Most important difference between survivors & losers…- CEO, Clothesource

25 Nov '08

6 min read

The current crisis is showing just how easily poorly-prepared businesses can be knocked over. And the past two decades' boom saw the development of very, very many weak businesses – raw material suppliers, manufacturers, brands, retailers. For buyers right now, it's getting more and more important to deal with the risk that a supplier might keel over. For sellers, not getting paid, or getting paid late, is now often a bigger risk than not getting the business.”

To another question on how he apprehends the apparel industry in 2009 he categorically said, “No one can predict the scale of the downturn in the west apart from anything else, we don't even know what stimulus packages governments are going to apply. But with sales to the west likely to keep on dropping slightly, western buyers pushing for lower prices, and currencies unstable, we're going to see a lot more exporting-country businesses go under, while total demand for clothes stays roughly stable. That's going to mean huge consolidation, with financially strong businesses snapping up a lot of weaklings.

Coming towards the end of the interview we asked on whether he foresees any major shifting of business from countries during or post this crisis, to which he eloquently and expansively replied “As far as retail is concerned, the world's clothes will be predominantly bought in the west (including Japan) and China for at least the next decade. China's extraordinary retail boom (apparel sales up 25% this year so far) might go on another year. But Russia's retail boom will go into reverse, and no other emerging market will come anywhere near the size of the US, German, Japanese, UK, French, Italian or Spanish markets. One day, most clothes are going to be bought by Asians: but we're a good decade or two away from that.

As for manufacturing: tough to predict, since a lot depends on the health of the buying countries, which are only now launching their economic stimulus programmes. Among exporting countries, China and Malaysia are the only ones to have committed to serious industry support programmes so far. In the next week alone, India and Turkey have said they'll announce their packages – but who knows what'll come out in the next month? Who knows how long the euro will remain devalued by 20% against the RMB, and the pound 40% cheaper against it?

But one thing is certain that buyers will shift to places with a concrete business advantage. 'China's now uncompetitive' myth is ancient history – so China's going to get share back, at least of sales to the US. Countries near the point of sale can get business back, if they can manage their costs, as buyers want shorter and shorter lead times. And Vietnam and Bangladesh cost stories aren't going to go away. Of the others: it's a lot easier to predict the losers – like Sri Lanka and Uzbekistan – than the winners.

To end the interview we asked him the most important question in the minds of apparel manufacturers and retailers as to his advice to apparel companies to tackle the crisis. He had three major points of advice for all...

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