Bangladesh is among the worlds top five largest exporters of mens and womens suits, blazers and trousers by value

Bangladesh is among the world's top five largest exporters of men's and women's suits, blazers and trousers by value

Senior executives and analysts have told just-style how the higher margin suit segment is drawing in major manufacturers, who are now confronting the challenges of building technical know-how, recruiting skilled labour and attracting global buyers.

Dhaka-based apparel maker Ananta Group is one. "To test out new product," was managing director Sharif Zahir's response when asked why his company got into manufacturing suits in a country synonymous with knits.

"Challenges are greater when it comes to doing anything beyond pants and knits. In most cases, the skill set doesn't exist," he told just-style. "Convincing buyers is also difficult as Bangladesh is not known for suits."

In 2011, Ananta sank US$20m into the Universal Menswear Ltd, a joint venture with Time International Trading, a leading Romanian tailoring manufacturer.

The joint venture firm can produce 120,000 men's suits per month, and it has been doubling its capacity since July 2016, according to a note from the joint venture.

The 26-year-old Ananta group, with an annual sales turnover of US$250m has attracted regular buyers for Universal's formal suits and blazers that include Sweden's Hennes & Mauritz (H&M) and the UK's Marks & Spencer (M&S). H&M alone buys 60% of Universal products. The joint venture raised US$40m by exporting formal suits and ladies' blazers in 2017, up from US$25m a year earlier.

Suit segment growth

Ananta's growth story mirrors the overall strength of the segment.

Bangladesh's exports of suits, blazers and trousers doubled from US$5.1bn in 2010 to US$10.1bn in 2016, with a 12% compound annual growth rate (CAGR), according to international trade data.

Bangladesh is in the top five largest exporters for men's and women's suits, blazers and trousers by value, alongside China, the European Union, Vietnam and Turkey, according to Navdeep Singh Sodhi, a partner with Gherzi Textil Organisation, in Switzerland. The global export market was worth US$108bn in 2016, he says.

Another leading Bangladesh garment maker Energypac Fashions Ltd, based in north Dhaka, is also focusing on suits and jackets, with US$32m in export proceeds being earned from suit sales in 2017. It is on track to reach US$66m in export sales of these products by the end of this year, the company says.

"Potential is high as suits are high-value items. Chinese firms are increasingly focusing on their domestic market," Pavel Bhowmick, its chief operations officer, told just-style.

He argues that orders for suits and blazers are coming to Bangladesh as the south Asian country has the capacity to handle bulk volume and is price-competitive.

Lured by higher margins, Energypac in January opened a US$16m new production facility in Gazipur, near Dhaka, dedicated to suits.

Bhoumick reckons that while outerwear including jackets brings margins of US$12-US$14, a suit fetches US$25-US$28 in margins. Energypac makes casual, formal and summer suits for both men and women. It also produces school uniforms and fashion suits for boys. The company supplies M&S, C&A, Zara and Jos A Bank.

While this is good news, Bhoumick explains that Bangladesh's growth in the segment could be stunted by ongoing weak backward linkages: his company must import wool, poly-wool, poly-viscose and polyester fabric for suit making from China and India.

Full capacity

The success of East West Industrial Park, a garment maker in north Dhaka, illustrates why companies are increasingly looking at this area. It is currently working at full capacity, according to the company's CEO Shibbir Ahmad.

East West registered US$60m in overseas sales in 2017, up from just US$5m five years ago. The company's overseas sales have been climbing 20% every year.

The company jumped into the suiting space with a view to seizing China's export market, though profitability was also a factor.

"It's profitable," notes Ahmad. "Margins for suits are 60% higher than those of trousers."

The company's major buyers are H&M and Japan-based Link International, with H&M alone purchasing 70% of the supplies.

Competitive sourcing

As global buyers pursue a China-plus strategy to diversify alternative sources, analysts believe Bangladesh offers competitive sourcing for a wider range of products.

"...China will cede some market to low-wage countries with a higher skill set, and Bangladesh and Vietnam will be two key contenders," predicts Sodhi.

Gherzi has identified supply chains, capacity building, logistics, marketing and strategic alliances as five key reasons why Bangladeshi companies can widen their presence in the suits and blazers segment.

But backward linkages will have to be addressed for Bangladesh to press its advantage. Sodhi says that with pressure from retailers to cut lead times, local weaving and processing capability will have to be ramped up.

Faruque Hassan, senior vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), agrees further progress is stymied by dependence on imported fabric, which prolongs shipping times.

However, he stresses that manufacturers still needed to press on with added value diversification, saying the country's apparel export basket is limited to only five to six items including T-shirts, polo shirts and denim, which still account for 80% of Bangladesh's clothing shipments. "New products and new markets are important," he told just-style.

Dr Khondaker Golam Moazzem, research director with the Centre for Policy Dialogue, a Dhaka-based think-tank, told just-style that new added value products would help the industry reach the BGMEA's ambitious target of exporting US$50bn worth of apparel annually by 2021, playing "an important role in achieving the big target in a short span of time." Investment in high-tech machinery and skilled human resources will be needed though, he adds.

Better trade access would also help. Suit sales in the US are lower than they could be because Bangladesh does not enjoy preferential market access to America, Zahir says.

In a bid to  move from their traditional low-cost growth pillars, such as T-shirts, shirts, trousers and sweaters, Bangladesh's apparel producers are also rushing into the lingerie space, as reported on just-style last month:

Bangladesh manufacturers making inroads into lingerie