Are buyers paying the price for producing cheap?

IN_DEPTH_ In connection with the recent disasters in garment factories in Pakistan, Bangladesh and other sourcing countries, many international brands and retailers have been in the news for producing in the factories involved. Their strategies for

dealing with the situation (a potential PR nightmare) have been as diverse as the brands themselves. Whereas some chose not to react at all, others have acknowledged their involvement, with a growing number even pledging their support or undertaking improvement measures of their own. This next installment in our sourcing series takes a look at the buyers’ side.

One

measure that comes to mind is the Accord on Fire and Building Safety in Bangladesh that 30+ mainly European brands and retailers have signed till date. Those companies are: H&M, Inditex, C&A, PVH, Tchibo, Tesco, Marks & Spencer, Primark, El Corte Inglés, jbc, Mango, Carrefour, KiK, Helly Hansen, G-Star, Aldi, New Look, Mothercare, Loblaws, Sainsbury’s, Benetton, N Brown Group, Stockmann, WE Europe, Esprit, Rewe, Next, Lidl, Hess Natur, Switcher, A&F.

Note the absence of US brands and retailers like Walmart, Gap and others that are hesitant to sign because of legal risks; Japanese fashion house Fast Retailing so far hasn’t signed either but is active with initiatives of their own like a chain of Grameen-Uniqlo stores across Bangladesh and a one million dollar donation to the Asian University for Women and a project to support girls' soccer to empower the next generation of Bangladeshi women.

Big brands have big problems

Clearly, the focus is currently on the big names as the textile and garment industry is highly concentrated: the 50 largest companies account for about 65 percent of revenue. Their actions, be they positive or negative, speak loudly because they are so visible. Their competitive advantage in terms of selection, purchasing, distribution and marketing is also a drawback as the pressure is high, changes need to be approved by various instances and implementation may take a while.

So let’s think about the remaining 35 percent of revenue for a while. What about the hundreds if not thousands of small and medium-size retailers and brands worldwide that are not in the limelight? How do they deal with the current crisis? And what kind of unique solutions have they eked out for themselves? Size can be an advantage here as small stores and brands offer unique or specialized merchandise, often targeting a specific demographic or local market and know their customers well. Plus, they are often more flexible when it comes to decision making and initiating change.

Proud to make in China

UK-luxury babywear fashion label Bonnie Baby, founded in 2005, is one such company. All baby and children’s clothes are designed in Britain and manufactured in China – in safe factories under good conditions. “We make in China, and have always done so, and are proud to do so as we have got to know our factories well,” said founder Tracey Samuel in an email to FashionUnited. Knowing your business partners and suppliers is key as this can establish quickly if they simply pretend to care about worker safety and production standards to get an order or if they really adhere to legal requirements.

“China has set in place good minimum wage and health and safety laws that have quite rightly forced up the prices, (recent minimum wage increases of 25 percent). I now have the satisfaction of knowing all my garments are made in a good factory with good working conditions and each worker is paid a fair working wage,” adds Samuel.

Instead of rejoicing, other international brands have looked at costs only and moved out of China as it became too expensive. Bangladesh with the lowest minimum wage at 38 dollars has been the choice for many. Now, they have to deal with the consequences.

But even for Samuel, the story doesn’t end there. It is the consumers that need to be convinced too – first of all that 'made in China’ does not automatically stand for poor quality and unsafe working conditions and that quality and safety has its price. "We spend a lot of time educating our customers about the benefits of ‘made in China’. … I just have to convince the British public that they should pay more for this”, says Samuel. The good news is that consumers are becoming more conscious and do inquire with brands directly: “Since the Bangladesh disaster, we have seen many more of our customers asking about the origins of our products”, confirms Samuel.

We will look at what suppliers would like buyers to do to in terms of safety standards and working conditions in our next installment in this series Tuesday. In the meantime, do send us your feedback at news@fashionunited.com.

Simone Preuss

Image: Garment labels / Keith Williamson