5 minute read

The fashion industry VS consumers’ attitudes

The fashion industry clashes with consumers’ attitudes

Supply chains have been trying to eradicate modern slavery and poor workplace practices for decades. Usually we hear news about illegal practices from developing countries but they are everywhere. The latest developments around a facility in Lescerter raise questions how logistics leaders could win the battle against it.

‘With pressure from value retailers looking for margins in very low priced products, it is inevitable that some factories or other supply chain operations will resort to limit workplace rights, despite what is expected of them. Questions are often asked from places such as Bangladesh and recently even Leicester in the UK, where factories are accused of being dangerous either due to poor safety management or indeed poor Covid-19 management,’ says Nick Fox, Head of Logistics - Europe at Theory.

Production Managers will have to resolve a conflict between margin and safety and workers’ rights. Managers should not turn their backs on what is going on, if a price is too good to be true, then questions need to be asked. Either a factory has a fantastic piece of new technology or the buyer needs to dig deeper. With logistics it is the same, a warehouse operations variable cost per unit is not that hard to work out, even in a developing country.

According to Fox a deterioration of workers’ rights could be expected because of the financial problems, brought by the coronavirus. However, a more likely scenario is for the rights in law to stay the same but implementation may well be different. ‘To employ people in UK factories will be at least six times more expensive than in some Asian countries if they pay the minimum wage,’ Fox continues.

Challenges ahead

Covid related redundancies are already fact in the fashion industry. ‘Most brands I know have tried to soldier on but we are seeing cracks appear. Zara and H&M have announced big redundancies, and many others will follow suit. There will inevitably be

rationalization in what was, even before Covid, a heavily over supplied marketplace,’ says Fox.

High end and midrange brands are not sure where to position themselves with the way the fashion industry is restructuring. On the other hand, brands at the low end with no online presence are also being challenged. If they choose to move online they will have to deal with an enormous amount of reverse logistics which will eat out the thin margins they have. Fashion businesses constantly need to become more efficient. One of the main cost issues they have is high levels of overheads as the sector does not employ new technology well in its supply chain. Investment should have been made to take cost out of supply chains over the last few years, but if new technology has not been adopted then brands with high overheads will start to suffer. The other problem for the industry is the way stock moves around. Some of it is being sold on full price, others discounted or goes to discount brands. A lot is still unsold. The market is becoming more polarized between high end brands who may need to make smaller volumes profitable and mass ...

About

Nothing beats the practice of seeing things with your own eyes. Managers need to have an actual idea of what is happening with their supply chains. It is difficult at the moment, but factory or warehouse visits are a must, even if travel is currently curtailed. And walking about means looking at the detail and lifting the covers. You need to look your providers in the eye and discuss how their business really functions.

market brands who need to find margin in a very competitive environment.

Redundancies will probably be inevitable, and those that survive will be the skilled managers and operators who can embrace technology to take a business forward. This technology knowledge is important at all levels nowadays. For example skilled truck drivers, warehouse staff who know how to work with the demands of big customers and tech-savvy supervisors will always be in

demand. All levels will need to upskill.

Ethical investors

The idea of ethical investing has been gaining momentum during the last couple of years. Companies have to consider how

their actions will be perceived by the investors and what values they share. ‘There is a thin line between what is ethical and

what not,’ says Fox.

“Consumers are slowly educating themselves how their choices affect the industry and the planet.”
“If a price is too good to be true, then questions need to be asked.”

The low cost retailers are focused primarily on their margins which means they have to push for the lowest cost possible. Inevitably this leads to the temptation to sacrifice standards.

The other side of the arguments goes to what consumers’ attitudes are. Ethical investing will mean higher costs and Fox questions how many people would be willing to pay more for clothes. ‘People are buying T-shirts to throw away and sooner or later we have to start asking questions,’ Fox believes. Although the society might support tougher measures, once they are implemented prices could go up and that could lead to protests, for example the Yellow Vests in France. The expert believes that attitudes will eventually change. Nick Fox, Head of Logistics - Europe at Theory

Consumers are slowly educating themselves how their choices affect the industry and the Planet.

Market differences

Different markets have responded differently to the lockdown. China has seen a good bounce back and retailers there are very happy with the situation. Japan, another major Asian market, has also recorded good post-lockdown sales. In Europe and the UK things are also slowly going up. The USA is the market that is not performing very well.✷

Brexit barriers

The UK government is trying to organise companies to prepare for Brexit but according to Fox smaller companies see the task as too hard. He expects to see delays in the short term but in the medium the industry will slowly adjust to the new rules and documents. ‘I might be optimistic but I do not see how we can have tariff barriers between the EU and the UK,’ Fox says. The UK is getting itself ready for a

14

no-deal Brexit but because of the importance of the market to the EU both sides would rather have an agreement.