As long as the economic downturn continues, apparel businesses are going to be more motivated by short-term survival than by great long-term strategies believes Mike Flanagan. Here he asks whether recession is changing the rules - and takes a closer look at some of the sweeping generalisations doing the rounds.

Things have changed a lot in the apparel industry over the past year.

Just 12 months ago it was facing problems of global inflation, a shortage of Chinese workers was set to make Chinese clothes impossibly expensive, oil prices were hurtling towards $200 a barrel, and the US dollar was sinking so low that emerging-world garment makers feared they would be unable to compete.

But even though things are now very different, commentators are still able to make sweeping generalisations on very little evidence.

In the middle of 2008, the new fad was the "collapse of globalisation", as analysts at a Canadian bank seriously argued that importers would stop buying things in Asia, and buy local instead.

Well they were bankers (though may not be any more of course) - and I take great pride in being the first public commentator to have pointed out just how shallow and ill-informed that delusion was.

Though now, of course, saying "this is a bank's forecast" always means the rest of the sentence goes "so we're ignoring it."

For the record, preliminary US import data for January shows textile and apparel imports from Central America were down 22.7% on 2008. From China they grew 1.3%.

"Buying local" is probably going to be one of those forecasts - like the paperless office - that just never happen.

In the current recession, we're seeing more and more similar observations about how the world has fundamentally changed.

Some might be right of course, but in other cases we're seeing people make assumptions on the basis of one-off events. Trouble is, it's hard to know which is which.
Here are a few:

• 1: No-one's ever going to pay full price for clothing again. I've counted at least three analysts attached to major US banks claiming the current round of retail price promotions means prices are never going to be the same again.

In fact, US clothing prices fell just 0.9% in January: in the world outside Wall Street, most clothes were being bought for much the same price as last year. And sales weren't that different either.

Getting customers to pay prices retailers want them to isn't going to get any easier in the near future - especially in countries like the UK whose currencies have collapsed. 

But Wall Street analysts will remain better authorities on local bars and restaurants than on predicting consumer behaviour - as they have always been.

• 2: Major overseas buyers are moving out of China. This is almost certainly a simple piece of self delusion by owners of garment factories outside China.

China's been increasing its share of clothing sales to the EU and US for the past six months, and its clothing exports actually grew in January.

Personally, I believe the massive lending spree by its banks to exporting companies in December and January will keep factories going despite customers delaying or defaulting on payments, and reliable customers pushing for price reductions. 

I'd say that in the short to medium term, China will go on increasing its market share. In the longer term, though, a lot of those loans will turn out to be insupportable.

So there's a real risk the recession in China will just be delayed, and we'll be seeing stories about China getting unreliable as businesses finally keel over.

• 3: The Japanese are moving out of China. This is different - and could be bad news for North American, European and Australasian buyers.

Japan gets 75% of its combined textile and garment imports from China, 93% of its clothing alone. But Shigeru Takagi, director of the International Textile and Clothing Trade Office at Japan's Ministry of Economy, Trade and Industry (METI) reportedly said on 23 February that Japan wants to cut this to 50%.

Many businesses in low-cost Asia - especially in Bangladesh, Indonesia and Thailand - see Japan as their defence against growing problems in making money from other export markets.

Japan's shift away from China a real possibility. METI has a tradition of agreeing big strategic issues with Japanese businesses, who then follow the strategy. And it's obviously unwise to get virtually all its clothing from a country it has spats with from time to time.

But the impact could be colossal. Japan is the world's second largest clothing importer and South East Asian countries and Bangladesh, which have or are acquiring duty-free access to Japan, currently account for just 7% of those imports.

Takagi's plan would at least quadruple them. And such growth would push up those countries' total clothing exports two to threefold - putting considerable pressure on prices for European and US importers from Asia.

