"As I am sure you are aware," read the e-mail, "the impact on retail will be vast." It was only then, says Mr Mostafiz Uddin, boss of Bangladeshi clothes manufacturer Denim Expert, that it fully dawned on him just how "vast" the coronavirus was going to be for his business and his 2,000 employees, who stitch jeans for European high-street brands.
The note, from British fast fashion retailer Peacocks, landed in Mr Uddin's inbox on March 17 as several European countries and US states were entering lockdown. It explained that Peacocks would no longer be paying Denim Expert for any of the clothes it had ordered, including "stock already handed over".
With shoppers forced to stay indoors, demand for new clothes has collapsed. Although some retailers are still operating online, revenue streams for many of the world's largest companies have been wiped out, with rent and wages eating into cash supplies and stock piling up in warehouses.
McKinsey estimates that up to a third of global fashion players, such as brands and department stores, will not survive the crisis.
And the impact is being felt all along the US$2.5 trillion (S$3.6 trillion) industry's complex supply chains, hitting places where companies and employees cannot always access government-funded emergency support. Shuttered stores on London's Oxford Street very quickly translate into closed factories in Bangladesh and Vietnam and stockpiles at cotton farms in Central India.
The damage caused by the lockdowns in markets such as the United Kingdom raises the question of whether those supply chains can be stitched back together again.
At a time when retailers would normally be placing orders for their Spring 2021 collections, they are instead trying to unpick existing contracts. Peacocks has refused to pay for over 43,000 pairs of jeans that Mr Uddin's employees in Chittagong have already sourced, sewn or shipped. Topshop owner Arcadia has told Denim Expert - whose clients include Zara owner Inditex as well as YM Inc of Canada - it will not pay for orders worth US$2.5 million.
Mr Uddin says his employees tried to contact both Peacocks and Arcadia, proposing compromises for clothes still in production that would have enabled him to mothball his factory, but neither retailer replied.
Arcadia, which has put roughly 90 per cent of its 16,000 employees in the UK on the government-funded furlough scheme, declined to comment. Peacocks initially said it considered its bill with Denim Expert to have been settled, explaining that it was not aware of an issue, and called the cancellations "an essential step as, otherwise, we would be taking delivery of stock that we simply could not sell". It did, however, later acknowledge that it had missed Denim Expert's repeated demands for payment. Mr Uddin says he has still not received any money.
Bangladesh is the second-largest exporter of garments in the world. And its clothing manufacturers have, since the crisis began, lost out on more than US$3 billion in payments for T-shirts, shoes and designer dresses already produced or sourced - a pipeline of months' worth of clothes - according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
The industry makes up the lion's share of the country's export revenues and employs more than four million people, the majority being women. Bangladesh industry groups estimate that over half of the workforce has already been laid off. Last month, workers demanding that employers continue to pay wages clashed with police, prompting the government to step in and cover 65 per cent of wages - a loan that manufacturers are expected to repay. Some factories have reopened, raising concerns that workers are being put at risk to help the country reboot its economy.
Elizabeth L. Cline, an author on labour rights and environmental practices in the fashion industry, argues that outsourcing has enabled retailers to distance themselves from risks in the supply chain. The system, she says, is designed to operate similarly to the business model of gig-economy companies such as Uber: "Let's pretend our essential workers are not our employees and leave risk with people least equipped to deal with it."
FAST FASHION JOB CUTS
Bangladesh, Vietnam and Sri Lanka are among the countries that have, in recent decades, become global production hubs for much of the rich world's clothing, accessories and footwear. Once concentrated in China, manufacturing has moved to South and South-east Asia as retailers tried to lower their wage bill.
This approach went hand in hand with fashion retailers encouraging more frequent consumption of cheaper goods - so-called fast fashion - to drive revenue, says Dr Patsy Perry, senior lecturer in fashion business at the University of Manchester. Many fast fashion brands take in new stock every week.
Retailers, she says, have always had the upper hand in their relationships with Asian manufacturers, with demands of retroactive discounts commonplace in the industry. "We hear a lot of talk about partnerships, but if a supplier says it cannot agree to certain terms, then the retailer can always go somewhere else," Dr Perry says.
Mr Uddin says he will not take legal action against clients that have left him with hefty bills. "If I sue, I will forever be known as the supplier that sued its client. I would likely be finished as a business," he says.
In Vietnam, South-east Asia's fastest-growing big economy before the pandemic, companies in the garment industry have already started "disappearing", says the Vietnam Textile and Apparel Association's acting general secretary Hoang Ngoc Anh.
The organisation estimated last month that if the lockdown lasted until next month, the country's textile and garment companies could lose more than US$500 million in revenues. However, the real figure will probably be much higher as official data does not capture the myriad of small suppliers likely to be severely affected by the collapse in demand. "Until now, about 400,000 to 600,000 workers have lost their jobs", Ms Anh says, out of the total 2.8 million workers in the sector. "This is an estimate, and we may be missing some smaller companies and micro enterprises."
