Uncertainty is the biggest challenge facing the apparel industry in recent days. The economic situation in Europe and the US, swings in commodity prices, labour shortages and rising costs, all add up to a worrying situation. In this challenging scenario branded apparel manufacturers have faced severe pressures from various sources over the last few years, including mass merchants, retail private label brands and agile vertical retailers. Each one threatens to further erode prices and margins while demanding faster sell-through as well as increased speed and flexibility. Pressures in the apparel industry are complex, multidimensional, and not easy to classify. However, based on the review of experiences shared by the peers in the industry, I have classified them in four categories:
- Market pressure
- Technological pressure
- Environmental pressure
- Social and legal pressure
In the apparel industry, fashions change at lightning speed, and new trends and consumer preferences emerge at the blink of an eye – today, even more than in the past. Apparel brand-owners are under pressure to formulate winning strategies to achieve a competitive price. They are in expectation to get their products from the design centre to the store faster than ever, and retailers must stock and sell those products immediately while consumer interest is at its highest – and before the next selling season begins.
Gross margins on apparel have dropped significantly in the past two years as a result of the global economic turmoil, as retailers have slashed prices to move merchandise. This has put renewed pressure on retailers to be more efficient with their labour allocation in order to recoup a few percentage points of margin lost by price-cutting.
When a product is out of stock and a customer comes in, that customer is highly likely to shop for the product in another store… perhaps unlikely to return again in the future to the original store for that product. It also means that the customer doesn’t buy additional apparel products and accessories, robbing the retailer of important add-on sales and profits. This is more critical than ever to apparel retailers since many have adopted defensive-inventory practices designed to keep only as much inventory in the store as is absolutely needed to avoid overstocks and markdown. This has put significant pressure on retailers to enhance supply chain efficiency by having real time visibility to merchandise levels in their stores and at distribution centres.
At a fundamental level, retailers are in business pressure to sell products that their customers want to buy, and they need to do everything possible to maximize sales. Having the right mix of products, maintaining adequate shelf availability, and keeping prices competitive are all key factors to their long-term success.
With an increased level of competition from low-cost manufacturers around the world, the apparel industry is under tremendous pressure to increase productivity, to improve performance, to improve production quality, and to advance the management systems.
Though the main considerations in the business pressure on apparel particularly in sourcing and manufacturing decisions are lower costs, high productivity, and better quality, however, faced with increasing labour costs, advanced technologies for garment manufacturing processes have been called upon to increase productivity and produce better quality goods, in high volume, in short time cycles, at lower costs. Thus, advanced technologies and conduciveness facing new challenges driven by the intense competition is critical for garment manufacturers to remain competitive and grow. Constant innovation and adoption of new technology become an essential element for competitive advantage in the global market because manufacturing units can maintain quick and flexible responses to market demand using the technologies.
Recent technological pressure in clothing manufacturing includes the development of robotics for the automation assembly line for garment making; high-speed sewing machines; new pressing and fusing techniques; computer-aided design; computer-aided manufacturing; and computer-aided marketing. These technologies can be used individually or in combination with other technologies to achieve the desired economies. Business pressure on top management is the commitment to technology which positively influences the technology adoption of the apparel industry.
Challenges and importance of a sustainable planet have been gained momentum to live a greener lifestyle. Apparel business has also felt the touch of it. At the garment production, the main pressure on the environment is the cutting losses, package materials and the use of accessories, such as buttons and zippers, which can contain heavy metals. Prevention of cutting losses by smart design and process control includes environmental savings of all chemicals used in processes such as sizing, de-sizing, scouring, bleaching, mercerisation, washing, dyeing, printing and finishing. A large amount of water is being used in such processing. When the clothes are used the chemicals can turn up in the water during washing or when clothes are dried after disposal of those chemicals will be released as well thereby creating pollution pressure on the environment.
Brand companies and retailers, especially multinational corporations, have become aware of the concerns of consumers and NGOs and aware that they can contribute to sustainable development as well. As a response to the international attention about Corporate Social Responsibility issues and consumer pressure, brands such as Nike, Adidas, Reebok, Levi’s, Gap and others developed codes of conduct designed to ensure that suppliers in which they had only a contractual relationship to produce goods complied with a basic standard of workplace practices. Many textiles production companies in Asia, Latin America and East and South Europe experience this and feel sandwiched between tight production orders and a diversity of different codes and standards on Corporate Social Responsibility to comply with. Emerging pressures of NGOs, trade unions and western consumers to make multinational buyers ensure basic human rights in supply factories and also there is a demand for adequate health and safety measures in those units. Pressures from multinational buying companies to change factory working conditions and social codes of conduct introduced by different buyers have become mandatory, with non-compliance resulting in the cancellation of orders. Growing awareness of workers’ collaboration with NGOs, worldwide activist campaign for workers’ rights in developing countries, and heightened media coverage are also responsible to encourage more pressures on apparel business in social and legal front.
The branded apparel industry is at a crossroads to face pressure from various corners. There are several new challenges and understanding the dynamics is important for the branded apparel industry to change and adapt, or otherwise lose relevance. Several leading companies have already begun to reshape the blueprint for success by implementing leading edge supply chain capabilities combined with a holistic business process that dramatically reduces cycle times, increases visibility across the entire value chain, enables quick response to changes at retail, and ultimately delivers satisfaction to the consumer, in the form of the right product, at the right place and time, at the right price, and in the right size and color. But overall industry success and survival depends on each branded manufacturer’s ability to radically change how business is done withstanding pressures from the market, technology, environment and social and legal standards.