In 2020, the COVID-19 epidemic that spread across the world caused a huge impact on many industries, and the clothing industry was one of them. Over the past few months, there has been news of some well-known clothing brands closing stores, laying off employees, or even going bankrupt. But behind these well-known brands, there are many more small businesses and workers who are under greater pressure, and their plight is not well known. On October 8, a report by the British “Guardian” revealed the crisis chain of the clothing industry amid the global epidemic.
“Workers in apparel factories around the world face destruction as fashion brands refuse to pay $16 billion in payments. “The Guardian” stated that since the outbreak of the new coronavirus pneumonia, major European and American fashion brands have unilaterally canceled orders and refused to pay overseas suppliers. The total price has reached more than 16 billion US dollars.
My life turned into a disaster movie in one day
Mostafiz Yudin is the founder of a garment production and foreign trade company in Bangladesh and is well-known in the local industry. Most of his customers are European and American clothing brands. In March this year, Yuding suddenly received an email from the British customer Arcadia, saying that due to the impact of the epidemic, all orders would be canceled and goods from Yuding’s factory would no longer be accepted.
Bangladesh clothing manufacturer Yudin: We should be regarded as a link in the value chain, but the fact is that (customers) are only given to long-term partners I sent an email and said the order was canceled and they no longer wanted my goods. (Although) I have bought the raw materials, they just don’t want them. How can (customers) do this.
In order to make Arcadia’s new clothing, Yudin spent more than 1 million US dollars purchasing raw materials, and the brand had a total of approximately 2.44 million US dollars worth of goods in his factory. Today, these goods, which were supposed to be sent to the UK, are filling Yudin’s warehouse.
Acadia is not the only brand that has canceled orders. Yuding said that since March, 80% of the factory’s foreign trade orders have been cancelled, without any further explanation or compensation from customers. He posted his experience on social networking sites and attracted the attention of major media. Under pressure from public opinion, Arcadia Group responded.
In a letter to suppliers, Arcadia Group said that the new coronavirus epidemic was a “force majeure” and therefore the cancellation of the order was in line with the terms of the contract. They currently only accept goods that have left the port and are in transit as of March 17, but they can only pay 30% off the payment at a preferential price. All other orders, including garments that have been made but not yet shipped, will be cancelled. The reason is that after the season, customers will no longer buy spring clothing. Since stores are still closed, warehouses can no longer receive new inventory. A spokesman for the company also said they were under no obligation to reimburse Yudin for the cost of purchasing raw materials.
Yuding found it difficult to accept this explanation. He believes that when the two parties sign a contract, there is an unequal relationship: “The contract has 33 pages and 300 clauses. If I don’t sign, the brand owner will say, if you don’t sign, I will find another factory.”
Yuding believes that the normal operation of the factory depends on a system of debt and mutual trust. After receiving the order, he used the vouchers from the previous shipment to obtain a loan from the bank to pay for the new round of production costs, including raw materials, worker wages, production costs, transportation fees, etc., and would wait for the new batch of goods to be shipped. A production and trade cycle will not end until the buyer pays the new voucher in full. Now, because a large number of orders have been cancelled, banks are no longer willing to give him loans, and raw material suppliers are demanding payment. The previous production method is unsustainable, and it is difficult for him to accept orders from new buyers.
Bangladesh clothing manufacturer Yudin: The entire value chain and the entire supply chain have to rely on trust, but I think after this incident, trust has completely collapsed.
According to data released by the American Workers’ Rights Alliance, Arcadia Group currently only receives 5% of all its orders in Bangladesh. It is expected that the brand Orders worth $130 million will be canceled globally.
In June, British high street shops gradually reopened for business, but Yudin was worried about how to pay workers. His factory is located in Chittagong, a city in southern Bangladesh, and has about 2,000 workers, most of whom rely on this salary to support their families.
As the world’s second largest clothing manufacturing country, Bangladesh’s foreign trade clothing production provides employment to more than 4 million people, mainly women.
A clothing company in Bangladesh.Person in charge: There are four to five million workers working directly in the garment trade industry, and another three to four million people are engaged in jobs related to the garment trade, such as accessories companies, textile mills, spinning mills, and cotton manufacturers.
