FT has a long read on the global textiles trade. Outsourcing and offshoring of manufacturing has doubtless helped hundreds of millions of people out of poverty. The textiles industry has been one of the biggest beneficiaries.
But it has come with its costs. And it goes beyond the commonly cited example of sweat shops. For a start, like elsewhere the industry has become more concentrated.
In 2019, 97 per cent of profits in the industry were generated by just 20 companies.
Similarly, the industry is characterised by an exploitative contract manufacturing business model, whereby retailers and fashion brands in developed markets contract with large manufacturers in developed countries. The former captures a disproportionately large share of the profits from the sale of a cloth.
Further, as the Covid 19 pandemic has demonstrated, the business model itself transfers risks to the contract manufacturer,
Elizabeth L Cline, an author on labour rights and environmental practices in the fashion industry, argues that outsourcing has enabled retailers to distance themselves from risks in the supply chain. “Even though brands control everything about the supply chain, they’ve set it up so that workers cannot ask for what they need,” she says. The system is designed to operate similarly to the business model of gig economy companies such as Uber: “Let’s pretend our essential workers are not our employees and leave risk with people least equipped to deal with it.”
And the bargaining power with these manufacturers, even among the biggest ones, is very small, even when the retailers have defaulted on taking delivery and making payments on orders placed by them, as has become widespread during the Covid 19 lockdowns,
Mostafiz Uddin, boss of Bangladeshi clothes manufacturer Denim Expert says he will not take legal action against clients that have left him with hefty bills. “If I sue, I will forever be known as the supplier that sued its client. I would likely be finished as a business,” he says.
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