Apparel exporters expect a turnaround in demand for their products in western markets by mid-2023, and till then they want to book every order – even if it offers a break even price – in order to survive amid the present slowdown in business, according to industry insiders.
Entrepreneurs in the RMG sector have expressed the hope that the global geopolitical situation will improve by the second quarter of the next year, which will lead to a robust recovery in consumer spending in the key export destinations due to pent-up demand.
Besides, new markets may bring good news for them as rising political tensions between the US and China may help them grab more orders shifting from China, Vietnam, and Myanmar, they said.
According to the Export Promotion Bureau (EPB), Bangladesh's apparel exports fell 7.52% year-on-year this September, after 13 months of much-needed recovery from the pandemic shock and promising growth.
During the first quarter of the fiscal 2022-23, apparel shipments reached $10.27 billion, which is 13.41% higher compared to the corresponding period of the previous year.
Apparel exporters told The Business Standard that they could predict a slowdown in shipments by August this year as most factories were getting fewer work orders, which is being reflected in export earnings.
They fear that this untoward trend might continue till April-May next year.
Sparrow Group Managing Director Shovon Islam said the industry is experiencing a slowdown as retailers are stuck with too much inventory at their stores as demand has fallen due to a mild recession in the USA, Europe and the UK.
The war-driven economic downturn, as well as higher Interest rates, have affected clothing demand, he said, adding, "We are now facing up to 15-20% fewer orders for regular items and up to 5-10% for fashion items, which may continue for another six to seven months. If the geopolitical situation improves and retailer's inventory gets exhausted, we may see a rise in orders only from April-May of 2023," he told TBS.
Fazle Shamim Ehsan, vice president of Bangladesh Knitwear Manufacturer and Exporters Association (BKMEA) said, "Ups and downs are part of our business, and entrepreneurs have indigenous knowledge to cope with any adverse situation."
"We await geopolitical stability, which is needed for getting back consumers' confidence," he added.
Shams Mahmud, chairman of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Standing Committee on Foreign Mission Cells, said, "Cotton was touching historic highs at the end of last year, which caused many buyers to place advance orders. If we analyse the export data for the first half of 2022, we will see that the year-end-year growth rate reached record highs because of this reason.
"Then in February this year, with the outbreak of the Ukraine-Russia conflict, we saw the effects of rising inflation across the world and a dampening of consumer demand. This is the main reason for the current negative growth."
Rising tensions between the US and China along with the shifting of orders from China and Vietnam by buyers from the US, South Korea and Japan might bring about a positive change in the situation and the sector might get back to a positive growth trajectory by this December, he added.
Echoing Shams Mahmud, the business development head of a multinational buying house in Dhaka, on condition of anonymity, told TBS, "A number of Korean brands and retailers are coming to Bangladesh to open a sourcing office in Dhaka alongside sourcing through buying houses to strengthen their sourcing capacity."
A leading retailer is scheduled to open its office in Dhaka by next week, he said, adding, "We are also getting a good number of orders from the Korean market. Hopefully, our business volume in the market will double by next year."
Ashikur Rahman Tuhin, managing director of TAD Group and a former director of BGMEA, said, "There are no shortcuts to overcoming the falling trend of our exports, but we have to try to pick up orders as much as possible."
"Every exporter should book orders to run his or her units even if it is at break even cost. It is the only way for survival until business returns to a positive trend," he added.
He expressed the hope that these tough times will not last long as the freight cost is steady now, while cotton prices are also stable. Only the order situation is not favourable, but it may improve soon, he expected.