Data from the Bangladesh Garment Manufacturing and Export Association website shows that in the 2018-2019 fiscal year, ready-made garment exports accounted for 84.21% of the country’s total exports, of which 60% of ready-made garments were sold to Europe.
Bangladesh social development expert Roxana Khan: In Bangladesh, the garment industry is the blood and main engine of the national economy.
Since the outbreak of the COVID-19 epidemic this year, orders worth approximately US$26.7 billion have been canceled or postponed in the country, involving nearly 1,000 factories and nearly 2 million workers. 58% of the factories surveyed said that due to the epidemic, they had to close most of their production lines and lay off workers. To this end, the Bangladesh government has launched a US$600 million aid plan for the manufacturing industry. However, as the epidemic continues, industry insiders are worried that the country’s garment manufacturing industry is facing a fatal blow.
In March, Hook, chairman of the Bangladesh Garment Manufacturing and Exporters Association, released a video calling on international customers not to cancel orders.
Rubana Huq, President of Bangladesh Garment Manufacturing and Exporters Association: “I will not question your decision, what I can do is appeal to you Be sensible and ship out all the goods that are currently being produced or have been produced, please ship them on normal payment terms. If we don’t get support like this over the next three months, 4.1 million workers will really be on the hook. Forced unemployment, this will cause social chaos that we cannot afford.”
In April this year, economists from the World Bank warned that the new crown epidemic may wipe out 5,000 Thousands of Bangladeshis have returned to poverty. In June, a report by the Center for Policy Dialogue, a think tank in Dhaka, further pointed out that the country’s poverty rate may regress to 15 years ago. A study by the Global Labor Rights Center shows that once an order is cancelled, 72.1% of international buyers refuse to pay for suppliers’ raw material expenditures, and 91.3% are unwilling to pay suppliers’ production costs.
Today, European and American countries have begun to restart their economies, but the situation of various brands canceling and postponing orders has not changed. Moreover, Bangladesh is not the only one suffering from the order cancellation crisis. In April this year, the Cambodian Garment Manufacturing Association issued an open letter calling on international brand buyers to abide by contracts and protect the lives of the country’s 75,000 garment workers.
In Cambodia, garment foreign trade processing accounts for 75% of the country’s total exports. Data from the country’s Ministry of Labor shows that there are about 1,100 garment factories in Cambodia. The country provides 75,000 jobs. Since the outbreak of the new coronavirus pneumonia, about 250 garment factories have been closed.
In Sri Lanka, another foreign trade clothing manufacturing country, this year’s clothing exports are also expected to be US$2 billion less than last year.
Affected by the epidemic, the global apparel industry has been hit hard since the beginning of this year
CK parent company PVH announced to streamline its North American business and close 163 retail stores. More than 60% of GAP stores have been closed. H&M sales dropped by 46% and more than 2,700 stores were closed. In June this year, the parent company of Zara announced that it had lost approximately 409 million euros in the first quarter and that the company planned to close 1,000 to 1,200 stores in the next two years.
According to McKinsey consulting firm’s forecast, 20% to 30% of companies in the global apparel industry will go bankrupt due to the epidemic.
But another set of data is equally astonishing. According to the British “Guardian” report, despite the impact of the epidemic on revenue, some brands and retailers still spend huge sums of money to distribute dividends to shareholders. Kohl’s, one of the largest clothing retailers in the United States, paid a dividend of $109 million to shareholders after canceling a large number of orders from Bangladesh, South Korea and other places.
The owner of an Indian garment factory whose foreign trade orders were canceled once said in an interview with the media: “If our workers do not die from the new coronavirus, they will Death of hunger.”
In the era of globalization, many brands have moved their manufacturing processes to countries with low labor costs in order to expand profits. But when a crisis strikes, it is difficult to expect them to be able to weather the difficulties with businesses and workers in these countries. In this global epidemic that has lasted for nearly a year, the workers in developing countries at the bottom of the industrial chain are often the ones who really bear the brunt of the disaster.
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