The meltdown of international, regional and country specific financial institutionsand the global economy as a whole and the subsequent trickle-down consequences for consumers is having a negative impact on the apparel industry. However, there are opportunities for companies and in particular for smaller independent boutiques and designers (I am referring in particular to South Africa) to consolidate their business; revisit their marketing strategy and customer relations in order to capture market shear. There is no necessity for South African designers and small boutiques to become victims of this financial calamity.
The global financial crisis has forced most consumers to re-evaluate their spending in line with "wants" and "needs" when it comes to buying and in particular the purchasing of clothing. It is imperative for independent fashion designers, clothing companies and boutiques to find alternative creative marketing opportunities such as the opportunity that "ReDress Stitching Links" offer. Research and empirical evidence indicates that cutting back on marketing and advertising in recessions has both a short and long term negative impact on business operations.
It is essential for South Africa fashion and apparel companies to market and communicate value, integrity and excellent customer services. While most companies will be finding ways to save on overheads and retain their market share an opportunity presents itself for those companies and individuals who see the larger picture, think in the long term and create a bigger presence in the market place through intelligent, cost-effective marketing and promotional strategies.
Intelligent marketing and promotion consists of active, smart, focused, creative and strategic brand development where companies can interact with the market, their customers and potential customers. This is the ideal time to build your brand, your reputation and position in the market.
Companies in the South African apparel market and affiliated companies such as (fashion photographers, trend forecasters, stylists, suppliers etc) need to communicate their services, effectively and efficiently to their targeted market they need to change not only the consumers but their potential clients thinking from a "want" to a "need" and this is only done through projecting their benefits, unsurpassed service and value.
What is marketing innovation? It's being creative with what you have. It's getting feet into your boutique. Having potential customers seeking you out because they have heard of you, seen your marketing and because you provide excellent service with quality products at a good price.
For example, UK apparel company, The Moss Bros menswear group is offering a "credit crunch" suit, shirt and tie package for £49.00. Consumers can choose between six Moss suits, three shirts and eight ties. This strategy brings shoppers through their door; the company captures their details for further marketing campaigns and each shopper who takes advantage of this offer becomes a walking advert for the company.
Futurist forecaster and author Faith Popcord said," consumers [are looking for] new benefits when they purchase clothing. Was the item of clothing made in a good way (the reviewing of the production value-chain), is the quality good … what does the boutique, the big company the individual designer stand for," according to Popcorn will be asked by consumers.
Links with the apparel industry and the economic crisis:
A step back to history
Whilst undertaking some research[1] I discovered a link with the current financial upheaval, the textile industry and Venice (Italy) going back to 1345 AD.
According to the research the first global crash as a result of the monopolisation of Europe's finances by the biggest banks of that time happened in 1345AD. The two largest banks in the world, Bardi and Peruzzi were family owned and operated from Florence. In England, the production of wool began to decline around 1310 whilst this was happing the two Italian banks gained a monopoly over the production and export of wool in Europe. The Champagne Fairs (France) was the hub for trading in cloth and clothing for all of Europe. Through manipulation the bankers took over the trading hub. The start of the 100 Years War between England and France led to the clothing industry in Flanders one of the main clothing production regions in Europe being boycotted and by the 1340s the industry was in decline leading to a fragmentation of the industry and the development of small cottage production.
King Edward of England tried to stop Italian merchants and the bankers exporting their profits from England. Subsequently the Italians converted their profits into wool and stored the wool in the Monasteries of the Order of Knights Hospitalers who were in partnership with the Italians in the monopolisation of the wool trade. Ironically, it was the representative from the Bardi bank that influenced Edward III to boycott French wool and in so doing raised the cost of wool of which the bankers now had total control.
The control over Europe's and much of the global wool trade by the Italians began to diminish. Spain's King Martin expelled Italian merchants, Henry IV of England stopped them from taking profits from his kingdom, and France imprisoned some of the merchants and expelled the Genoese bankers thus ending their reign over Europe's clothing industry. This lead to their collapse and a global financial crisis that affected both Europe and the East.
