HONG KONG — Fast-rising manufacturing costs could prove a major threat to the apparel industry — and hit consumers’ pocketbooks.
This story first appeared in the October 12, 2010 issue of WWD. Subscribe Today.
Panelists at the two-day World Apparel Convention held here last week by the International Apparel Federation said higher production costs from raw materials and labor would be passed on to consumers. The rising retail prices could potentially mean the end of cheap and fast fashion, they said.
“Cotton prices have doubled in the past year, but I don’t see this trend continuing,” said Robin Anson, managing director for Textiles Intelligence. “However, I don’t see the price coming down at least for the next crop year. High cotton prices are worrying but not new. We saw a similar spike in the mid-Nineties.”
Anson said the increasing cost of labor is a more worrying trend that is likely to continue, not just in China but also in Vietnam and Bangladesh. He said this was due to an improvement in the quality of life in developing nations and union labor pressure that inevitably occur as economies mature.
Michael Tien, chairman of G2000, a Hong Kong-based retailer for women and men’s workwear, said, “Chinese workers are no longer willing to work miles away from home to only see their family once a year. Minimum wage has already increased twice in the last two years. China is becoming increasingly pro-labor.”
Tien said China’s apparel industry could, over time, become more like that of Italy’s small manufacturing districts.
“This can be a win-win situation,” he continued. “The key to China is how to link the roads and rail. This will be dependent on the government’s plans to develop the country’s infrastructure.”
Anson said the Chinese government is trying to encourage investment in Urumqi in Xinjiang province, where costs are the cheapest in the country. He noted China is investing heavily in high-speed rail technology that could link Urumqi with Germany by rail.
“China has the financial reserves to pay for projects, but lacks resources,” Anson said. “If this comes to fruition, however, it could revolutionize apparel sourcing in Europe.”
Another important issue for the industry groups, fashion brands and fiber makers at the conference was green manufacturing.
Thomas Rasch, director general of German Fashion, an industry federation of about 300 members, said the concept of environmental sustainability has grown to include new areas like human rights.
“Factories are [now] expected to be responsible and to act fairly against both workers and the environment,” Rasch said.
Industry representatives lamented a lack of standardization in green manufacturing practices, but they pledged to work toward a shared agenda.
“The current situation is untenable,” said Antonio Braz Costa, general director of CITEVE, Portugal’s Technological Centre for the Textile & Clothing Industries. “We need to push for industry-wide standards and create conditions where companies will want to adopt similar regulations, not because it is mandatory by law, but because it will make them more competitive.”
Part of the challenge of a collaborative effort, however, was the varying economic conditions within countries, he added.
VF Corp., which owns brands such as Seven For All Mankind and Nautica, has made significant investments in waste-water treatment and solar energy. Thomas Nelson, VF’s managing director and vice president for global sourcing, said he believes steady progress has been made in Asia over the last eight years since the company began instituting best practices for sustainability and energy efficiency at its factories in the region. Nelson said the company’s engineering team has been instrumental in helping to trim waste, maximize shipping capacity and set up metric systems that track progress.
“But there still aren’t enough engineers in Asia,” he said. “They can be a huge return on investment. That is certainly the direction we will go in the future.”