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Supply Chain News: Apparel Retailers Dealing with Inventory Glut, Paring Back Spring Orders Dramatically


Many Global Apparel Factories in Bad Shape, as Prices for US Apparel Imports Fell Sharply in 2020

Feb, 10, 2021
SCDigest Editorial Staff

Some retailers, notably grocers, home improvement and electronics retailers , fared very well in the strange pandemic economy.

Supply Chain Digest Says...


The decline in apparel sales in 2019 led to lower prices from global clothing factories, as the law of supply and demand as usual kicked in.

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Apparel-related retailers though– not so much. Who needs new clothes in a work from home economy, with sweat pants and casual shirts seeming to dominate the scene?

US apparel imports fell 23.5% percent in 2020 to a value of $64.1 billion, down from $83.7 billion in 2019, the Commerce Department's Office of Textiles & Apparel reported Friday.

And that has left many retailers and brand companies still stuck with merchandise placed on shelves in 2020 – making it difficult to bring new spring items into stores, create a unvirtuous cycle that risks further reductions in sales.

"Some major retailers are still nursing last year's clothes, which would have been sold off in clearance sales in normal times," the Reuters news service reported this week.

As a example, UK retailer Primark told Reuters it was still had about $205 million in inventory of 2020 spring/summer stock, and nearly $275 million in unsold autumn/winter goods.

The consultants at McKinsey estimate that the value of unsold apparel in stores and distribution centers globally is somewhere in the range of $168-192 billion - more than twice normal levels.

So retailers are cutting back apparel orders hoping to clear out the old inventories they still have – and strategy likely required due to cash flow challenges.

In addition to cutting orders for new merchandise, retailers and brand companies are also asking for extended payment terms, says Hong Kong sourcing giant Li & Fung – certainly a sign of cash flow issues.

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Those reduced orders from retailers and brands in turn are having a major negative effect on global apparel makers. large and small.

Reuters reports that 50 apparel factories surveyed by the Bangladesh Garment Manufacturers and Exporters  Association said that on average they had received 30% fewer orders than usual for the Spring season.

"We are operating at 25% of capacity. I have some orders to run the factory till February. After that, I don't know what future holds for us. It's difficult to say how we will survive," Bangladesh apparel factory owner Shahidullah Azim told Reuters.

So is this the story for all of 2021? Maybe.

McKinsey forecasts a 15% sales drop in global apparel sales this year.

But Euromonitor predicts growth of 11%.

The decline in apparel sales in 2019 also led to lower prices from global clothing factories, as the law of supply and demand as usual kicked in.

The Just –Style magazine web sites recently analyzed data from the Office of Textiles & Apparel and found apparel items imported from China fell in price by 20% in 2020, and that clothing item import prices fell for nine of the ten largest apparel export countries to the US in 2020 versus 2019.

Anything to add to this stoy on apparel inventories? Let us know your thoughts at the Feedback section below.







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