Amid the uncertain global fashion market with trade uncertainties – fresh lockdowns and stricter restrictions in key markets amid a rise in COVID-19 positive patients and deaths – fashion brands and buyers have taken a sluggish pace in sourcing apparel from manufacturing countries.
Creating worries for readymade garment (RMG) manufacturing countries –especially Bangladesh. Creating a pile-up of unsold apparel amid miserable sales. Bangladeshi RMG manufacturers say that there were getting 20% fewer work orders for the next season starting from June.
Mainly in small and medium enterprises are taking fewer order placements as they have fewer production capacity and frail fiscal strength, and a few foreign buyers.
Industry leaders say the demand for late payment is still as severe as it was in the early months of COVID-19 in 2020. In some cases, it has worsened as the condition in the Western market is terrible.
AK Azad, Managing Director of Ha-Meem Group faces fewer orders and late payment.
Azad said, “I know the lockdown will lengthen, and there is an uncertainty, and I am trying to improve the efficiency so that I can survive during COVID-19.”
One of the major markets, the EU – accounts for 60% of garment exports – for Bangladesh, is having the 3rd wave of infections. Countries such as Italy, Germany, France and UK are recalling stricter lockdowns, and several other countries across the world are following it.
Before COVID-19, buyers used to give payment due on-demand at sight. It needs the party receiving the good or service to pay a portion amount directly upon being presented with the bill of exchange. While currently, buyers are now demanding a late payment for 180 days, occasionally even more. So, the situation has not improved in terms of payment deferment, suppliers said.
Small and medium (SMEs) are the foulest victims in such a condition. Moreover, most of them are not receiving sub-contracting orders as the larger units do not have big volumes of RMG export orders for themselves for the next seasons.
Fazlul Hoque, Managing Director of Plummy Fashions Ltd said, “The old inventory in the retail stores is one of the major reasons for the go-slow policy by the buyers. I have received 20% fewer work orders from my buyers for the next seasons.”
Hoque added that the apparel orders for some specific products were higher than the traditional goods.
For example, he received the orders for loungewear and night wear because of a higher demand for casual wear as people are usually staying home in COVID-19 lockdowns.
Kutubuddin Ahmed, Chairman of Envoy Group said, “Although the industry had been experiencing 20 percent to 30 percent fewer orders, it was recoverable because of the unstable work orders from China.”
Rubana Huq, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said, “Buyers are following now a go-slow approach and placing orders in small slots instead of bulk amount. Since the Western market is under strict lockdown, their retail sales have plummeted. So, the request for payment deferment is always there.”
Throughout the March-April period 2020, the RMG industry met order cancellations and deferrals worth about $3.18 billion.
“We are negotiating with each of the buyers as best as we can. Some 90 percent of the previous orders have been reinstated, and we are trying for the rest. However, it is complicated since a good number of the dues are caused by the bankrupt buyers, and we don’t have any legal protection against such non-payment,” Huq added.
Not all the retailers and brands have cleared the full debts yet, she also said.
Whenever the BGMEA is reported about non-payment or other purchasing-related issues, the association immediately engages with the respective buyers to facilitate amicable resolution and expedite negotiation, Huq said.
“We have been contacting the buyers one by one on behalf of our suppliers. We have taken the help of our foreign missions, international media, and other social partners, including labour federations.”