There seems to be no respite from the declining work orders from global buyers for the Bangladesh readymade garment manufacturing sector.
According to the latest available reports that cited data collated by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), garment exporters have witnessed a sharp decline in new orders, as nearly 62 per cent orders shrank between the March and May period due to slower demands in export destinations and supply chain disruption caused by the COVID-19 pandemic.
According to the country’s apex garment makers’ body, the number of fresh orders dropped to 172 in March-May period, which was 454 in the same period last year. Meanwhile, during the July-May period of the current fiscal year, apparel exporters raked in US $ 25.70 billion in earnings, which is down by 19 per cent as against US $ 31.73 billion in the same period of last year. On the other hand, global retailers so far have cancelled work orders totalling to around US $ 3.15 billion.
As per the data, in March, apparel manufacturers who are members of the BGMEA received 87 work orders, which were 138 last year. While in April and May, they received 8 and 77 work orders, which were 136 and 180 respectively in the corresponding periods of 2019.
“COVID-19 pandemic has cast a devastating impact on the global fashion industry. Sales of clothing items fell sharply as global outlets are closed due to the lockdown,” maintained BGMEA Senior Vice President Faisal Samad, adding, “As the second largest exporter of apparels, Bangladesh faced the worst impact of COVID-19.”
Even in June, the flow of new work orders has not shown any significant improvement! New orders are coming in, but the volume is 40-45 per cent less than that received in the same period last year, claimed BGMEA President Dr. Rubana Huq who thinks despite some cancelled orders being reinstated (US $ 3.15 billion by some accounts), the readymade garment manufacturing sector of Bangladesh may have to incur losses to the tune of US $ 5 billion over all.
What’s even more concerning is that many buyers are allegedly demanding significant discounts from suppliers, while many are asking for extended deferred payment terms – 180 to 220 days – despite initially agreeing to pay up within 90 days.
The BGMEA President also does not foresee a turnaround anytime soon, as she thinks the coronavirus-induced slowdown would continue till the year-end.
The retail market is yet to rebound, as such, garment exports in the next few months could fall by 30-40 per cent, the BGMEA President expressed apprehensions.
So, by when can the industry expect to get decent work orders?
“Brands and retailers in the major export destinations of Europe and the USA are coming back to business and I am hopeful in the next 5-6 months, business will start coming to Bangladesh,” Md. Fazlul Hoque, Managing Director of Plummy Fashions Limited, told Apparel Resources.
However, a major concern for garment manufacturers would be on finding out ways to keep the show going, till things, slowly but steadily, come back to normal again.
In terms of market, Fazlul felt, Europe stands a better chance to rebound earlier than the USA considering the fact that COVID-19 had impacted Europe earlier than America. And many countries in Europe have already opened up their economies and business after prolonged shutdowns to control the spread of the epidemic, while the USA, though open, is still grappling with the pandemic.
However, on the positive side, retail landscape in the USA is now showing signs of rebound.
If in March, the US retail sales fell by 8.3 per cent, in April it was a worrying 14.7 per cent before making good amends in May when retail sales went up by as much as 17.7 per cent (US $ 485.5 billion) from what it was in April. Economists had expected a rebound from April, when widespread business closures drove retail sales to their lowest level since 2013, though the gain was greater than some had expected. After more than a month of quarantine, May brought a tentative restart of bricks-and-mortar retailing across most of the country, with major chains like Macy’s and Gap reopening hundreds of stores.
As per Statista, the apparel store sales saw the biggest surge with 188 per cent growth in May over April. Though apparel store sales were down by 63 per cent compared to May 2019, yet 188 per cent jump is extraordinary. The report by Statista also shows that while the quick bounce back in consumer spending is positive and encouraging, spending levels are still much below the pre-pandemic levels.
Experts believe that retail sales in the US need to rise by another 9 per cent if it has to reach the pre-COVID-19 position. It is pertinent to mention here that independent and specialty retailers have taken the maximum brunt of the lockdown, while the bigwigs have walked away more or less unscathed.
Sales at non-store retailers including the likes of Amazon too saw a growth of 9 per cent in May. According to Statista, while Walmart is expected to record US $ 527.8 billion in sales in 2020, Amazon stands at distant second with expected sales of US $ 268.2 billion. Costco could end up taking the third spot with estimated sales figures of US $ 156.6 billion.
May has definitely brought something good for the US retailers, as it could just be a beginning of a slow and long recovery. But as some experts believe it could be a pent-up demand unleashed in one single month, and therefore, one has to wait and watch the developments over the course of next few months.
Meanwhile, Bangladesh Commerce Minister Tipu Munshi, participating in a webinar titled ‘Beyond the Pandemic’ recently, expressed hopes that the struggling RMG sector could hope for turnaround soon. Expecting more export orders in the coming days, the Commerce Minister said, “As the buyer countries are gradually resuming their activities, I hope we will get more orders from them soon. If the situation keeps improving within the next 2 months, we will have a positive situation that will help recover from the crisis.”
Citing buyer countries cannot change sourcing destinations overnight, the Commerce Minister said, “As we produce medium quality products, the demand of these qualities will always remain high. But high-quality product producer may face order crisis.” He further added that a good number of foreign companies are shifting their investments and orders from China, and Bangladesh already has a positive trend and is also getting prepared to get some of these opportunities.
“This will help us get a good number of export orders in the coming days,” the Commerce Minister underlined while adding that to facilitate the RMG sector, the Government in the proposed budget for the fiscal year 2020-21, said, the RMG sector will enjoy 1 per cent additional export incentive besides the other existing facilities.
However, in an immediate post-budget reaction, BGMEA has urged the Government to keep the source tax unchanged at 0.25 per cent for another 5 years besides other demands. Meanwhile, economic analysts said the garment sector needs to survive anyway in this crisis period, otherwise the social and economic structure could collapse. They also maintained that a lot of linkage industries involved with the garment sector are facing hardships, and if these industries close down, employment and the economy will face a serious threat.
Considering the views expressed by the industry insiders, business leaders and economists while also keeping in mind the re-emergence of the retail sector, especially in Europe and the USA, after long-drawn battle with coronavirus, which is continuing still, Bangladesh seemed poised to make gains from apparel exports in the coming days. However, the biggest concern of the industry currently is to keep afloat till business and work orders make a comeback again.