Global crisis & the apparel industry
The Director of China Textile Economy Research Centre, Sun Huaibin recently said that the operating environment for China's clothing and textile sector that employs nearly 20 million is in a tough position as latest trade data indicates a drop in exports and an increase in production costs. China's exports grew 1.8 percent in the first nine months of this year a decline of 21 percentage points compared to the same period in 2007.
In September, American clothing companies recorded rapid declines in sales. Fashion chain Gap Inc reported sales in September had decreased by six percent, while other global apparel companies reported sales declines of seven percent for the same period.
While we are seeing a global trend in plummeting apparel sales figures governments are positioning themselves and re-evaluating their trade policies. It is disconcerting that there is such silence from the South African Department of Trade and Industry about the Chinese quotas that are due to end on the 31st December 2008. Will there be a blanket extension or an extension on certain products or will the quotas as a whole expire? The industry needs to know so they can position themselves.
In October, China's Ministry of Commerce said they will "step up its dialogue with major trading partners to ensure a smooth transition" when the quotas end in the US and Europe at the end of this year. There was no mention about South Africa. In September, textile and apparel groups from 17 countries urged the American congress to support and extend the Textile Monitoring Program to China once the remaining textile and apparel safeguards are removed on January 1st 2009 and to debate on the Duty Free Quota Free Process (DFQF).
China's share of the US apparel market grew from 15 percent in 2001 to 60 percent in categories where quotas had been removed resulting in hundreds of thousands of jobs being lost on a global scale. In response to the global economic turmoil, China said it would be increasing its subsidisation of its textile sector by increasing the export tax rebate and increasesin its existing 63 subsidies for the textile and apparel sector.
LDC countries such as Bagladesh and Cambodia have seen their exports in apparel grow by 90 percent since 2001 at the expense of AGOA countries.[2] The "Big Five" in the global textile and apparel sector: China, Vietnam, Bangladesh, Cambodia and Indonesia are the only countries showing consistent growth.
Amongst the "Big Five" competition is fierce with China having lost trade to Bangladesh and Cambodia. The data for developing and least developed countries textile and apparel industry sectors look bleak. Apparel imports from these countries have fallen by 24 percent ($10 billion) since 2001. Countries like: India, Malaysia, Sri Lanka, the Philippines, Jordan, Thailand and Egypt are battling to compete with the "Big Five." The biggest loss has occurred for countries in the AGOA region. In the first seven months of 2008, exports from AGOA fell by 13 percent.
As a result of these trends the global textile and apparel industries may experience the following:
* A consolidation of suppliers – "The Big Five"
* Loss of the market by China unless they can compete with Bangladesh and Cambodia.
* China's focus on brand label and fashion sector development. This could result in further competition for South Africa's fashion sector.
* A decline in exports from Africa. Resulting in further job losses.
* Due to South Africa's clothing sector not taking full advantage of the quota period and upgrading skills and the SA Department of Trade and Industry's slow delivery and structuring policies opportunities have been lost.
* Further increases of imports into South Africa from the "Big Five"
* A possible (if pricing is correct) surge of apparel imports in South Africa from China post January 1st 2008.
[1] The New Federalist, and The American Almanac
[2] Countries Eligible for AGOA Benefits
Angola; Benin; Botswana; Burkina Faso; Burundi; Cameroon; Cape Verde; Chad; Comoros; Republic of Congo; Democratic Republic of Congo; Djibouti; Ethiopia; Gabon; The Gambia; Ghana; Guinea; Guinea-Bissau; Kenya; Lesotho; Liberia; Madagascar; Malawi; Mali; Mauritania; Mauritius; Mozambique; Namibia; Niger; Nigeria; Rwanda; Sao Tome and Principe; Senegal; Seychelles; Sierra Leone; South Africa; Swaziland; Tanzania; Togo; Uganda; Zambia.
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