Coronavirus: fashion brands cancel orders worth $3bn

Posted by Sino SCS

Fashion brands are failing to take responsibility for ensuring garment suppliers in Bangladesh survive the coronavirus outbreak, according to a report. 

A survey, conducted by Penn State University’s Center for Global Workers’ Rights (CGWR), found more than half (51.9%) of Bangladesh garment suppliers have had the bulk or all of their orders cancelled by buyers. 

“Buyers have a contractual obligation to pay for these orders but many are making dubious use of general force majeure clauses to justify their violations of the terms of the contract,” said Mark Anner, director at CGWR. 

Almost three quarters of buyers (72.1%) refused to pay for raw materials such as fabric already purchased by the supplier, and 91% refused to pay the production costs of the supplier. 

As a result of order cancellations and lack of payment, 58% of factories surveyed reported having to shut down most or all of their operations, and more than one million garment workers have already been fired or furloughed.

Suppliers reported almost all (98.1%) buyers refused to contribute to the cost of paying the partial wages to furloughed workers required by law, and 97.3% refused to contribute to severance pay expenses of dismissed workers, which is also a legal entitlement in Bangladesh.

“All parties are feeling the extreme burden caused by Covid-19. However, not all parties are equally situated to find the liquidity needed to cover their expenses,” Anner said.

“The hit on supplier factories, who generally operate on paper-thin margins and have far less access to capital than their customers, is that much more extreme. And the burden on workers – who very rarely earn enough to accumulate any savings and who still need to put food on the table and possibly cover unforeseen health expenses – is enormous.”

According to data from CGWR, Primark has suspended or cancelled the most orders with suppliers in Bangladesh, worth an estimated $273m, followed by C&A ($166m) and Inditex ($109m). 

H&M and PVH – major buyers of Bangladesh garments – have agreed to pay suppliers for in-production orders.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) estimated $3bn worth of garment exports have been cancelled or suspended as a result of Covid-19. 

Rubana Huq, president of BGMEA, urged buyers to support the apparel industry in Bangladesh as workers lives and brand reputations are at stake. 

“Our factories are about to close. We will have 4.1 million workers literally going hungry if we don’t all step up to our commitment to their welfare,” Huq warned.

“I’m going to appeal to your good senses to kindly take all of your current goods that are under production or ready. Please take them under normal payment terms.”

CGWR top 14 buyer cancellations and holds (including in-process and planned orders)

1. Primark $273m

2. C&A £166m

3. Inditex $109m

4. Mothercare $62m 

5. Bestseller $59m

6. Kiabi $57m

7. VF Corp $56m

8. Tesco $50m

9. Marks & Spencer $39m

10. Khols $39m

11. Walmart $38m

12. LPP $37m 

13. Target $24m

14. JCPenney $23m

Since CGWR published its data, Inditex, Kiabi, Marks & Spencer and Target are reported to have told the BGMEA they would take ready and in-production goods. 

Author Sino SCS
中品供应链-Sino Supply Chain Service