Abstract
Selling of Bangladesh’s ready made garments (RMG) export left overs or surplus production is mostly known as stock lots business. This survey reveals that ‘Stock lot’ entrepreneurs who are creating 3000 jobs per year are doing 18 Million US dollar business every year without any major factory facilities. It has been found that buyers from Thailand, Saudi Arabia, Singapore, Malaysia, Africa, Europe, Canada, Japan Australia and Middle East are buying most of the stock lots from Bangladesh. The survey was conducted by interviewing 50 stock lots suppliers with a set of questionnaire. Most of them have been visited physically. It has been found that ten of per thousand pieces’ master copy made by locally, for including world famous brands like H&M, ZARA, Levi’s, American Eagle, Cross V, Max, Rookies, Dragon, Calvin Klein, sears, peak, Ralph Lauren, Jack and Jones so on are being widely sold in this business as stock lot. However this sector is creating huge business opportunities for educated young generation. But there is lacking of research and financial help from public or private institutions to the businessmen.
Introduction
Demands of branded surplus or stock lot garments are increasing day by day in the domestic area and in the international market. Now a day’s buyers from various parts of the world are looking for surplus or stock lot garments from Bangladesh.
There are many reasons behind the surplus or stock lots business expansion. The main reason for what many entrepreneurs doing this business of stock or surplus garments is the price and production lead-time. All popular brand and designers label garments are available in very cheap price compared to the real sales price and there have no lead-time for the production.
Normally factories produce 2 to 5% extra garments to reduce final inspection risk and this extra quantities, usually these are ending up as stock lot garments. However there are some other reasons like piece rejection(that means there are lots of garments rejected for physical and appearance problem like hole on the body, oil sport, foreign yarn, broken stitches, shading problem etc), final inspection failure, shipment cancel, master copy, duplication, stock of development samples, stock of correction samples, original samples provided by buyer. In addition, many businessmen produce stock lots deliberately for selling.
Meanwhile good number people have engaged themselves in this business. Most of the cases the export oriented factories are not selling the stock lots to the final end customers. They are usually selling them to some third parties. As the sector is not streamlined yet risk is high. As factories main business is export and they want to sell the stocks at once they sell them to third parties.
The third party businessmen buy them and they resell to many customers after doing sorting out according to quality, brand, style etc. However interesting finding of the survey is that there are have been good number of small factories or RMG workshops who are producing the copy goods of the different brands master samples and they are selling them saying stock lot.
Why people are getting involved in this business
Especially the educated young entrepreneurs are involved in this type of business because unemployment rate in Bangladesh is expected to be 4.20 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the Bangladesh Unemployment Rate is projected to trend around 4.80 percent in 2020.
Another reason to encourage the young people to forward this business is minimum investment and possibility of good profit. One of the leading stock lot’s holder Mr. Sayed said, “He started the business with 3 lacks taka before 2 years ago but now his capital is more the 10 lacs taka. He earns on an average 30 to 40% profit in every consignment”. As average selling price for stock lots is lower than fresh order price, per shipment, the buyer is getting more benefit then suppliers. And for these sells the exporters enjoying cash incentives given by the buyers.
It could not be clearly known whether the buyers of stock lot would place fresh orders if they didn’t find goods in stock market. However if it is considered that they would buy the same volume of goods from Bangladesh even though were no stock lot that would mean higher fresh order for garment exporters.
Factories save big loses:
The shipment delay, cancellation of orders, extra-burden of airfreight, price discounts, and losses due to vandalism are the common problem of the RMG sector. According to a survey, Dhaka Tribune reported on December 2013 that RMG sector in Bangladesh has suffered a loss of US$ 20 million, due to shipment delay, cancellation of orders, extra-burden of air freight, price discounts, and losses due to vandalism. Sometimes this types of lose can demolished the company forever. The factory owner of Eagle Eyes Mr. Nazimullah said, “If we didn’t able to sale the bulk stock lots to the local agents the maximum mid-range factory couldn’t survive in long run”.
These types of short and big quantity products fulfill the domestic demand also. There are number of stock lots shops available here in the capital city, including other major cities. Some of the examples are Banggo bazar market, Dhaka new market, Annana market in DOHS Baridara and some special place of Uttara area familiar for getting left out pieces of RMG exports for retail sales.