It might not happen for a long time, though The rapid changes in Japan's clothing retail trade - with Fast Retailing's Uniqlo business model showing rapid growth, as most other retailers and brands are in decline - implies that METI may be no more able to speak for its entire clothing industry than any European or American government department.

The scale and timing of the investments Fast Retailing has persuaded its suppliers to make in Bangladesh is evidence of how slowly - and thoroughly - Japanese buyers move into new countries.

Reactions from early Cambodian attempts to work for Japanese buyers, and presentations made by Japanese representatives to Burmese factories, show that South East Asian factories need to change as dramatically to satisfy the Japanese as they did for European and American customers in the early days of offshoring.

• 4: Buy a customer. I've always been sceptical about suppliers buying a struggling customer. If a business couldn't survive with the whole world to buy from, why will it do any better when it's restricted to using just one supplier?

Buying Roseby's in the UK didn't get or preserve any business for India's GHCL, for example, since it went bust within two years - though GHCL argues the acquisition brought retail branding and expertise it can use in India.

But when times get difficult, buying or inventing a customer might well give you sales volumes for a while until things get back to normal.

That's a main reason Lubbock-based growers Plains Cotton Cooperative Association (PCCA) announced it was buying Guatemalan jeans maker Koramsa: to ensure the PCCA's denim weaving plant still had a customer.

 And it's the thinking behind the MOL Magazalari shop in Istanbul with a "Turkish only" range, set up in mid-January by a consortium of 38 local clothing manufacturers, and claiming to have helped companies throughout Turkey restart operations. 

The store's CEO, Oktay Özdemir, is very bullish, and is talking about having over 100 stores by the end of the year, in six countries, with combined sales of $3bn. He has to, of course: the volume one shop will do isn't going to do much for any factory's future.

Generally, manufacturer-owned shop chains survive only if they've got real edge (as the Inditex fascias have), and I'd doubt whether "everything's made in Turkey" is a motivating force for the customers in Russia and Macedonia that Ozdemir wants to attract.

But when ability to survive a few extra months is what preoccupies so many factories around the world, MOL Magazalari is likely to give a few dozen manufacturers the extra months they need to re-orient themselves.

• 5: Compassion fatigue. Customers, this argument goes, are just too financially strapped right now to worry much about how garment workers are treated.

Maybe so - but consumer pressure isn't the only reason for ethical sourcing. True, a number of Chinese provinces have quietly suspended their minimum wage increases - and we're seeing trade associations from Bangladesh to Guatemala lobbying against proposed increases too.

But both Nike and the UK's New Look have recently made cases for some ethical practices actually improving a factory's productivity, and arguments from pressure groups have taken a whole new turn in the past month.

The Amsterdam-based Clean Clothes Campaign (CCC) put particular emphasis in a February report on what it called Wal-Mart's particular habit of making working conditions worse by repeatedly tinkering with product specifications, so ensuring jobs can be completed on time only by compulsory - and often unpaid - overtime.

London-based investment brokers F&C expressed concerns about the risks to profitability of attitudes to ethical sourcing at Li & Fung, France's PPR and the US Target chain.

And both groups - coming from the very different perspectives of ethical activism and investment analysis - singled out German discount retailers Lidl and Aldi for an absence of ethical standards in clothes buying (both are among the top ten German clothing retailers).

Why these two? Because, as the recession develops, their market share of Western clothing is growing disproportionately fast.

And with profits getting more difficult, people who want to see ethical standards maintained - whether they're running clothes buying businesses or investment houses - are keen to see the commercial case for ethics being made more strongly.

So is recession changing the rules? Probably not, and as the nonsense about "no-one's going to pay full price" shows, it's easy to exaggerate the effect of a few weeks of aggressive discounting.

But, as long as the recession goes on, businesses are going to be more motivated by short-term survival than by great long-term strategies.

Some of the techniques we'll be seeing for buyers and sellers to survive might be useful when the upturn comes. But I wouldn't - to use a pariah term - bank on it.

Mike Flanagan is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries.