Outlook 2013: Other issues to watch
Generally, 2013 is seen as being another challenging year for the apparel industry – although there is cautious optimism for an improved business environment. Issues such as compliance, sustainability and product safety are likely to come to the fore, and keep a close eye on trade talks to expand duty-free opportunities such as the Trans-Pacific Partnership (TPP).
Neil Saunders, managing director at retail analyst Conlumino:
In general, 2013 will be marginally better than 2012. Inflation and commodity prices have come down; disposable income is starting to rise (although only marginally, so consumers remain under pressure); and there has already been some rebalancing of the sector with a number of casualties in 2012, which has eased pressure on those still standing. However, that noted, the key thing is that relative to demand, there is still a lot of supply in the market and this means conditions remain intensely competitive.
Arguably, those waiting for the good times to resume will likely be disappointed. Current conditions are not just temporary, they are the 'new normal' for the fashion sector and are likely to be with us for many years to come.
Tom Nelson, managing director, VP global product procurement, VF Asia - part of the $9bn VF Corporation whose apparel and footwear brands Wrangler, Lee, The North Face and Timberland:
In the past decades we have worked independently as brands and retailers on almost every issue. In the future we must work together to make a positive difference for the world where we live and work. By working together we will be able to move towards a supply chain that provides much better working conditions for all of our employees and a much better environment. By working together we can change the attitude of "catch me if you can" to one of a willingness to improve.
We have seen these changes improve efficiencies, trust and goodwill. There is a thought this concept will drive cost up, but the opposite can happen. We need to join forces around things like compliance, sustainability and product safety. These are not proprietary concepts for our companies. I would encourage companies to get behind initiatives like GAFTI, BSCI, GSCP, Better Works, The HK AmCham Bangladesh initiative, or any others that bring us closer together. We can change the world by holding hands. Please don't stand on the sidelines. Get involved.
Mike Flanagan, CEO of apparel industry consultancy Clothesource:
Overall, better. The single most likely outcome is that there will be (a little) real growth in most major Western markets, while sourcing costs will stay stable-ish. But the likelihood of some other outcome - like the total unacceptability of Bangladesh as a supplier - is probably higher than it's ever been.
Roger Lee, chief executive, TAL Group, a leading garment manufacturer that produces 55m pieces of apparel a year and makes one out of every six dress shirts sold in the US:
There are many things that are constantly moving that we need to keep an eye on:
- The Trans-Pacific Partnership (TPP) is in full swing negotiations. If this is put in place, it will definitely affect which countries we chose to produce in.
- The Chinese economy affects the world market in many different ways so we need to monitor that.
- When will Burma open up is also a question. Many people are already rushing in to look and even build.
- What will brands and retailers decide do after the Bangladesh fire? I hope it will change the way our industry works.
- Each manufacturing country's economic policy affects the cost of producing there, so we constantly keep an eye on this.
- And how will the US and European economies perform in 2013? I honestly don't know, but again this will have a significant impact on us so we need to constantly monitor it.
I can only hope that 2013 will be better than 2012!
Julie Hughes, president of the United States Association of Importers of Textiles and Apparel (USA-ITA):
From a US perspective, our big agenda items for 2013 are the new negotiations to expand duty-free trading opportunities. The major on-going negotiation is the Trans-Pacific Partnership (TPP). TPP is the first major trade negotiation that the US initiated in the post-quota world - so we anticipate that it should also be the first US FTA that is going to move beyond a strict yarn forward rule of origin. Certainly that is the goal for USA-ITA members.
We also are enthusiastic about the beginning of the talks to start FTA negotiations between the US and the EU. As well as negotiations to develop regional cumulation for western hemisphere FTAs.
Our members continue to look for more opportunities for global sourcing. So you might be surprised that we see 'Made in USA' initiatives as part of this vision for 2013. We strongly endorse more operations in the US. But we understand that even 'Made in USA' reflects global sourcing. Most garments made in the US are likely to use imported fabrics or imported yarns or imported trims. This reflects the global nature of the industry and the future for sourcing. That is a continuing trend in 2013 for apparel sourcing executives.
While our focus at USA-ITA is on trade policy and sourcing, the big challenge for the industry remains the need for companies to listen to the customer and keep retailing exciting.
Jan Hilger, High End Fashion Consulting, and member of the board of DTB Dialog:
I expect 2013 to be better for the apparel/retail industry as there are many new entrants to the market and existing retailers are becoming more creative. Digital sales channels - be it webshops, application or platform sales - will take a bigger share from the traditional sales channels and offer a wider opportunity to reach a wider audience. This is a new chance for 'local heroes' to re-establish lost street sales through uniqueness and new ideas.
On the sourcing side I see more opportunities than challenges if one is willing to think out of the box and explore new ways of working or sourcing.
Andrew Lo, CEO of Crystal Group, one of Asia's largest apparel manufacturers, producing more than 230m garments a year for customers including Victoria's Secret, Levi's, A&F, H&M, M&S, Uniqlo, JC Penney and Gap:
2013 should be a much better year than 2012, especially in the first half, because of lower and more stable yarn prices. Last year customers were worried in the first half so they placed everything very late and it was tough. Now, there's nothing holding back the customer from placing orders. If I look at the second half of this year and going into 2014, there is nothing alarming me at this stage.
Dan Dunham, global sourcing manager at Cabela's, the US-based specialty retailer of hunting, fishing, camping and related outdoor merchandise:
- Build strong strategic partnerships with your mills and factories.
- Transportation costs throughout the supply chain.
- Risk mitigation in the Middle East.
- Improving quality.
Ashad Sattar, managing director at Sri Lanka clothing manufacturer Timex:
I think 2013 should be in turnaround by the second or third quarter of the year, as the US is already showing signs of recovery and Europe should also start to turn around.
Ranjan Mahtani, CEO of Epic Group, which operates manufacturing facilities in Bangladesh and Vietnam and supplies 36m garments a year for customers such as Wal-Mart, JC Penney, Kohl's, Gap, Abercrombie & Fitch, Marks & Spencer and H&M:
2013 looks like a tough year with global economic uncertainty, and the supply chain continues to diminish and be fragile.
Josh Green, founder and CEO of Panjiva, a New York based firm that provides information for retailers and importers seeking new sources of production:
I'm an optimist, so I choose to believe that 2013 will be better than previous years. Sure, the macroeconomic conditions don't appear to be heading in a significantly better direction. But the apparel industry will do better, if for no other reason than the fact that the last few years have made us sharper - and taught us what we need to know to thrive in the years ahead. Good luck to all in 2013!
Jonny Mitchell, managing director of the legwear division at Courtaulds Brands Ltd, owner of the Pretty Polly and Aristoc hosiery brands and a major supplier to UK retailers including M&S:
I think that the economy is fragile, and people's own perception of their ability to spend is deeply affected by fear of unemployment and lack of confidence in the market generally. Outside London, which still has its own micro economy, there is little to give younger and middle aged consumers confidence to increase their spending. Therefore I believe 2013 will continue to be tough for retail and the apparel industry in general. The winners will be those with the most compelling offer in terms of price, product and service!
Magdalena Kondej, head of apparel research at Euromonitor International:
2012 was a year when 22 of the world's economies experienced negative economic growth, consumers in developed economies saw their incomes stagnate, consumer spending in the eurozone shrank to levels not seen since 2003, and China saw its slowest economic growth in 13 years.
That said, for the apparel industry 2012 was not a bad year after all, with global growth reaching 5% in current terms. 2013 is shaping up to be similar in terms of dynamics: performance in Western Europe is expected to remain fairly stagnant at around 1% but it is still an improvement compared to negative growth over the past few years. China, contrary to recent concerns, will keep up double-digit growth, albeit slower compared to the record 2011.
On the whole, 2013 will be on par with 2012, with slightly slower growth in Asia-Pacific but the remaining emerging regions - Latin America, the Middle East and Africa - making up the difference.
Kurt Cavano, founder, chairman & chief strategy officer at TradeCard Inc, the supply chain collaboration and global trade platform:
Keep a close eye on the housing market. Recent data shows US home prices experienced their first year-over-year gain since 2006. The Wall Street Journal recently reported on the significance of this milestone - a 6.9% rise in prices in 2012. As we've seen in recent years, home prices in the US have a major impact on consumer confidence and spending. If the housing market continues to rebound, consumers will feel comfortable splurging on that new pair of shoes or blouse that they held off on purchasing in 2012.
Rick Horwitch, vice president, strategy & solutions business development, at testing, inspection and certification provider Bureau Veritas, Consumer Products Services:
I would pay close attention to the 2013 JC Penney "transformation." 2012 seemed to be a year to "purge" the system (inventory and organisation) of old habits and views. According to Ron Johnson, we will see the unveiling of the "new JC Penney" in 2013. While all of the hype and focus will be on the consumer-facing piece, a major portion of the transformation is taking place behind the scenes. Everything from product development, marketing, supply chain (sourcing, quality and compliance, logistics and distribution) and point-of-sale data capture are being re-engineered to meet the needs of the new JC Penney. Some of these initiatives are already paying significant dividends. While the jury may be out on whether the store transformation catches on, it is clear the efficiencies and savings in both time and money gained from the supply chain changes will have an impact for years to come.
Mike Todaro, managing director of the American Apparel Producers' Network (AAPN):
I have trademarked the expression 'The semantics of size'. We are carefully monitoring several pilots in body scanning and the metrics are staggering. We're going to see less emphasis on measuring point-of-sale and more on point-of-fit. The consumer is empowered. She can scan her exact dimensions and compare them against the actual dimensions of brands who say they fit her but don't. What does this mean? If you aren't the designer setting the size and the consumer confirming the fit, you're just 'operations'. You're just the supply chain.
John Miln, CEO of industry body the UK Fashion and Textile Association (UKFT):
As a trade body we will keep a close relationship with government, both here and in Europe, to ensure the industry voice is heard and that the industry has a positive influence on legislation and policy. Skills, training and education will remain high on our particular industry agenda.
The predictions for the economy are varied, but much depends on the first quarter's results which might affect the remainder of the year. Raw material prices have slightly reduced but it is difficult to know if this is only temporary. Consumer confidence thus remains critical.
As a trade body we expect to engage across our industry membership in greater measure in 2013 in order that both profile and awareness are enhanced. As to 2013, predictions are beset with dangers - but we don't expect 2013 to be much different from 2012 as to outcomes for the apparel/retail industry.
Click on the following links to read other articles in this management briefing:
Outlook 2013: Apparel industry challenges
Outlook 2013: Apparel industry opportunities
Outlook 2013: Lessons that should have been learnt
Companies: JC Penney Company Inc, Uniqlo, H&M Hennes & Mauritz AB, Marks & Spencer Group Plc, VF Corporation, Timberland Company, TAL Group, Victoria’s Secret, Levi Strauss & Co, Wal-Mart Stores Inc, Kohl’s Corporation, TradeCard
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