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Coronavirus: Why the collapse of fashion brand Primark’s business is bad news for Bangladesh?

Now the ready-made garments industry of Bangladesh is facing a severe storm. To understand this situation the example of a fashion brand Primark is enough. If you enter any store of Primark in any city in Europe or America and pick up a garment, it is more likely that is made in Bangladesh. The brand is gaining popularity with Western consumers by selling garments at a cheap rate. Before the coronavirus epidemic, monthly $600 million worth of products were sold in Primark stores. And in the last month, it is zero.

collapse-Primark-bad-Bangladesh
Figure: Clothing giant Primark has gone from making £650m in sales a month to nothing as the coronavirus has forced it to close in Europe and the US. Courtesy: Getty Images

George Weston, Chief Executive of Associated British Food, who owns the Primark, announced on Tuesday. In a statement, he released a six-month profit-loss estimate, saying, “Every month where we had $650 million sales, it has now fallen to zero after closing all stores on March 22, and we have sold nothing.”

Primark has 370 stores in 12 countries around the world. A large part of the garments of this brand is made in different factories in Bangladesh. But all their stores have been closed for the last month. Primark has even stopped trading online. Their website now offers suggestions on how to refurbish your wardrobe, and how to decorate your house and celebrate your birthday alone in this lockdown.

Why the decline of Primark is bad news for Bangladesh?

Primark is considered to be one of the most commercially successful brands on the UK High Street. Their entire business model is developed by capitalizing on cheap labor countries like Bangladesh. They also have a very efficient supply chain. Fast Fashion says that in the current clothing industry, Primark is one of its pioneers and beneficiaries. Fast fashion means a new design garment that can be bought so cheaply that it can be thrown away after a season. Brands like Primark give priority to how much cheaper it can be made than the quality of the garment.

Primark has 370 stores in 12 countries around the world. A large part of the garments of this brand is made in different factories in Bangladesh. But all their stores have been closed for the last month.

Primark employs 68,000 people. The head of the company admits that if the governments of various European countries had not provided financial assistance, most of their workers would have been laid off. Primark has already canceled all their orders in Bangladesh. Their stock has been sold in large quantities. Primark claims that they have already paid for the orders that have already been delivered. The company also said that a ‘special fund’ will be set up for the workers in the factories where Primark’s clothing is made.

Primark hopes they can reopen the store once the coronavirus comes under control. But they are also acknowledging that the rules of social distance must be followed so that sales will not be the same as before. This means that even if the lockdown goes up, the crisis is not over. The owner of Primark, fell another 4.2 percent on the London Stock Exchange on Tuesday. The market value of this company is now £15.4bn. Their share price, which was more than 27 pounds last February, has now dropped to 19 pounds.

Primark is considered to be a very successful business compared to other brands in Britain’s High Street. When they are in this situation, market analysts see more terrible bad news for other brands. Richard Hunter of Interactive Investors said, “This is a huge blow to Primark’s business, no matter how short-lived.”

The same story is being heard in all the big brands in the garment industry. Many brands are appealing to their apparel manufacturers and suppliers so that they do not have to pay the price now. The payment deadline should be postponed a bit. And as a result, the garment industry of a country like Bangladesh is in serious crisis now.

Rubana Haque, President, BGMEA said that “The soil under our feet has moved.”

The Washington Post published an open letter on April 19 to Rubana Haque, the garment industry owners of Bangladesh. In this, Rubana Haque urged international brands not to abandon garment workers in Bangladesh.

In an open letter, Rubana Haque said, “Now they are worried about the new shocking factories built by garment owners in Bangladesh after the collapse of Rana Plaza. The ground has gone down from their feet.  Garment brands are not responding to factory owners’ requests. They are either exiting the contract or cancel the order, citing the “inevitable disaster” clause in the purchase agreement. ”

According to Rubana Haque, garment exports fell by 30.19 percent in March alone. In April, the decline was 77.76 percent. Between March and May, exports will fall by $4.9 billion. So far, a total of 1 thousand 120 factories order have been canceled the price if the order is a minimum of $1 million.  As a result, 22 million workers will be directly affected.

Rubana Haque claims that paying the workers is always a priority for them. The readymade garments sector will get about 84 percent of the $589 million incentive announced by the Bangladesh government for all export sectors.

But the garment industry pays about $423 million a month. Therefore, according to him, one month’s salary can be run with the help of government incentives. So, when all orders are being canceled, exports are completely stopped, then there is a huge challenge in front of Bangladesh.

Rubana Haque says some brands are talking to their preferred suppliers separately under pressure. But many other suppliers have been left out. She says it will severely disrupt the supply chain.

She concluded her open letter by saying, “April is now the cruelest month for Bangladesh. But there is another catastrophic summer ahead.”

This report was based on a report made by BBC

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