Bangladesh clothing manufacturers are facing tough times demanding fair price for clothing supplied by them. Additionally, they are in tremendous pressure from global buyers to improve conditions at workplace, after the Rana Plaza building collapse in 2013. Local apparel makers say, over $1 billion has been invested so far to renovate and retrofit their factories as per the demand of Western buyers, retailers and brands. Yet, retailers and brands have not increased the price. Buyers are still paying the traditional low prices for products and earning huge profits. A shirt costing $3 or $5 is being sold between $25 and $30.
The same is the case with high-end value added products, which is 30 per cent of the total volume of garment items exported per annum from Bangladesh. MNCs pay between $8 and $12 to local manufacturers for purchasing a piece of value added high-end shirt and retailers sell the same shirts at $100 sometimes even at $150, garment makers said. According to manufacturers and economists, the faulty global supply chain is to be blamed. Economist Rehman Sobhan, highlighting this very point says the current business model forces suppliers to squeeze their workers as much as they can because they have to produce the shirt at $5. There needs to be investigation into this matter to resolve issues faced by manufacturers.
The Western view
Offering another perspective, European brands say brands and store owners also do not always make profit as they can sell the highest 60 per cent of the items at tagged prices. Of the remaining 40 per cent, 20 per cent are sold at discount prices and the rest 20 per cent are sold at clearance outlets or donated. Mahmud Hasan Khan Babu, VP, Bangladesh Garment Manufacturers and Exporters Association, too echoed the view of the merchandiser. Retailers have the target to sell 75 per cent of the RMG items at tagged prices and the rest are sold at discount prices. Moreover, the companies annually pay millions of dollars to high-ups, he said. Internal unhealthy competition among manufacturers is also responsible for low prices.
Need of the hour
There needs to be an end to such a plight of manufacturers. The low price of garments will continue until manufacturers say no to it. Retailers are getting the products at lower prices because manufacturers are ready to supply them products at the said price point, opines Kutubuddin Ahmed, Chairman of Envoy Group, which exports garments worth a millions dollars every year. Bangladesh should manufacture high-end items apart from basic items for receiving higher prices.
Trade analyst say, apparel exports is buyer-driven and global brands dictate the market. If producers can come to an understanding they will sell a certain product at certain price, they can get a fair price. But that doesn't happen due to intense competition. There are efforts at the international level to bring global brands under the fair trade system but it is not working well. Also, some trade unions and NGOs are trying to set a standard on Asian wage level for apparel workers and if it can be set, producers will get higher prices.