• Wednesday, Nov 25, 2020
  • Last Update : 12:24 am

Garment exporters dealt a fresh blow: brands offering lower prices

  • Published at 10:38 pm November 9th, 2020
New BGMEA building
The new headquarters of the Bangladesh Garment Manufacturers and Exporters Association in Uttara, Dhaka Syed Zakir Hossain/Dhaka Tribune

Between January and September, the prices of apparel goods exported from Bangladesh were 2.1 per cent lower than a year earlier

When it rains, it pours, it is often said. And the ongoing plight of the country’s garment exporters harks back to that adage.

Not only are they facing cancellations or deferrals of work orders or lower volumes, but the global retailers are also asking for discounted rates from Bangladesh’s garment factories, the second-largest apparel supplier to the world.  

Between January and September, the prices of apparel goods exported from Bangladesh were 2.1 per cent lower than a year earlier, according to the National Board Revenue data analysed by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the sector’s apex trade body.

In September alone, the prices of clothing goods fell by 5.2 per cent. 

Dhaka Tribune has obtained a copy of the data and spoke with 20 large garment exporters for the report and all said that buyers were quoting 8-10 per cent less than what they did before the pandemic took root.

They, however, declined to not go on record about the Western retailers’ opportunistic buying practice for fear of reprisal.

“Retailers always tended to bargain for lower prices -- it is a common practice. But during the pandemic, they went one step further,” said a garment exporter who ships to major American retailers. 

Previously, he did not take on work orders for a dozen shirts at less than $18 a unit. 

“But now I have to accept it at $16. This is a huge strain on me as I have to bear all my factory’s expenses regardless of what the buyers offer me,” he added.

Another exporter had a similar story to share.

Last year, the buyer had paid him $1.20 for a pair of cotton pyjamas. The same buyer is negotiating for $1.10 a pair now.

“This is the direct impact of the muted consumer demand in the Western world,” the other supplier said. 

And all are in the same boat.

“We have witnessed a sharp decline in prices,” said BGMEA President Rubana Huq. 

Brands are squeezing suppliers further to face the ongoing financial crunches created by the pandemic. 

“Unfortunately, this is leaving the supply side extremely vulnerable.”

Given the tight spot they are in, the garment exporters are accepting whatever price is being offered.

“They are trying to survive this tough period even at a loss hoping for a better future. But this is not sustainable and we call on responsible buying practices from brands,” she added. 

Between 2014 and 2018, the prices of apparel products shipped from Bangladesh to the EU declined 3.6 per cent and to the US about 7 per cent, according to data from the BGMEA.

Between March and October, garment shipments, which bring home more than 84 per cent of the export earnings, raked in $16.5 billion, down about 23 per cent year-on-year, according to data from the Export Promotion Bureau.

And the direct impact of this has been that the sector let go of 70,000 workers.

Now the price cuts are posing a fresh risk to the sector’s 4 million-odd mostly female workers’ livelihood.

“With fewer work orders than capacity, the manufacturers are struggling to run their factories as it is very tough to bear the expenses of wages and other costs,” said Abdus Salam Murshedy, managing director of Envoy Textiles.

In the present context, lowering the prices by brands will be a big blow for the manufacturers and this will ultimately impact employment, said Salam, also a former president of the BGMEA. 

When a manufacturer cannot bear the expenses, then he or she will go for cost cutting by reducing his/her employee count. 

“So, it is an earnest call to our partners not to reduce the prices amid the pandemic and behave ethically for the sake of millions of workers, mostly women,” Murshedy added. 

Total exports fell as the demand decreased but the capacity remains the same, so the buyers will take the advantage of the situation and cut prices, said SM Khaled, managing director of Snowtex Group, another major exporter.

As per the law, it is mandatory for a manufacturer to increase the wages by 5 per cent every year, while the cost of utility also goes up, Khaled said.

“We are enhancing efficiency by adopting the latest machinery but still we can’t keep up with the buyers. The buyers should behave ethically in setting prices of products especially amid a pandemic,” he added.

However, the economists called for an improved business environment to reduce the cost of doing business. 

“In the present context, both the manufacturers and the retailers are in trouble,” said Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue. 

So, the government has to focus on reducing the cost and time doing business by improving the port capacity and the other facilities.

On the other hand, Bangladesh needs to increase the capacity of its backward linkage industry, especially in fabrics production, he said, while advising the garment sector entrepreneurs to introduce production engineering to improve efficiency and minimise costs, he added.  

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