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Orders are booming, but what about profit?

The COVID-19 pandemic threatened the whole world, impacted all kinds of business including fashion business and created great uncertainty among people, however, over time, the situation is getting normal, people are becoming used to it. According to the recent news of national and global media, the fashion industry is bouncing back from the coronavirus crisis. Manufacturers are getting huge work orders.

Figure: Most of the buyers are offering lower prices. So, manufacturers’ profit margin is not increasing at a satisfactory rate.  

The biggest fashion retailers of the world–including Inditex, H&M, Massimo Dutti, etc.–are observing increased sales in the quarter edged above levels seen before the pandemic. Due to the coronavirus outbreak stores were closed and restrictions were imposed on movement and play behaviors of children and youth to reduce the spread of the virus. Now, most of the stores are reopened and people rushed to restore their wardrobe which triggers fashion sales.

According to a recent report published in Reuters, Inditex sales accelerated in the May-July period to 6.99 billion euros, 7 percent higher than in the same period in 2019. Not only Inditex other leading brands also observing sales growth.

As the brands and retailers is bouncing back, it means apparel manufacturers are getting enough work orders. According to the apparel leaders of Bangladesh, Bangladeshi apparel makers are now flooded with work orders.

You may think that the fashion business is then going ok, the situation is win-win! The sad but true fact is though the apparel manufacturers are getting huge work orders, they are not getting the right price. Most of the buyers are offering lower prices. So, their profit margin is not increasing at a satisfactory rate.

Some other problems are also contributing to lessen the manufactures’ profit. Now a day, buyers are placing orders with a short lead-time that puts manufacturers in another trouble. Moreover, it is prime time to ship goods for the upcoming Christmas sales. Western retailers and brands are asking for flying goods to their stores to catch the peak season for sales.

To supply the products on time, exporters have to deliver their products through air freight. Freight charges have already risen due to the adverse effects of Covid-19 on the global shipping sector. Textile and apparel makers are facing the extra cost for imports and exports.

A recent report said that the apparel exporters of Bangladesh are apprehending significant losses in business for missing freight transport deadlines as the number of scanners and flights at Hazrat Shahjalal International Airport in Dhaka is currently insufficient to meet demand.

In the running situation, apparel makers have to click the opportunities and utilize the situation to survive in a sustainable way. Excess work orders have given an extra benefit to exporters to negotiate better prices. They should not work with all orders they are getting. Before confirming any work order, manufacturers need to ensure a sustainable profit.

Bangladesh is still a lucrative sourcing destination mainly for its cheap products. So, buyers are coming here and they will be coming here, according to many market researches. The recent market trend is becoming supplier-driven.

It is a great opportunity for exporters to negotiate better prices. When a manufacturer can say ‘no’ to a retailer while taking an order, there is an opportunity to ask for better prices. Also, a united approach among manufacturers should have had to deal with buyers for their sustainable profit.

In fine, it can be said that the cautious move during taking orders can protect the supplier’s benefits. Manufacturers now have to take orders considering their capacities too, as the failure to execute will bring criticism for the company and the country as well.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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