Life as we know it went through unprecedented upheaval in 2020 and uncertainty still reigns supreme in the early days of 2021. The fashion industry has been hit especially hard. Western brands and retailers are the primary demand engines for this industry, and for many, revenue streams completely disappeared overnight in March 2020. This led to the delay and cancellation of billions of dollars worth of completed orders, which has had a devastating ripple effect on the lives of low wage workers in developing countries who are dependent on employment in the apparel manufacturing sector. The industry has recovered somewhat, but order sizes are smaller as brands and retailers proceed with caution given the impact of recurring retail store shutdowns, reduced operating capacity, and COVID-19 infection within their own employee base.
The sourcing landscape for the apparel industry will look very different in the next decade. Many brands and retailers had been seeking to diversify their supplier base out of China for several years in response to labor shortages, rising labor costs, and more recently tariffs implemented by the Trump administration in 2018. China is also seeking to transition to a higher value added economic model that is less dependent on low-cost labor, and has removed tariffs on 97% of all products imported from Bangladesh. Now, the US retail industry faces concerns that the Trump administration will implement punitive tariffs on Vietnam, a country whose sourcing volume has grown significantly as brands and retailers actively seek viable alternatives outside of China. Reports of widespread, systemic forced labor implicating the textile and apparel industry in China’s Xinjiang province, along with U.S. Customs and Borders Protection blocking shipments from the region, has accelerated the urgency for investment in viable source base alternatives. The fashion industry, known for its waste and excess, may experience even more intense scrutiny from regulators in years to come as the Biden administration seeks to address factors contributing to climate change.
Wal Mart recently committed to sourcing $10 billion of Indian-made goods each year by 2027. This new export commitment is expected to provide a significant boost to small businesses and will provide hundreds of new suppliers in a wide range of categories, including apparel. Saurabh Kapoor, a Delhi-based apparel supply chain expert and founder of Palette Global, shares his perspectives on the challenges and opportunities that lie ahead for India as a global manufacturing hub and fast growing consumer market.
What are the biggest changes you have seen in India’s apparel sector over the past decade?
The biggest change has been the remarkable growth that the fashion and apparel business community has achieved both domestically and internationally. India is the world’s second-largest exporter of textiles and apparel with a massive raw material and manufacturing base. The textile sector is a significant contributor to India’s economy, both in terms of its domestic share totaling 2% of GDP and its export contributions, totaling 15% of the country’s export earnings. India is on its way to becoming the world’s fasting growing e-commerce market, driven by robust investment in the sector and a rapid increase in the number of internet users.
One of the major changes we are seeing is inclination towards sustainable and circular fashion, with awareness increasing after the onset of the coronavirus pandemic. There are now many new start ups and brands focusing on people and the planet, and developing business models centered around the concepts of redesign, repurpose, recycle, rental, and resale. The mindsets of exporters are evolving as they are focused on designing sustainable supply chains through emphasis on organic and recycled textiles, as well as looking at sustainable packaging solutions.
India has been proclaimed as the “next superpower” in apparel manufacturing but this has yet to truly come to fruition. Why do you think this is? Do you think we are at an inflection point now?
I’d like to highlight that India’s vision for apparel trade is positive and trending in the right direction. However, the growth has been really slow compared to competitor countries like China, Bangladesh, Cambodia, and Vietnam. The reasons of a slowdown in any economy include a lot of factors. Renegotiations of orders by key buyers amid a slowdown in retail demand and continued competitive pressures from peer nations together with high raw material costs and higher air freight charges are likely to put pressure on margins. While government and industry leaders are pushing their way through to increase apparel exports, I believe that the right policies and agreements need to be put in the right perspective to gain momentum. A recent example is the free trade agreement with the UK post-Brexit.
How has the COVID-19 pandemic impacted you personally as a professional working in the fashion sector?
The fashion industry was dynamic and consistently gaining momentum, and the coronavirus pandemic completely broke the rhythm. Job loss has become a phenomenon of the new normal also. My previous job was impacted due to COVID-19, however I feel that some organizations have now started to use COVID-19 as an excuse to cut costs. This situation has given me insight and a better understanding of the organizations around us. It also hurts to see when people have been let go, and retained employees are given promotions and salary hikes. I also see a lot of organizations that did retain all of their employees despite business numbers going down, or in the case of reductions in force, they offered financial aid to employees. With all of the challenges and family to support, I took a decision to start my own venture and take up new projects with my mission to contribute to the lives of people in the fashion trade. With another resurgence of the new coronavirus strain and lockdown, things are starting to look scary. All I can say is I hope things get better soon and the market trends in a positive direction.
What insights can you provide to Western brands and retailers that are looking to grow their supplier base in India?
The aim of Palette Global is to create a bridge between brands and suppliers to ensure smooth execution with complete transparency. We help with design inputs and execution, and vendor sourcing and development. Our focus is on creating a mutual understanding on needs and requirements to achieve common goals. This includes finding the right supplier with quality product, competitive cost and lead times, and building a transparent and reliable supply chain.
What is your perspective on sustainability in relation to your work in the fashion sector?
I remember the times when words like “sustainability”, “ethical”, and “eco-friendly” were rarely used in the public domain. Now after going through 2020, we can safely say the significance of the term “sustainability” has skyrocketed. Its significance and importance is driven by the fact that the fashion, apparel, and textile industries are huge contributors to pollution and damaging the earth’s resources. Fast fashion makes shopping for clothes more affordable, but it comes at an environmental cost.
The fashion industry produces 10% of global carbon emissions and is the second-largest consumer of the world’s water supply. 85% of all textiles go to the dump each year. And washing some types of clothes sends thousands of bits of plastic into the ocean. If we don’t act now, what will we leave for future generations? This question in itself is very concerning and now people, organizations, and allied industries have started to work towards attaining the sustainable supply chain of the future. Circular fashion has defined a new system where our clothing and personal belongings are produced through a more considered model: where the design and production of an item and the end of its life are equally as important.