Latin American apparel makers and retailers are eyeing blockchain technologies and delving into Industry 4.0 manufacturing to tackle rising contraband, slash red tape and bolster sales.
“We are investing a lot in advanced manufacturing and in product export certifications,” Rafael Cervone, president of the Brazilian Association of Textile and Clothing Industry (ABIT), told just-style on the fringes of the Colombiatex fair in Medellin, Colombia. “These digital certificates are growing a lot in Brazil and we need them day in and day out. I think blockchain could give us a tool to get them quicker and cheaper.”
Export certificates and other processing red tape have become an industry headache.
“All the products we have in Colombiatex require a special document to take them abroad and bring them back. We have to prove we are bringing them to our fashion show [for example] and are not for sale. With blockchain, “it will be easier to show these products are samples,” eliminating potential product loss during cross-border trade. “Our dresses, pants and other clothes have been cut by scissors many times because authorities don’t believe they are samples,” Cervone added.
So how could blockchain do this exactly? A blockchain is a list of records or transactions carried out between the members of a decentralised computer network. Because each transaction is encrypted and time-stamped, the system provides an incorruptible “distributed ledger” tracking “smart contracts” or business-scaling transactions between parties.
As it – and the myriad cryptocurrencies that monetise each blockchain (such as Bitcoin or Ethereum) – develops, the technology is showing great promise for records management activities including product traceability.
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Cervone was referring to Devery, a fledgling “product verification protocol” blockchain that just garnered $10m through an initial coin offering or ICO – a process via which new platforms raise expansion currency, similar to an IPO.
Devery allows textile and clothing makers to assign a unique signature to their products, store it in the blockchain and use it whenever they need to prove authenticity or origin. The innovation is expected to help manufacturers tackle counterfeit or sub-valuation – a huge problem denting makers’ fortunes in Latin America.
Solete Foizer, an analyst at export promotion agency Apex Brasil, said it’s working to train the industry to use blockchain to achieve economies of scale. She said the nation’s biggest textile manufacturers Vicunha and Santista are already looking to incorporate blockchain solutions.
“Everyone is looking at it but it’s a very new subject and not everyone knows how it works. However, we are working to communicate what blockchain is and its benefits to our 30,000 members.”
Brazil is ticking out of its worst recession in over a century, though looming presidential elections in the autumn could thwart all progress. The country just signed a free-trade agreement with Colombia, providing its neighbour with access to the Mercosur bloc that includes Argentina, Paraguay and Uruguay to lift sluggish foreign shipments.
“All the import tariffs were reduced to zero so we have an opportunity for both sides,” Cervone enthused, adding that Latin America’s largest economy hopes to boost sales to Colombia beyond $30m last year.
“We hope to grow 15 to 20 percent this year,” Cervone said from the Abit pavilion at the regional sourcing fair, where Brazil led $356m in potential sourcing contracts during the three-day event, up 60% from 2017.
The 30-year trade show drew 356 international buyers from 24 countries to purchase goods from 579 exhibitors of which 40% came from Brazil, India and Spain. About 36% of the sourcing contracts were in textiles, 28% in machinery, 19% in feedstocks, 10% fibres and 7% in others, according to organiser Inexmoda.
The positive results (at least in paper as the contracts will need to be executed), boosted hopes that Colombia’s textiles industry can emerge from the doldrums after big losses last year triggered by a flood of undervalued fabrics, higher consumer taxes and slower economic growth. Manufacturers are pleading with Bogota to introduce anti-dumping measures to shore up the sector, something that it’s reportedly considering.
In Brazil, the textiles and apparel sector hopes to grow 10% to $47bn this year, fuelled by a gradual increase in domestic sales, according to Cervone. Investment will surge to $570m from $450m last year, with much of it going to new spinning mills, machine-to-machine or Internet of Things (IOT) technologies, as well as Industry 4.0 pilot manufacturing plants.
In that regard, Cervone said the Senai National Industrial Training Service in Rio de Janeiro recently launched a “magic mirror” leggings fitting plant that uses a digital scanner featuring 1,500 shape alternatives and is due to be ready in July. Customers will use the mirror to choose their ideal fit which will then be delivered by drones, Cervone explained. Four other pilots involving sportswear and other segments are in the works for the second half of the year, he added.
Grupo Crystal, a vertically-integrated manufacturer to retailer with eight production facilities in Colombia and brands such as underwear label Punto Blanco and teen wear Gef, is mulling the launch of a cryptocurrency to give its customers new payment options.
“We are talking about blockchain inside the company as a technology to better understand our customers and see if we can launch a cryptocurrency,” said e-commerce director Felipe Arguelo, adding that a proprietary coin could help boost digital sales. However, he cautioned that such plans are merely in the brainstorming phase.
“A lot of Colombians are not educated on blockchain but banks are looking at it and advancing in digital payments.”
The firm could use the Nucleus Vision solution, another ICO set to launch at the end of February that aims to help retailers better identify their customers to build royalty programmes. With its genesis at Harvard University, the platform will marry blockchain and IOT technology to offer customers “previously unaccessed” marketing data, with services paid through its nCash coin.
Whatever it does, a well-timed cryptocurrency will likely help Grupo Crystal stand out from big rivals such as hypermarket Exito or Studio F, which are also growing their footprint in Colombia and Latin America.
Meanwhile, Mexican manufacturers are also looking to scale up with blockchain, said Alfonso Zepeda, general manager of the Jalisco State chapter at apparel industry association Canaive. However, he noted many plans are in beta stage.
“We are just getting into this and some of the big retail chains are looking at it but the reality is cryptocurrencies are still very new.”
That said, Jalisco State, home to “Mexican fashion capital” Guadalajara, is working to launch the Jalisco Fashion Centre to help SMEs develop fashion-centric collections amid long delays to inaugurate a similar national R&D center in Pachuca near Mexico City.
The facility will boast automated cutting and direct textile printing machines for multiple yarn types as well as a textiles laboratory to analyse a garment’s composition, Zepeda said.