Article by Dr. Luigi Bertorelli, International Coordinator, Textile/RMG Component of BQSP originally published in “The Daily Star” 5 November 2006
Distribution channels differ greatly across the EU member states. The UK has a high concentration of distribution, which is reflected in the relatively low market share of independent retailers. The southern member states, Portugal, Italy and Spain, however, have high market shares for independent retailers. These retailers buy mainly from manufacturers and wholesalers/importers, contrary to Germany, The Netherlands and Scandinavia for instance, where many independent retailers are members of buying co-operations.
In order to define the best sales and marketing strategy in Europe some background market information shall be given.
Margins are under continuous pressure in the major EU countries. Consumer expectations with regard to lower prices, in particular, as well as tough competition have resulted in the retailer's needs for lower inventories, less out of stock and lower markdowns. Consequences for the buying policy are: fewer pre-seasonal orders, more collections per season, investment in seasonal planning and control, co-operation with suppliers (quick response/electronic data interchange), and fewer suppliers.
The need to reduce costs has provided the main driving force behind the development of foreign garment sourcing for the markets of importing countries. As a result, production has migrated to a growing number of developing countries, as buyers have sought and are still seeking for ever lower-cost locations. In practice, it is not a question of looking for the lowest wages but looking for manufacturers with the "lowest overall manufacturing costs". The best value is not necessarily created in countries where labour costs are lowest. Instead, it tends to be generated in factories where management are best able to manage costs and productivity and where technology is used cost effectively. In other words, the skill and circumstances which contribute to achieving the best value are factory-specific rather than country-specific.
Minimising purchasing costs implies that many buyers try to limit the number of supplying countries and the number of individual manufacturers they deal with. Sourcing policies are made on two levels, country level and company level. On country level, aspects like quota, duty rates, ethical aspects, wage structure, distance, local infrastructure, economic and political stability play a role.
Other aspects like fast reaction, speed to market, logistics management, quality, production facilities, design capacity, availability of raw materials are not country-specific.
The EU apparel market is complex and sophisticated. Major apparel brands from EU countries (Italy, Germany and France) including premiere collections and more affordable brands compete in the high-price segments with famous names from the USA, Switzerland and in the case of swimwear from Australia. Cheap, mass-produced items from low-cost regions such as China, Southern Asia, Mediterranean and CEECs compete in the low-price segments. The movement away from cheap products (with low relation to fashion and comfort) to mid-price segments including products of higher quality and more individual clothes, offer interesting possibilities to exporters. In this segment, European as well as foreign retailers (clothing chains, buying and selling organisations, mail-order companies, department stores) operate with their own private labels, sometimes combined with branded products (for an increasing part sourced outside the EU) and also with non-branded or fancy branded items. A polarisation of brand leadership also appears likely in Europe: retailers in Germany, UK, France and other EU countries are clearly aiming to replace manufacturer brands with their own identities in the middle market, leaving the upper market to designer brands.
The opportunities for Bangladeshi exporters to choose their distribution channels depends on external (demand and requirements of importers/buyers) and internal factors. The choice on the most suitable distribution partners and various distribution channels in the EU, their role, perspectives as well as their advantages and disadvantages for suppliers must be deeply investigated.
There is no EU quality standard for outerwear. Most of the importers (manufacturers, wholesalers, retail organisations etc.) work with their own minimum requirements. In this respect they have formulated and stipulated minimum quality requirements, relating to both materials and make.
At the moment, the most important environmental and health issue in clothing trade is product legislation. EU product legislation on environmental and consumer health and safety issues is compulsory, therefore of utmost importance. For instance, legal requirements on dangerous substances such as certain azo dyes splitting off carcinogenic amines. The necessary EU requirements, applicable in all EU member states, include: azo dyes in garments, nickel, flame retardants, cadmium, PCB/PCT and asbestos. In addition, legislative requirements in Germany (azo dyes, formaldehyde, PCP, covenant on children's clothing, chromium, disperse dyes, dioxins and furans), the UK (regulations on flammability) and The Netherlands (azo dyes, formaldehyde in textiles with skin contact, PCP) are outlined when they are additional to EU legislation. These three countries are chosen, because they are relatively pro-active in their legislation. Please note this does not imply that there is no additional relevant legislation in other EU countries. Most of the EU legislation mentioned is directly applicable to foreign firms supplying products to a European country, for instance through their own foreign sales outlet. However, products are often put on the market indirectly, through importers. In most cases this makes the importer responsible for the product. Importers might therefore encourage or even force foreign suppliers to meet certain standards, for example through legally binding guarantees.
