving it good access to international markets, including the recently negotiated EU free trade deal and other agreements.
Similarly Bangladesh will have to address three important factors -- higher productivity, workers' wage hike and profitability – for sustainability of the apparel sector, say experts. RMG sector contributes 13 per cent to GDP. To achieve $50 billion export target Bangladesh will have to earn $22 billion in the next five year with a 12 per cent growth. Manufacturers have been spending millions of dollars on remediation and relocation of factories. A slowdown in exports and weak remittance growth are the challenges for Bangladesh. The EU and the US account for over 70 per cent of exports, and weaker growth, together with retreat from trade liberalisation, could adversely affect export growth, mainly the garment industry, with a negative impact on the balance of payments.
China of course is the world’s largest textile and apparel supplier. But the country is facing issues with rising costs making it lose ground globally. Meanwhile, with President Trump at the helm China is also evaluating its effects on its textile and apparel exports. China has, in any case, been shifting its production to other low-cost countries such as Vietnam, Laos, Bangladesh and even Africa, including Ethiopia and Kenya. Near 37.4 percent of total Chinese textile and apparel exports were destined for the US in fiscal year 2014-15. However, a further decline is expected this year. China’s global textile and apparel exports in 2015 was $284.2 billion whereas the first quarter of 2016 stood at $90 billion (a decline of 5 percent year over year). Chinese companies pursue an “operate-from-within-the-market” strategy for the US by setting up operations there. They have been looking at acquisitions of textile producing units.
Africa is the other upcoming sourcing destination. Fashion goods from Africa benefit from tariff free access to the UK market as a part of the EU trade policy, which makes them significantly cheaper than products imported from Asia. African goods have a 12 per cent advantage over Chinese items. However, the zero tariffs and zero quotas regimes are now at risk with Brexit. African countries want the UK to maintain the tariff free market access for their fashion products. As UK and European retailers and brands seek to innovate and strengthen their market position by diversifying existing supply chains, Africa provides a new source for ready-to-wear garments, shoes and fashion accessories.
The Turkish economy is heavily dependent on the fashion industry. As per Euromonitor textiles accounted for the greatest share (18.5 per cent) of total goods exported from Turkey in 2015. In monetary terms, the value of clothing exported reached $16.8 billion in 2015. However, even though Turkey has faced political upheaval and terrorist activities, its focus on supplying fashion to Britain and further afield shows no sign of abating. Although more expensive than their counterparts in Asia, Turkish manufacturers can offer faster delivery times and the flexibility to repeat in season. Asia cannot compete with Turkey's close proximity to the UK and Europe, which allows buyers to quickly make repeat orders on products that are flying off the rails or to quickly make changes - for example, trying a new pattern or a new colourway - to existing designs.
Myanmar has emerged as an up-and-coming force in the Southeast Asian textile sourcing market space. It is catching the attention of investors around the globe. A number of large foreign corporations are interested in manufacturing in Myanmar. As a most favored nation WTO member, Myanmar boasts low tariff rates for exporting countries that are also WTO members. These positive changes have been associated with a rise in foreign direct investments. With a competitive minimum wage, GSP trade privileges in the EU market and a strategic location at the China-India intersection, Myanmar is becoming increasingly popular among manufacturing companies burdened by the upward cost spiral in China.
"The second largest garment exporter in the world, Bangladesh’s RMG export was $28.668 billion in 2016. Looking at its potential, the government has set a goal of reaching $50 billion in exports by 2021. Considering the current consumption, approx three billion metre of woven fabric is required for export per year. Local mills are capable of producing only around 45 million metres of fabric, which is around 14-15 per cent of the demand. The country is spending almost $4 billion to import fabric every year."
The second largest garment exporter in the world, Bangladesh’s RMG export was $28.668 billion in 2016. Looking at its potential, the government has set a goal of reaching $50 billion in exports by 2021. Considering the current consumption, approx three billion metre of woven fabric is required for export per year. Local mills are capable of producing only around 45 million metres of fabric, which is around 14-15 per cent of the demand. The country is spending almost $4 billion to import fabric every year. There lies a big gap in the supply and demand. Investing in woven fabric manufacturing means saving huge forex, offering a big boost to the economy.
Shorter lead times
Going by the fast changing fashion trends, nowadays most of fashion retailers want products in 60 days, implying 30 days for fabric production and 30 days for garments making. If there is strong support from local mills, a product can be developed 2-3 weeks faster in comparison with the fabric of foreign origin. This would be an added advantage for the country. Working with local suppliers also helps companies in sorting issues that may crop during order processing. For instance, if there is quality issue with a Chinese origin fabric, it takes almost 3-4 weeks to arrive at solutions, considering the email communication, sending evidence or a supplier representative visits, etc. But in case of local mills, it can be sorted in just a week.
Least complexities & risk
While importing fabrics, a number of commercial processes are considered. But if it is a local supplier, things are easy. For instance, if you have a rejected fabric and you need to return it back to source and get replacement fabric, it would take only couple of days for local mills but for foreign mills, it may take months. At the same time, when there is an issue in business and you are in the same country, the risk management is very easy.
Price challenge
Price is one of the biggest challenges for garment manufacturers as well as fabric suppliers. Compared to competitors like India, Pakistan and China, the country’s fabric prices are high, as it doesn’t produce cotton. But Bangladesh has comparatively cheaper labor cost. So, the country needs to trade off with that and needs to keep its fabric cost as low as possible to survive in the market.
Product diversity
Bangladesh mostly produces basic products mainly cotton based in solid, print and yarn dyed and denims. Bangladeshi woven fabric manufacturers’ product range is very narrow. There is a huge demand for different kinds of fabrics. Retailers are looking for more technical fabrics with different functional properties. So, Bangladeshi fabric manufacturers need to be ready for this and diversify their products in those areas as well.
Most mills are not producing high stretch products. Mill’s capacity being limited they make more basic volume products, and innovation is low. One of the other major categories is denim. The country has a strong market share in this segment. There are in 30 denim mills, which produce 25 million metre fabric per annum. Today, the country is No. 1 jeans exporter to Europe and No. 3 to the US.
Local support – a must
Huge investment is needed in woven sector as backward linkage of garment industry to achieve $50 billion by 2021. Without strong support of raw materials, the country cannot achieve this goal. There is also a need to look for diversified products and train manpower to harness newer opportunities. In order to compete, the country needs to ensure competitive price, quality and excellent sales service to RMG sector. On top of that, there is a strong need to promote Bangladeshi fabrics in a big way across the globe to gain major market share.
