COVID-19 and the Fashion Apparel Industry (updated April 2020)

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It comes with no surprise that the fashion apparel industry has changed drastically in light of the novel coronavirus (COVID-19).

  • According to the latest statistics released by the U.S. Census Bureau, hit by COVID-19, the value of U.S. clothing and clothing accessories sales went down by 50.5% in March 2020, compared with a year earlier.
  • According to a recent NPR news report, in Bangladesh, the world’s second-largest garment exporter, about one million garment workers have lost their jobs as a direct result of sourcing changes. An online survey of Bangladesh employers, administered between March 21 and March 25, 2020, indicates that 72.4% of furloughed workers have been sent home without pay, and 80.4% of dismissed workers have not received severance pay.
  • A survey of 700 companies conducted by the International Textile Manufacturers Federation (ITMF) between 28 March and 6 April 2020 shows that companies in all regions of the world suffered significant numbers of cancellations and/or postponements of orders. Globally, current orders dropped by 31% on average. The severity of the decrease ranges from 20.0% in East Asia to 41% in South America.

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  • According to a newly created COVID-19 Tracker developed by the Worker Rights Consortium, it is concerning that many large-scale fashion brands and retailers are not paying their overseas manufacturers back for the materials the manufacturers have already paid for to start making garments.

Additionally, here is a list of well-known fashion brands that have announced to cut or cancel sourcing orders as of April 13, 2020:

  • Primark has closed all its stores across Europe and the U.S. and asked all of its suppliers to stop production. However, the company has set up a fund to pay the wages of factory employees who worked on clothing orders that were canceled.
  • Ross Stores has announced to cancel all merchandise orders through mid-June, 2020.
  • Gap Inc. has decided to halt the shipments of their summer orders and the production of the fall products
  • H&M has also canceled orders but told its suppliers it would honor the orders it already placed before the COVID-19.

Additional reading:

Compiled by Meera Kripalu (Honors student, Marketing and Fashion Merchandising double majors) and Dr. Sheng Lu

The discussion is closed for this post.

EU Textile and Apparel Industry and Trade Patterns (Updated April 2020)

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The EU region as a whole remains one of the world’s leading producers of textile and apparel (T&A). The value of EU’s T&A production totaled EUR146.2bn in 2018, marginally up 2% from a year ago (Note: Statistical Classification of Economic Activities or NACE, sectors C13, and C14). The value of EU’s T&A output was divided almost equally between textile manufacturing (EUR77.4bn) and apparel manufacturing (EUR70.0bn).

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Regarding textile production, Southern and Western EU, where most developed EU members are located such as Germany, France, and Italy, accounted for nearly 73.7% of EU’s textile manufacturing in 2018. Further, of EU countries’ total textile output, the share of non-woven and other technical textile products (NACE sectors C1395 and C1396) has increased from 19.2% in 2011 to 23.0% in 2017, which reflects the on-going structural change of the sector.

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Apparel manufacturing in the EU includes two primary categories: one is the medium-priced products for consumption in the mass market, which are produced primarily by developing countries in Eastern and Southern Europe, such as Poland, Hungary, and Romania, where cheap labor is relatively abundant. The other category is the high-end luxury apparel produced by developed Western EU countries, such as Italy, UK, France, and Germany.

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It is also interesting to note that in Western EU countries, labor only accounted for 21.7% of the total apparel production cost in 2017, which was substantially lower than 30.1% back in 2006. This change suggests that apparel manufacturing is becoming capital and technology-intensive in some developed Western EU countries—as companies are actively adopting automation technology in garment production.

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Because of their relatively high GDP per capita and size of the population, Germany, Italy, UK, France, and Spain accounted for 61.1% of total apparel retail sales in the EU in 2018. Such a market structure has stayed stable over the past decade.

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Data source: UNcomtrade (2020)

Intra-region trade is an important feature of the EU’s textile and apparel industry. Despite the increasing pressure from cost-competitive Asian suppliers, statistics from the World Trade Organization (WTO) show that of the EU region’s total US$73.7bn textile imports in 2018, as much as 57.1% were in the category of intra-region trade. Similarly, of EU countries’ total US$205.0bn apparel imports in 2018, as much as 48.0% also came from other EU members. In comparison, close to 97% of apparel consumed in the United States are imported in 2018, of which more than 80% came from Asia (Eurostat, 2020; WTO, 2020).

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The EU textile and apparel industry is not immune to COVID-19. According to the European Apparel and Textile Federation (Euratex), the outbreak of COVID-19 may cause a 50% drop in sales and production for the EU textile and apparel sector in 2020. A recent survey of EU-based T&A companies shows that almost 9 out of 10 respondents reported facing serious constraints on their financial situation and 80% of companies had temporarily laid-off workers. Around 25% of surveyed companies were considering closing down their businesses. Further, EU T&A companies were concerned about EU’s tightened border controls, which have “increased sharply, leading to delays in supplies but also cancelling of orders, thus aggravating the economic impact.”

COVID-19 and U.S. Apparel Imports (Updated: April 2020)

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The spread of the coronavirus (COVID-19) has already resulted in a plummet of U.S. apparel imports that we have never seen in history. According to latest statistics from the Office of Textiles and Apparel (OTEXA) under the U.S. Department of Commerce, as of February 2020:

  • The value of U.S. apparel imports sharply decreased by 11.2% in February 2020 from a year earlier. Between January and February 2020, the amount of U.S. apparel imports decreased by 10.9% year over year, which is nearly the same loss as in the 2008-2009 global financial crisis.

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  • As the first country took a hit by COVID-19, China’s apparel exports to the United States nearly collapsed in February 2020–down as much as 46.1% compared with a year ago (and -40.6% drop YTD). This result is also worse than the official Chinese statistics, which reported an overall 20% drop in China’s apparel exports in the first two months of 2020).

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  • China’s market shares in the U.S. apparel import market dropped to 21.3% in February 2020, a new record low in history (was 30% in 2019 and 23.9% in January 2020). However, it is important to note that such a downward trend started in October 2019, as U.S. fashion brands and retailers were eager to reduce their exposure to sourcing from China.
  • China’s lost market shares have been picked up mostly by other Asian suppliers, particularly Vietnam (18.8% YTD in 2020 vs. 16.2% in 2019) and Bangladesh (9.1% YTD in 2020 vs.7.1% in 2019). However, there is no clear evidence suggesting that U.S. fashion brands and retailers are giving more apparel sourcing orders to suppliers from the Western Hemisphere. In the first two months of 2020, only 9.5% of U.S. apparel imports came from CAFTA-DR members (down from 10.3% in 2019) and 4.2% from NAFTA members (down from 4.5% in 2019).