Clothing sales in the United States are down. Should RMG exporters be worried?

Garment exporters from Bangladesh now fear a drop in shipments to the United States, their main destination; and that means trouble. According to BGMEA, almost all buyers are now requesting delayed deliveries, while a few are also canceling orders

TBS report

August 29, 2022, 09:00

Last modification: August 29, 2022, 10:11 a.m.

Illustration: TBS


Illustration: TBS

Due to record inflation, American consumers are taking a conservative stance when it comes to buying clothes. This is having a domino effect in Bangladesh.

Garment exporters from Bangladesh now fear a drop in shipments to the United States, their main destination; and that means trouble. According to BGMEA, almost all buyers are now requesting delayed shipments, while a few are also canceling orders.

The commercial standard contacted apparel industry leaders to understand how our apparel export market will be impacted, what to expect in the near future; and more importantly, the ways forward.

‘It’s short term. Volumes previously committed in China will soon be transferred to Bangladesh’

Illustration: TBS

Illustration: TBS

Illustration: TBS

Shams Mahmoud

Managing Director, Shasha Denims Ltd and former President of Dhaka Chamber of Commerce and Industry (DCCI)

Over the past few months, the RMG industry has seen a slowdown in orders. This happened for several reasons, including excess inventory caused by logistical issues in the United States. There has been a delay in clearing goods from US ports and disruptions in market conditions caused by the war between Ukraine and Russia, which have left US brands with excessive inventory at present.

Moreover, at the beginning of the year, when cotton prices reached historic highs, buyers placed advance orders, fearing a further rise in raw materials to come.

The war caused inflation around the world which, coupled with the strength of the US dollar, caused a global recession.

As a result, orders were reduced and European brands in particular were more affected as they suffered reduced profits due to conversions against a strong US dollar.

These scenarios are hitting our RMG industry hard, at a time when we are also facing rising energy costs, frequent power outages and rising operating costs.

Buyers are also pushing back orders after purchasing commodities. All this put us in a delicate situation.

However, I think this is a short term problem. Even if orders drop, there will be new buyers. The projections for the next season are good, with volumes on the rise.

There is an increase in inquiries from American brands such as Calvin Klein, Abercrombie and Fitch and American Eagle; all of these previously sourced their lion’s share from China.

Thus, the volumes previously committed in China by the American brands will soon be transferred to Bangladesh. Even if we can move a third of the orders, it will have a positive impact on the industry.

Bangladesh is also the only country in the world right now with a very strong upstream supporting industry with a transparent supply chain.

That said, we are of course taking new initiatives such as product diversification and exploring new markets to adapt to the current situation.

For example, our clothing company only made denim pants. But now we are taking orders and shipping new products like shirts, shorts, workwear, etc.

We will soon include the manufacture of jackets for export. Still in the field of textiles, we are now in direct competition with Turkish factories and have started to export fabrics to the markets of Asia as well as those of Central and South America.

Middle Eastern markets also seem to have a lot of potential. The problem with emerging markets is that they have high demand even if the quantities are small.

We won’t understand the real situation until September – when orders start coming in.

Shams Mahmud spoke to Promila Kanya of The Business Standard.

“Different American brands are in different states when it comes to how their business is doing”

Illustration: TBS

Illustration: TBS

Illustration: TBS

Sharif Zahir

Managing Director, Ananta Group

Since we are developing multiple products, different products are now in different states. For example, orders for our formal wear or outerwear are in fairly good shape, as orders from the US market are not declining on this front.

In the US market, different brands are in different states in terms of their business development. Levi’s business, for example, is still booming. Basically, discounters like Walmart and Ross have excess inventory. Walmart therefore stopped buying to take care of its stock.

Here, therefore, we have to keep some inventory, some shipments are delayed, and in some cases we keep products ready without shipping them.

For now, to manage the temporary crisis in which we find ourselves, we may have to readjust the working time – instead of 10 hours, we may have to reduce it to eight hours. We have to do aggressive marketing. If we were working with two buyers before, now we have to work with four buyers.

However, we hope that the US recession will not last long. We may have to suffer a season, though. But it should resume by November-December, or by January. And when it resumes, we will have the opportunity to turn around, because compared to Vietnam and other countries, Bangladesh is still competitive. We still have the opportunity to expand our business in the US market.

We need to move forward strategically in the US market. We don’t do much about it. Vietnam has aggressively marketed itself in the United States as an alternative to China and has gained a lot. We could perhaps relate to American cotton, for example. Our spinners or those who make fabrics could use more American cotton [to enhance marketing in the United States]. We could work with more American associations, like their textile association.

Levi’s is now one of our main buyers. The incident that happened with their [former] country manager [Muhammad Zubair Aslam, now vice-president of the company for South Asia] is stupid. Such incidents affect business [though]. [After his arrival in Dhaka airport, Zubair, a Pakistani national, was denied entry into Bangladesh by the immigration on the grounds that his visa was cancelled, while his passport was shown in the block list. Levi’s termed the behaviour of the Bangladesh High Commission in Islamabad ‘unprofessional’ and asked the trade body to prevent such a situation from occurring in future once again.]

Also, American brands could not join the RSC [RMG Sustainability Council] after the departure of Nirapon. They always rely on third parties for security issues. It was also not handled well. Since the US is a big market for us, this should have been handled properly.

Before making a decision, we need to think about our biggest markets. We have to think about the share of my trade with Russia, for example, and the quantity with America. Overall, we couldn’t penetrate the US market like Vietnam or China did. But it could happen to us if we adopt pro-America policies.

Sharif Zahir spoke with Masum Billah of Business Standard.

“We have an option now – potential workforce reduction”

Illustration: TBS

Illustration: TBS

Illustration: TBS

We are currently in an extremely critical situation due to rising inflation and reduced orders in the international market. So, at this critical hour, the actions that the government and others take matter more than ever, because those actions will determine whether we will continue in the future. Wrong actions can now spell disaster for the industry.

I think it is important that the message sent to the global market is extremely strong and highlights the critical situation in which we are about to enter. If anything, exaggerate to make sure the point is heard.

If I’m thinking realistically, unfortunately we have an option now – a potential workforce reduction.

I know this is unacceptable but reality says those at the bottom of the huge chain are the ones who will suffer the most.

And we have another problem – we rely heavily on imports. China will get away with accelerating manufacturing change to meet domestic needs. Unfortunately, Bangladesh does not have its own brands that can compete in the international retail market.

There is another option, which I am sure our government will disagree with, which is to subsidize trade to avoid a severe contraction, or to subsidize and support workers who will not have work to TO DO.

Comments are closed.