The pandemic-induced lockdown comes back to Europe to haunt one and all!
The lockdown ghost seems to have returned. Just when the fashion and apparel retail world was struggling to come out of lockdown blues, another lockdown has hit Europe now – enough to send shivers down the spine of the industry.
First it was France, which went into lockdown on 30 October, followed by Germany which entered into ‘lockdown light’ from 2 November. If all these weren’t enough, England has also gone into a 4-week lockdown from 5 November. Italy, Sweden and Belgium too have imposed strict restrictions till the end of November. To make matters worse, the ghost of lockdown has returned at a time when people were slowly beating the pandemic blues to come out and shop for Black Friday and Christmas.
In one of our earlier stories on consumer spending on Christmas this year, we had mentioned the wariness amongst the consumers to shop during the festive season. While 47 per cent Indians and 40 per cent Americans said they would spend less on this year’s Christmas, 49 per cent of UK consumers said that have reduced their monthly expenditure and have shifted their investment from non-essential to essential purchases.
Read more of this at It’s COVID Christmas 2020!
This was when the second lockdown hadn’t happened and so one can very well imagine the agony the retailers are undergoing ever since most of the European countries have gone into another lockdown.
A final nail in the coffin for physical stores; but e-business too needs to be strategic
Let’s first accept it that the second lockdown is going to hit bricks-and-mortar stores – and this time it is going to be hit badly. Despite all debates and theories of how much the impact will be on physical stores, one cannot deny that bricks-and-mortar stores will no longer be a place to shop. It hasn’t still fully recovered from the first lockdown and now the second one is going to crush it massively. While the pandemic and the resulting lockdown have already hit bankrupt American retailers like JCPenney and Neiman Marcus, amongst others, the woes of many British bigwigs like Edinburg Woollen Mill (EWM), TM Lewin or M&Co too are also only going to get aggravated further.
Marks & Spencer (M&S), the British fashion retailer, has just witnessed its first-ever loss with its half-yearly apparel sales slumping all thanks to the first coronavirus lockdown. The retailer knows that there’s more pain to come with the advent of new lockdown. M&S saw a pre-tax loss of £87.6 million for the 6-month period that ended 26 September 2020. Apparels, in particular, lost over £600 million off its sales. That says it all! Steve Rowe, Chief Executive M&S, says “New restrictions in England have created ‘significant uncertainty’ and would impact the profitability of its apparel business over the Christmas period.”
Primark too has been vocal about it! It has said that it might lose as much as £375 million in sales during the fresh lockdown in England. Considering Primark doesn’t believe in trading online, it’s going to be even tougher for the retailer.
Also Read: Primark warns of £375 million loss amidst fresh lockdown closures
Talking about online sales, as it has been all through 2020, e-commerce will definitely continue to surge in this second coming of lockdown as well, but not every retailer can venture into e-commerce. It is not going to be easy. Retailers know that unless logistics works, e-commerce won’t work. The distribution centres have to be at strategic points to bring down shipping costs. Besides, if stores have less merchandise, it will result in less sales and more shipping costs. Apparel Resources had discussed this at length in one of its earlier stories.
Also Read: It’s not easy selling apparels digitally
The e-commerce apparel sales accounted for 38.6 per cent of total US apparel sales in 2019 and 100 per cent of the growth in retail apparel sales. According to Digital Commerce 360 estimates, ecommerce’s share of apparel sales has risen by nearly 10 percentage points in last 3 years, as online apparel sales accounted for 34.0 per cent of total US apparel sales in 2018 and 29.9 per cent in 2017. Notably, ecommerce has captured an even greater share of apparel sales throughout 2020 owing to the coronavirus pandemic.
However, it is important to state here that by whatever number the e-commerce sales go up in 2020, it will still be much less than the sales that apparel sector lost through bricks-and-mortar stores.
South Asia will be hit in a major way
While the apparel retailers continue to struggle amidst the new lockdown, it may also have deleterious impact on other countries that include the likes of India and Bangladesh. Several garment units in South Asia, in particular India and Bangladesh, have still not recovered from the first lockdown as a result of which lakhs of apparel workers had to be laid off. The continual fall in retail sales in big export markets like the US and Europe has already eaten away the richness of the garment industry in Asia by spiraling unemployment and economic crisis. Will there be another slump in international demand for their products? A second lockdown in Europe has now instilled fear in Asia.
The fear is more in countries where textile industry constitutes major share of all exports. In fact according to International Labour Organization (ILO), nearly 65 million people work (75 per cent of all textile workers across the globe) in the textile industry in China, Vietnam, Cambodia, Indonesia, Myanmar, Pakistan, Philippines, Sri Lanka – not to mention India and Bangladesh.
A worried India….
India, the 6th largest exporter in the world, is concerned and has big reasons for its concerns! It hasn’t fully recovered from the first lockdown and now the second one is worrying. Here, it is important to state that India’s apparel exports to Europe (the UK, France, Germany and Belgium) fell by as much as 30.23 per cent in January-August 2020 period from what it was during the same period last year. The country’s apparel export to the aforementioned 4 countries during January-August 2019 was US $ 141.03 million, while in January-August 2020 it was just US $ 98.39 million. That’s a fall of 30.23 per cent (see the below table)!