The market size:
Table-1: Employment generation by the companies under the survey
| Employment status 2016 | ||||
| Suppliers type | Number of people involved as supplier | Total Suppliers | People involved as employee | Total number of employments by 50 companies |
| Small suppliers | 5 | 50 | 250 | 3000 |
| Medium suppliers | 20 | 1000 | ||
| Large suppliers | 25 | 1750 | ||
| Small supplier: who export approximate average of $ 6,250.00 per month. | ||||
| Medium supplier: who export approximate average of $ 18,750.00 per month. | ||||
| Large supplier: who export approximate average of $ 43,750.00 per month. | ||||
50 businessmen which have been interviewed under the survey have created 3000 job opportunities in 2016. It could not be found how many such companies are there in total in Bangladesh. But approximately thousands of people are involved here.
Table-2: Average yearly turnover of 50 companies under the survey.
| 50 stock lot supplier’s turnovers in 2016 | |||||
| Suppliers type | Approximate average turnover per month | Number of suppliers per category | 50 suppliers turnover per month | Total turnover per year in USD | USD in Million |
| Small suppliers | $6,250.00 | 5 | $31,250.00 | $18,000,000.00 | $18.00 |
| Medium suppliers | $18,750.00 | 20 | $375,000.00 | ||
| Large suppliers | $43,750.00 | 25 | $1,093,750.00 | ||
50 entrepreneurs who are mostly young have sold around 18 Million US dollar worth of stock lot garments in 2016 according to the survey.
Catering to the untraditional market:
Textile leaders and experts emphasis on penetrating unexplored potential markets for the country’s readymade garments (RMG) products in United Arab Emirates, Singapore, Brazil, Mexico, Hong Kong, South Korea, Japan, Australia, South Africa, Malaysia etc. Currently more than 80 per cent of apparel export sourced to USA and EU, so the experts pointed out that these countries could be new potential destinations for Bangladesh’s apparel products if it be able to diversify products with quality, low production costs matching with the taste of consumers of these nations. It has been found that the main customers of the branded surplus garments are mainly from the countries mentioned above, that means Bangladeshi made garments are being sold to those countries in significant numbers. But most of those stock lot shipments may not be reflected rightly in the export basket.
Quality aspects of stock lot shipments:
Quality inspection is an important issue in RMG sector. Quality inspector ensures the right quality of a garment export order, whether this order is ready for shipping or not. Quality inspection of garments or fabrics can be done by maintaining four systems. Like 4-point system, 10-point system, Granville “78″ system & Dallas system but the surplus buyer doesn’t bother about the quality issues. They only maintain the physical inspection like measurements, in-side and out-side inspection of a garments. It may pose bad image of Bangladesh RMG in the international markets.
Risk for top brands:
This types of low quality products sold with the labels of top brands poses risk for them in the international market. It has been found that some of the sellers of stock lot are basically not always selling RMG left outs. They sometimes produce garments and putting top brands labels unauthorized. It has been found that such companies are copying H&M, Zara, s’olive, spirit, jack and jones etc. master copy products and they are using their main label, size label, care label etc. And these goods are being sold and exported as stock lot in some way. These products are not 100% physical and chemical tested so chemical hazards and toxic substances may pose a wide range of health hazards (such as irritation, sensitization, and carcinogenicity) and physical hazards.
Stock lot sellers are not getting cash incentives:
The factory or the stock lot sellers are not getting cash incentive for such sales even though those products could be eligible for getting that. Under the cash incentive scheme, the exporters are receiving 3 to 5 percent cash incentive for exporting to the different destinations. One of the commercial manager of Green Life Knittex Ltd Mr.Jewel said, “we couldn’t get any cash incentive from the government if we sale the goods as stock lots. Normally we get 4% cash incentive for every shipment.”
Conclusions:
A proper database and registration system could be developed for Stock lots business. An association for stock lot businessmen could be formed for better organization and management of the business. It should be ensured that this business do not defame Bangladesh’s RMG sector
References:
- http://www.tradingeconomics.com/bangladesh/unemployment-rate/forecast
- http://www.bgmea.com.bd/home/media/Time_to_explore_new_markets_for_RMG
- http://www.eiu.com/industry/article/1223914506/clothing-the-world/2016-02-04
- http://www.clickittefaq.com/rmg-sector-suffers-20mn-loss-dec13/
- http://www.garmentsmerchandising.com/flow-chart-of-quality-inspection-system-in-garment-sector/
- https://www.google.com.bd/search?sclient=psy-ab&client=safari&channel=mac_bm&biw=1067&bih=715&noj=1&q=gdp+of+bangladesh+2016&oq=GDP+&gs_l=serp.1.1.0l10.41896.41896.1.44522.1.1.0.0.0.0.111.111.0j1.1.0….0…1c.1.64.serp..0.1.110.hn3gmeyzzS4
