COTTON USA AND COTTON AND TEXTILE INDUSTRY REPRESENTATIVES FROM AROUND THE WORLD DISCUSS THE IMPORTANT OUTCOMES, PACKED IN CONSUMABLE PORTIONS.
CONSUMERS – INFORMED AND DIGITAL
As per Cotton USA the clothing brand has to pay close attention to what customers think. For example, Paolo De Marco, vice president of the sportswear and contemporary brands coalition at VF International says, “Today’s customers have higher expectations. They are better informed than ever before and in return expect to receive a great deal of product information from the manufacturer on, for example, the supply chain or the chemicals used. This pose a considerable challenge.” At the same time, today’s customers are willing to spend a bit more on clothing–provided that it meets their requirements. “Price increases must always be justified with innovations,” added De Marco.
Kim Kitchings of Cotton Incorporated, whose Customer Comment Project evaluated over 300,000 customer comments on the websites of 25 clothing retailers, takes a similar view. One result: In 2011, when cotton prices were at a historic high, many customers feared that cotton would be replaced by alternative fibers. It was the Germans, Italians, Japanese, Chinese and Americans who had an especially critical attitude to such fibers. As a result, according to Cotton Incorporated, US consumers are willing to spend US$39 on a pair of jeans instead of the average today of US$30. They would be willing to spend US$16 instead of an average of US$12 for a cotton T-shirt.
Lianne van der Wijst, fashion and retailing expert at the marketing research institute GfK, has also identified a change among consumers: Advances in technology, tools and information has led to the emergence of a new type of customer who will be calling the shots in the next few years– the Xtreme Shopper. These consumers rely less and less on brics-and-mortar stores as the only way to shop and make buying decisions mostly with the help of digital devices and social networks: 60% of Xtreme shoppers say that their smartphone/tablet PC is their most important shopping tool.
The Xtreme shopper customer type is especially common in the APAC Region (east Asia, south Asia, Oceania), where every second consumer is part of this group. In the US, 26% of all shoppers are already considered as part of this category, while in the Netherlands Xtreme shoppers now account for 20% of total retail customers–with the proportion increasing.
PROCUREMENT – INVEST AND HARVEST THE RETURNS
A lot has changed in supply markets in the past few years. While the export of clothing from China grew by a solid 11% from 2012 to 2013, exports from Vietnam and Bangladesh rose substantially (by 19%)–unlike clothing exports from Indonesia (up 2%) or India (down 6%). Whereas in 2003 11% of US clothing imports came from Mexico, today it is only 5%, while by contrast 38% comes from China (2003: 12%), Vietnam 9% (2003: 4%) and Bangladesh 6% (2003: 3%). This shows that despite costlier production, China remains an extremely interesting country for sourcing, says Dr. John Cheh, CEO of the Esquel Group, producer of over 100 million cotton shirts a year in China, Malaysia, Mauritius, Sri Lanka and Vietnam. While it is true that in China there is now a comparatively high monthly minimum wage of US$254. (by comparison: in Indonesia it is US$203, in Vietnam US$129, in Cambodia US$100 and US$69 in Bangladesh), but wages account for only 25% of production costs–with the remainder attributable to raw materials, processing, operating expenses and administration. The Chinese yuan/renminbi is much more stable against the US dollar than for instance currencies in India, Bangladesh, Vietnam or Indonesia. Production costs could be reduced, according to Cheh, primarily by optimizing the supply chain. Through the use of standardized processes and the application of modern technologies and automated control mechanisms, water, energy and raw material consumption could be reduced– Cheh gave a few examples from his company. China is thus making advances in innovation and continuing to evolve its high tech capabilities.
But what about Bangladesh, which has recently gained a poor reputation as a supplier due to the tragic accidents of last year? Matin Chowdhury, owner of the Bangladesh-based Malek Spinning textile factory says, “The textile industry in Bangladesh has grown in response to demand, but far too rapidly. There was no time to expand the factories gradually. What we did right in Bangladesh: We delivered the goods to buyers at the right price, at the right level of quality and on time. What we did wrong: We ignored safety.” We all know what the result was: more than 1,100 fatalities due to the collapse of the Rana Plaza in Dhaka. Should all clothing companies respond by avoiding Bangladesh as a production site? Chowdhury asks people to consider this: “Before the tragedies, textile producers in Bangladesh were proud, but now they are shattered, with none of their former business partners willing to speak with them anymore.” There is consensus on this: Simply walking away from Bangladeshi textile factories won’t help people there. Garry Bell, vice president of corporate marketing of the major, vertically integrated Gildan clothing manufacturer explains his business credo: “We clothing manufacturers must invest in sustainability and safety in the textile supply chain.
Of course, something like that will cost a great deal of money at the beginning, but the investment will pay off in the long run, because extensive cost-savings can be achieved. Sustainability is a genuine driver of sales revenue and promotes risk minimization–otherwise you run the risk of hurting your brand.” Chowdhury confirms that the necessary know- how is not only coming from external investors but to an increasing degree from local textile producers as well: “Bangladesh continues to be interesting as a production site. Many entrepreneurs who made money while the country’s textile business were flourishing are reinvesting. And many second generation textile entrepreneurs have studied abroad so that we are in good hands!”
EIGHT SURPRISING FACTS ABOUT THE WORLD ECONOMY ACCORDING TO DR. PATRICK DIXON
If you believe Dr. Patrick Dixon, founder of the consulting company Global Change Ltd., which specializes in forecasting trends, the biggest problem with the economy is “institutional blindness.” He shared a few inspirational facts to give people a broader perspective:
- In 2015 over 40% of gross production internationally will be achieved in Asia.
- There are many countries in the world which which were not hit by the last “global financial crisis”–we are often blinded by an American/European perspective.
- 75% of US and UK wealth is in the hands of people over 65 years of age (mostly women).
- In many European countries, up to 70% of retail spending happens at fewer than eight companies.
- In 2014 worldwide e-commerce revenue (B2C) will reach €1.5 trillion.
- E-commerce accounts for 12% of overall UK retail sales revenue.
- In the future we will say: E-commerce really took off in 2050; before that it was just playing around.
- Out of all mobile payments, 70% take place in Africa, mainly in Kenya.