Vietnam's largest apparel producer, Garment 10 Joint Stock Company, is still negotiating payment of clothes contracted before Covid-19 struck. Faced with plummeting demand, the company, which employs 12,000 workers in 18 factories across Vietnam, like some other producers in the country has pivoted to manufacturing something else: face masks and other highly sought after personal protective equipment. It recently signed a long-term agreement, says the company's deputy director-general Than Duc Viet, to deliver 400 million face masks to a global medical company based in Europe in the second half of this year.
Further along the supply chain, Mr Ganesh Nanote, a cotton farmer in Akola, a traditional cotton-growing area in India's Maharashtra state, is bracing himself for the impact of the coronavirus. "Already our income is low and we cannot cope with more losses," he says.
The cancellation of orders initially shaved almost a third off benchmark cotton prices since the start of the year and although they have rebounded slightly, the International Cotton Advisory Committee, a global trade body, is forecasting that the average price for the upcoming 2020-2021 crop year will fall to a 15-year low of 57 US cents a pound.
With India being a leading producer and exporter of raw cotton as well as textiles, the impact on its cotton supply chain is expected to be severe. Ms Smriti Irani, the country's Textiles Minister, appealed last month for international buyers not to cancel their orders. The plea went unheeded. A survey last month of 60 Indian garment factories by consultancy Rajesh Bheda showed that almost 40 per cent of orders were either partially or wholly axed.
Despite the torrid experience of bricks-and-mortar retailers in recent times, McKinsey last year labelled the global fashion industry one of the "rare economic success stories" of the past decade.
But behind that headline is a story of extreme consolidation. Last year, 97 per cent of profits in the industry were generated by just 20 companies, including Inditex, the world's largest clothing retailer, and sportswear retailer Nike - dominance that is only likely to be tightened in a recession, says Mr Achim Berg, who leads McKinsey's consulting work on fashion.
He says both fashion retailers and suppliers need to brace themselves for a "Darwinian shakeout".
H&M was one of the first global retailers to promise it would support manufacturers and the workers who make its clothes by paying for all ordered goods, including those still in production. "We want to ensure the future viability of the industry once the crisis has passed," H&M said in a statement. Others such as Inditex, Marks and Spencer and Tommy Hilfiger owner PVH Corp have since pledged support for their supply chains.
But some retailers have been accused of acting too slowly. Primark, the UK high street retailer, said early last month that it would pay garment workers affected by cancelled orders. But wages account for only about 15 per cent of the £256 million (S$442 million) worth of orders that Primark cancelled with Bangladeshi manufacturers, according to the BGMEA. The firm, which before the crisis had weekly sales worth about £650 million, has subsequently announced that it will pay for clothes received by mid-April - worth £370 million - to its global suppliers.
Ms Nazma Akter, a trade unionist and founder of Bangladeshi labour rights group Awaj Foundation, says "charity" such as the Primark fund will do little to help affected workers. "They are protecting themselves, saying 'we are taking responsibility'," Ms Akter says. "But our people are being beaten for protesting on the roads, asking for their money, and no one is with them."
Mr Berg defends retailers, arguing that some are simply not in a position to pay suppliers. "It's the biggest crisis for the fashion industry in over 100 years; the first reaction has been to not pay anybody, not suppliers nor landlords," he says. Primark's owner Associated British Foods, which has furloughed 68,000 workers across Europe, is one of several UK businesses that have refused to pay quarterly rent to landlords.
Supply chains will be different in the future, Mr Berg believes. His clients are already trying to shorten the time it takes for an ordered shirt to arrive in shops, boosting their flexibility in the face of demand shocks. "The last couple of weeks have shown the vulnerability of the supply chain... and accelerated the realisation that you need to be closer to the source," he says.
This chimes with those who have urged retailers to return production closer to home, but, says Ms Carry Somers, a designer and founder of industry campaign group Fashion Revolution, "the garment industry is a lifeline for millions of people and a way of raising people, women in particular, out of poverty".
Mr Paul Lister, head of ethical trade at Primark, does not expect the pandemic to have an impact on where the retailer manufactures its clothes in the future. "I think the system is very flexible," he says, explaining that the retailer works with more than 700 suppliers from Turkey to Cambodia.
Back in Chittagong, Mr Uddin's factory has been operating at about 30 per cent capacity since the first week of this month. But his warehouse is overflowing with jeans that he fears he will never be able to sell. And although he has received a few small orders, he says his fabric suppliers are refusing to deal with him until they receive payment for denim that he never managed to ship.
Unless retailers pay for clothes already in production, he says, he will have no business to save.
• Additional reporting by John Reed in Bangkok and Andrea Rodrigues in Mumbai
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