| India’s Apparel Exports to Germany, UK, France, Belgium in 2020 | |||
| Country/Category | Jan.-Aug ’19 | Jan.-Aug ’20 | % change |
| Value | Value | Qty | |
| Germany | |||
| Knitted | 401.04 | 286.95 | -28.45 |
| Woven | 344.47 | 234.26 | -31.99 |
| Total | 745.51 | 521.21 | -30.09 |
| UK | |||
| Knitted | 520.39 | 337.67 | -35.11 |
| Woven | 630.76 | 367.20 | -41.78 |
| Total | 1,151.15 | 704.87 | -38.77 |
| France | |||
| Knitted | 256.45 | 150.08 | -41.48 |
| Woven | 255.13 | 177.90 | -30.27 |
| Total | 511.6 | 328.0 | -35.89 |
| Belgium | |||
| Knitted | 70.17 | 59.16 | -15.69 |
| Woven | 70.86 | 39.23 | -44.64 |
| Total | 141.03 | 98.39 | -30.23 |
Notably, Europe accounts for nearly 20 per cent of India’s exports with Germany being one of the biggest markets. Sharad Kumar Saraf, President, Federation of Indian Export Organisations, substantiates “Indian exporters to Europe are a worried lot. The order may not be cancelled, but they certainly would be postponed. With Christmas and New Year coming up, a lot of exporters were looking to ship in the first week of November. But now we are staring at order postponements and keeping our fingers crossed.”
He added that the ongoing uncertainty is likely to hit India’s exports target for the year. Earlier, he expected India to reach at least last year’s export levels but now that seems difficult.
CARE Ratings Chief Economist Madan Sabnavis also says that the new lockdown is not good for world economy, but he believes India is in a much better situation today to handle the second pandemic wave.
Lalit Thukral, Chairman, Noida Apparel Export Cluster (NAEC), says “A sharp fall in domestic and export demand due to COVID-19, and lower profitability, are enough to give a major setback to the apparel industry. We saw some hope with fresh orders coming from European countries for Spring/Summer Collections 2021. However, with fresh lockdown in the UK, Italy, Spain, France and Germany – which have at least 40 per cent share in overall apparel exports worth over Rs. 50,000 crore from India – the Indian exporters have started sulking again as it will result in higher revenue loss.”
He had no qualms in distinctly stating that with the lockdown in these countries, the apparel exports’ revenue will certainly go down by 30 per cent in this fiscal (and as explained previously, the fall has been 30.23 per cent). “For the apparel exporters, the fall will be more because of tepid discretionary spending in these countries,” Lalit added.
Amidst this uncertainty, the apparel exporters are now exploring the domestic market to compensate the financial loss. Though it is not sure will it be enough!
Conforming to what Lalit said, Neeraj Prakash, owner of a garment export company in Noida, said “Now, there is a lot of uncertainty. Even the orders ready to be shipped are dumped in the customs office. If this scenario continues, then the future of Indian apparel sector is very bleak. He added Noida (a garment hub in Uttar Pradesh, India) alone is set to lose the export orders of Rs. 5,000 crore this year. The domestic demand is nothing more than a drop in the ocean for us.”
Going towards southern part of India, the condition of apparel makers and exporters in Tirupur – the knitwear hub of India – too is no different. After massively hit by the pandemic, Tirupur was gradually recovering with 10 per cent increase in apparel exports in September 2020, when the second lockdown happened. Substantiating on this, K Sanjay, who owns a manufacturing unit in Tirupur, said “Things are slowly falling back in place and it will be difficult if another lockdown is enforced.”
Adding to what Sanjay said, Senthil Kumar, another apparel manufacturer, said, “We are already facing labour shortage as almost 50 per cent of the migrant labourers are yet to return. If a second wave is reported in India, it will be difficult for us to manage things.”
However, the President of Tirupur Exporters’ Association, Raja Shanmugham is optimistic. He says “In the last 8 months, we all have learnt a bit on how to deal with the coronavirus. I don’t think Europe or other country will impose a complete lockdown again. So there won’t be supply chain disruption or cancellation of orders.” He believes the anti-China sentiment has created an opportunity for the Indian industry to capture more global orders, but exporters need to work on bettering the quality of their products in addition to consistently ensuring order fulfillment on time.
Bangladesh too is walking on tight rope….
In a survey conducted in June, it was distinctly highlighted that 77 per cent of workers in Bangladesh, the second largest exporter of readymade garments (RMG) after China, said they had eaten less than they should have because they could not afford to buy enough food. These are worrying signs!
And the worries escalated lately when garment exporters in Bangladesh claimed that buyers and retailers across the Europe have been asking them to delay shipments of ready orders – much enough to give sleepless nights to every apparel exporter in the country. Further on this, Dr. Rubana Huq, President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that after a decent increase in apparel exports in the months of August and September this year, October saw the exports go down by 5.85 per cent.
The BGMEA says that the country earned US $ 1.92 billion in export in the first 27 days of October this year, while the numbers were US $ 2.04 billion during the same period of the last fiscal year. There is now fear again among apparel exporters and workers – fear of no sales and no work.
Here one has to mention that today EU with over a 60 per cent share remains the largest market for Bangladesh textiles products followed by the US with 15 per cent share.
Kutubuddin Ahmed, Chairman, Envoy Textiles, says business will plunge into trouble if any more orders are cancelled or held up. What’s needed is complete Government support! Mohammed Hatem, the BKMEA Senior Vice-President, now feels the Government should continue to offer support to the garment sector as orders for the season are going to be hit.
While the ghost of pandemic-induced lockdown has returned to devour the retailers and brands all across Europe – and one never knows when it will return to the US – it’s started instilling a fear among Indian and Bangladeshi apparel exporters. This fear is here to stay for some time even if the pandemic recedes and lockdown ends. Till then one can only hope the pandemic disappears from the planet and the world returns back to its happier days – when shopping was all fun.
