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DHAKA – Bangladeshi garment suppliers are still being driven down on price by apparel brands and retailers – but some brands take a more enlightened approach than others. Via a Bangladeshi intermediary, Apparel Insider reached out to a number of ready-made garment manufacturers to conduct a timely piece of qualitative research in Bangladesh, the world’s second largest garment exporter. Our dispatch comes at a time when a new minimum wage has recently been agreed in the country’s garment sector which will unquestionably impact on FOB prices.

We talked to six garment manufacturers of varying sizes and all of which supply products to Western brands. For reasons of commercial sensitivity, all owners wished to retain their anonymity.

We asked about several issues, the first one being price. Is there still a downward pressure on unit cost? The answer to this question was fairly unanimous.

One owner told us: “[The situation on cost] is getting worse. One reason being too many factories accepting orders at lower price … or bargaining skills need to improve.

Another pointed out that, “my feeling is that the unit price is going down each and every season. On the other hand the price of all the materials and operation costs are going up.”

This is actually a real issue for all manufacturers. With raw materials costs notoriously unstable – cotton a prime example – manufacturers can often face a double-whammy if unit costs are also being driven down.

One manufacturer pointed out that “for basics there is always a price war.” This in itself offers a clue about the direction the Bangladeshi needs to take if it is to escape the race to the bottom – more specialisation, more added value, and more innovation equals greater bargaining power with brands.

We also addressed broader issues with manufacturers we spoke to, one question we asked being, will brands pay more for sustainably produced products? We received a mixed response here. One manufacturer told us: “Ideally they should pay. Maybe certain small brands will pay, but the bigger ones are not doing the right thing. Generally, the bigger company has a tall hierarchy system in the management. So as we have seen, the ones dealing with CSR issues are not the ones placing orders. The ones placing orders don’t really care much as it is not their responsibility.”

This is a comment which pretty much encapsulate the challenge the industry faces in getting buying teams and sustainability teams singing from the same hymn sheet. In larger brands, it may well be a case that the left arm does not always know what the right arm is doing – and that surely needs to change.

On this question, another mill told us: “Always they talk about this [sustainability] but never consider the cost of it.”

As ever, things do, indeed, come back to cost here. Another manufacturer suggested that, “when we talk about sustainability then both teams talk in the same language … but when as a manufacture we ask for increased cost to maintain sustainability then they do not allow us to increase the FOB price.”

We also asked manufacturers for some of their experiences – negative and positive – of dealing with brands. To start with the latter, there were several examples which illustrated the essentially unequal relationship between suppliers and brands. If ever there were a buyers’ market, this is it.

One manufacturer told us that designers often change styling, add trims or change the wash method of a garment but the buying team never “want to pay willingly [for these changes] … we have to push sever times. And finally, they ask us to absorb the additional cost or share it 50/50.”

Another told us: “One buyer for an order confirmed to me a quantity 80000pcs, but due to the Turkish lira’s devaluation and tax rule changes, they reduced this to 16000pcs and gave no compensation.”

Only in an industry where the buyer really is holding all the cards could they get away with such behaviour. The same factory owner put the case quite succinctly: “We stopped working with them. But there are hundreds more suppliers ready to fill our void so the buyer doesn’t ever get punished for their wrong doing.”

This is an extended extract from a longer feature which will appear in the next printed issue of Apparel Insider magazine. To subscribe, please click HERE

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