Apparel Online Bangladesh Magazine January Issue 2019 | Page 32

INDUSTRY DIARY - 2018 THE LATEST NEWS HAVE YOUR SAY For the latest news on apparel and textile, make sure that you visit https://apparelresources.com/top-news/ Write to Apparel Resources, B-32, South Extension-1, New Delhi (110049), India or email: [email protected] Managing Director, CJ International << It is a hard question to answer… Taking into account the increasing cost of living and the welfare of the workers, I have to agree that the move to increase their salary and the quantum of salary hike is rationale. However, at the same time, I also feel that increase in minimum wages will have an adverse impact on the Bangladesh apparel industry at least in the short run. This is so because Bangladesh’s unique selling point has always been the low cost criterion and not value addition. The consumer, on the other hand, puts pressure on the retailers to push for compliance and fair wages but they are unwilling to pay a reasonable price for the items that they buy. Currently, a cup of coffee in Europe would cost as much as a cheap T-shirt; and the consumer would expect the T-shirt to last for a few seasons or years. In my opinion, if we can move from low price being our unique selling point to value addition being our strength like that in other countries like Sri Lanka, I feel we would then have a much better chance for sustainable growth. << Roshan Withanage Janos Horvath Vice President (Intl. Sales), Wilcom International Pty Ltd. The answer to this question revolves around three vital points, which are: Sustainable Business Model: In today’s competitive world, many business people look for quick profit and one of the easy ways to achieve this is through low wages. There are, however, many components of the business model that are fundamental to provide sustainability and long-term perspective to a business. I would mention two of them here: brand image and trust of customers. These factors are of intangible value, and it takes a long time to build them but can be lost much faster and easily. However, they strongly underpin the long-term success of business. We know that after the tragic industrial accidents in past few years, the reputation of Bangladesh employers has been tarnished in countries where the buyers are from. And many people ask how is it possible to buy a T-Shirt at K-Mart in Australia for as low as US $ 5 when shipping, storage and floor space must cost around the same? The gut feeling of people suggests that price cannot be that low without extreme exploitation of the workers. Value Addition – Aiming for Niche Markets: Plain garments can be produced by machines with very little human intervention. And people do not buy them because they need to stand out from the average and they need to wear something of value. Hence, there is not much profit in such products unless we aim for very large 32 Apparel Online Bangladesh | January 2019 | www.apparelresources.com volumes. But ultimately, a business needs to increase not volume but profit. And this can also be done by adding more value to the garments in the form of ornaments, decoration by embroidery or printing. Creating smaller series of product volumes with variation and adding a ‘unique’ feel can result in value addition. This requires more skilled workforce and such workforce needs to be paid better, so that they are motivated to learn and aim for higher skilled jobs. Export Markets vs. Domestic Markets: Twenty years ago, when I started to work with Indian customers, almost everyone was an exporter. Today, most of the Indian garment industry works for the domestic market. This growth has only been possible because there is a middle class of three hundred million people with huge buying power, people who have money to spend. Higher paid workers will spend more money and this money recycles, and helps to grow the economy. It creates a better balance between export and domestic markets. This means that garment factories can diversify and should not be exposed to only one market but should balance the business between multiple demand cycles. An old business wisdom is to have many small customers instead of a big one because what happens if you do not get orders from the big customer? Your business goes down because you have no other source of income.