New IAF president Rahul Mehta discusses the apparel industrys growth prospects

New IAF president Rahul Mehta discusses the apparel industry's growth prospects

The global apparel industry is expected to grow 3.5% to over $500bn this year, matching a similar gain in 2014 and consolidating a three-year recovery, according to the International Apparel Federation's (IAF) new president Rahul Mehta.

In 2013, the industry grew 3%, up from a 2.5% gain in 2012 which marked the beginning of a recovery from years of anaemic growth fuelled by the global recession. Between 2008 to 2011, growth hovered around 1%.

“There is good growth from rising consumption in developing countries like India where growth may reach 17% and in China,” Mehta told just-style in an exclusive interview. He added a pick-up in the US economy will help boost fortunes, offsetting weaker gains in recessionary Europe.

A turnaround in Japan, combined with strong sales in other emerging Asian nations such as Cambodia and Sri Lanka, is also seen lifting trade.

Asked if record-low oil prices could provide a boon later in the year, Mehta said: “It’s too early to start counting the chickens but a prolonged reduction in oil prices could provide a boost toward the end of the year.”

By category, Mehta said women’s wear continues to steal the show in Asia, with growth of about 22%. This, in addition to buoyant men’s and kids' wear segments, will top global sales in 2014 and in the near-to-medium term.

Mehta noted luxury apparel (both aspirational and super-luxury), however, could be hit by continual recessionary jitters in the developed world while sportswear is also facing competitive pressures.

Three challenges
As Asian low-cost producers face criticism from rising factory accidents, Mehta said it’s imperative for brands to step up scrutiny of third-party suppliers. However, he said this is becoming challenging. 

“Every brand has to inspect and audit their suppliers to ensure they meet labour laws and other legal compliance,” Mehta said. “However, there is a fine balance to do this. You can’t subject suppliers to 100 audits a year.”

To tackle this issue, brands could team with country regulators to issue standardised manufacturing inspections and auditing schemes, he added.

That said, brands must also to do more homework to understand the countries they are operating in.

“Many times people view a developing country’s labour standards as very low while from that country’s standpoint, workers may be very well looked after,” Mehta said.

As fast fashion continues to boom, there is a greater need for garment manufacturers to adapt to increasingly tight delivery deadlines, which have been moving to roughly two months from around six months for many garments.

Some producers have been struggling to adapt but continue to face challenges. To help, clothiers can commit to buying a certain amount of fabric but require flexibility to purchase certain garment styles based on demand, according to Mehta.

Mehta echoed views that near-shoring (sourcing close to market) will continue to gain traction, causing more manufacturing to move toward top-selling US and European markets and away from low-cost Asian suppliers.

“Fast-fashion growth could double in the next three to five years,” Mehta predicted. “This could mean production coming back closer to markets and brands paying a little more to make clothes in countries with better technology and more skilled workforce.”

Lifting profit margins is also a major obstacle for brands and retailers, especially in the developed world, as they have plummeted in recent years from growing price pressure and rising competition.

“Margins are down 25% since the recession,” Mehta said. “They need to recover while maintaining reasonable consumer prices.”

Sourcing shift
Roughly 60% of garment sourcing takes place in Asia, 20% in Latin America and 20% in Europe. By 2020, some of it could move to Europe and the US as brands engage in near-shoring strategies to satisfy increasingly fickle consumers.

Overall, sourcing could decline to 55% in Asia, Mehta predicted. Emerging Asian suppliers such as Bangladesh, Cambodia or Vietnam will help buffer some of the Asian losses while an expected pick up in African sourcing will help retain output in the East and Southeast hemispheres.

Regarding his two-year IAF tenure, which began last autumn, Mehta said he wants to introduce global industry awards, a fashion student internship programme and a “more robust and timely” industry data and statistic service for its client associations.

The awards plan, which Mehta said could be approved in this year’s annual convention in Istanbul, could include prize categories for best retailer, fastest-growing brand, best association in terms of legal and social compliance, and best green garment manufacturer, among others under review.

Mehta, who also leads the Clothing Manufacturers Association of India (CMAI), said another goal is to increase membership numbers by 25% from 47 country associations and 50 corporates currently.