The fledging price points of readymade garments combined with buyers’ increasing pressure to reduce the prices further has become a matter of grave concern for garment manufacturers in Bangladesh. An Asia-Pacific Trade and Investment Report published in 2016 underlined that considering all exports, the prospect for RMG falls into the general mould of declining prices, which was aptly reflected in BGMEA’s rough estimation for the January-July period, during which the prices of apparel products have reportedly seen on an average 6% decline while their production cost increased by 17% to 18%.
“Buyers continuously pressurize us to cut down on costs. Even for repeat orders, they want 10-15% less price. Many a times we are in loss to do the programme, but to run the factory we are compelled to take orders…,” rues Md. Showkat Hossain, Director of Chittagong-based ANNEX Fashion Limited, which manufactures mainly woven bottoms, dresses in small quantities and some kidswear in the FOB range of US $ 3.50 to US $ 6.
The story is no different for Azmain Fashion Limited, another Chittagong-based small garment manufacturer (both knit and woven), which started operations in 2013 as a sub-contractor to subsequently graduate into exporting to clients in USA, Canada, Japan and Mexico through buying houses. “When we started the business, prices were decent but now prices have become very less, down by almost US $ 1 CM already,” reiterates Sofiul Alam (Keto), MD of the company.
While ANNEX is working with 5 lines with production capacity of 1,00,000 pieces per month, Azmain Fashion Limited has production capacity of 1,80,000 pieces a month.
This declining trend in price – as is highlighted by another study conducted by Mark Anner, Associate Professor at the Penn State University titled: ‘Prices and Development in the Global Apparel Industry: Bangladesh in Comparative Perspective’, which maintained that prices of men’s and boys’ cotton trousers exported to the US market declined by almost 40.89% in the past 14 years – coupled with pressure from the buyers to cut cost, is especially a big problem for small manufacturers who are struggling to stay relevant in today’s competitive environment.
Certified by BSCI and SEDEX, ANNEX was forced to shut down its Kadamtali-based unit by Alliance earlier on compliance grounds, necessitating a shift to a more compliant building from where it is operating currently. “Accord has visited us here and suggested some improvements to make… We have lost some orders before due to non-compliance,” maintains Hossain, who has now decided to come up with a fully-compliant unit, expected to be operational by 2019.
“In the new building, we will invest in automation. We are planning 15 lines over there with in-house washing facility. As of now, we don’t have a washing plant and outsource the same…,” states Hossain highlighting the steps undertaken by him to handle the challenges effectively and remain viable to the buyers. Hossain is also planning to implement IE in his new unit to improve productivity and cut cost.
Azmain, however, is not too keen on investing in compliance and has its own reasons! “At the moment, we are not looking to get Accord or Alliance accreditations,” adds Alam, citing example of a friend who despite having a compliant facility and catering to the same buyer as Azmain is getting no better price.
Lack of financial assistance from Government and financial institutions have further worsened things… The stumbling block to upgrade requires a lot of investment and the situation is particularly grim for the small operators who find it difficult to keep investing in the upkeep of the factory, new technology, employee engagement and welfare, and compliance at all levels.
However, players like ANNEX which has initiated remedial measures and invested in technology and IE is better positioned to tackle the existing challenges as it is the only way to go for in the garment export business but the same cannot be maintained about the other small and marginal players, many of which are not well-equipped to wither out the present challenges.