After a downfall of two consecutive years, the year 2019 has witnessed a great comeback of the textile and apparel industry. The industry has strengthened the entire value chain, from fibre to fabric to apparel.
In 2020, the industry has to deal with the consequences of past events. The factors driving growth are an abundance of raw material, competitive manufacturing cost, growing e-commerce, rise in disposable income, and growth of conscious consumers.
Since recent years, the apparel and textile industry is going through a series of events affecting the economy in some or the other way. Below-listed events are some of the events reshaping the entire fashion industry globally. And the impacts can be seen in the coming years.
The most trending word of 2020 - "COVID-19" is impacting all the industry across the globe.
China - one of the most prominent players in the industry has a huge impact on the supply chain as China accounts for almost half of the material required to make clothes. Click to Tweet
Other players have also seen a downfall in supply chain and sales due to Coronavirus. The impact of COVID -19 is projected to last for long. Players are preparing for long term impact on social trends and behaviors. The effects of COVID-19 is going to last longer for all the big and small economies.
Watch a webinar to know on COVID-19: "The Superstorm In Global Supply Chain."
US-China Trade War
The US-China trade war is likely to have a long-term impact on the complex global apparel supply chain. The trade war between the two biggest economies is going to affect all the businesses caught in between. In recent decades, the global supply chain is getting more complex. The flow of goods and finances among far-reaching partners involves many trading partners.
According to a report by McKinsey, apparel brands and retailers should consider spreading out to other high-growth economies – India, Southeast Asia, Brazil, Russia, the UAE, and Saudi Arabia.
While structuring the supply chain, textile and apparel leaders must consider several tradeoffs – cost, labor, quality, and services.
The apparel and fashion industry is bracing itself for the effects of Brexit. The U. K's fashion industry didn't favor Brexit – "Fashion hates Brexit".
According to Richard Lim, Chief executives of analyst Retail Economics, the potential scenarios are:
Hard Brexit – where the existing trade deal will disappear. And designers, retailers, and manufacturers would have to pay to trade with the EU. They might have to pay clothing and footwear tariffs of about 11 percent.
Free trade agreement – The free trade agreement with some trade conditions attached to it, might make it difficult for a business to plan.
And the last one, where the UK could remain part of a customs union, but the path has already been rejected by Theresa May.
Effects of Brexit:
Manufacturers will face reams of paperwork for each part.
Technical barriers to trade.
Impact on the UK fashion industry
UK will lose tariff-free access to the world's largest economy and be subjected to WTO trade rules. Around 74 percent of all apparel and textile from the UK are exported to the EU.
The other worrisome aspect is the queues at the border and delays in shipments caused by additional customers' duties.
The talent of the fashion industry will get drained. The impending deal or no deal has left fashion breadwinners unsettled. They are choosing safer and better job opportunities.
A great fall in students enrolling for art and designing courses. Colleges outside London see an average of 7 percent of the students enrolled in art and design courses coming from the EU.
According to UKFT, around 80 fashion tariff lines would be levied with import duties between 8-12 percent, and the government will closely monitor the effects on the UK economy for a period of 12 months. In 'no deal' case, exports to the EU will attract tariffs between 6-12 percent.
Know More On: Impact of Brexit On Global Textile Industry
WTO & Tariff Prefrences
World trade organization effects the apparel and fashion industry positively. According to World Trade Statistical Review 2019, the current dollar value of world textiles and apparel exports totaled $315 billion and $505 billion in 2018, respectively, an increase of 6.4 percent and 11.1 percent from a year earlier. This was the fastest growth of the world textile and apparel trade observed by WTO since 2012.
According to WTO, World GDP growth is expected to decline from 2.9 percent in 2018 to 2.6 percent in both 2019 and 2020.
The WTO agreements contain provisions that give developing countries special rights. Under which they get tariff preferences in accordance with the Generalized System of Preferences (GSP).
Global Economics and Business Scenario
The global economy is at a crossroads; the apparel and fashion industry saw some major changes. Manufacturers are shifting to developing countries from developed countries to reduce labor costs.
Though even the developing countries are facing the greatest challenges, despite cheap labor cost due to the short production life-cycle, high volatile, low predictability, high level of an impulse purchase and the quick market response.
To control the production cost, the apparel industries in developing countries are rather focusing on the sourcing of cheaper raw materials and minimizing delivery cost than labor productivity due to the availability of cheap labor.
The global apparel market is forecast to reach $1,004.6 billion in value by 2021, an increase of 19.2 percent since 2016. The compound annual growth rate of the market in the period 2015-20 is predicted to be 3.6 percent.
What to Expect in 2020? Industry Outlook
The year 2019 has witnessed significant developments that affected the apparel and textile industry. A few names of major events include – the US-China trade war, Brexit, WTO hearing, shift in sourcing strategy, rising demand for sustainability, and economic slowdown.
In 2020, along with the impact of 2019's events, a few more events are joining the list. The biggest of all is COVID-19.
To know how past events of 2019 are impacting the industry in 2020: Watch Our Previous Webinar.