To benefit sustainably from its garment export performance, Bangladesh should shift its production capabilities to cater to the higher value-added category of clothing demand.
Bangladesh exports basic garments at the lowest possible cost, unbeatable by any other competitor country. Manufacturing clothes is the most basic link of the fashion industry value chain, as discussed in my previous blog. But can the country get more out of it?
On the one hand, clothes will always be in demand. On the other hand, far from being just a garment to keep one warm and safe against the elements, people wear clothes for a variety of reasons— as a form of cultural identity, to signal one’s income status, a form of self-expression, as a medium of protest or celebration, or to “wear” a wide range of human emotions.
Indeed, psychology and anthropology may have as much to do with the purchase of a garment than economics. For example, Princess Kate Middleton of the UK royal family has made such an impact on the global fashion map that the phrase “Kate effect” was created on her account to describe how items she is seen wearing immediately disappear off store shelves. Such an impact on demand, though massive, is often short-lived and transitory.
Demand for apparel can thus be categorized into two types: (i) demand for basic apparel; and (ii) demand for apparel that appeals to individuality and sense of style and is subject to a smorgasbord of factors that influence perception of quality, brand name, style appeal, trendiness, and other product attributes.
In the first category, the demand for primary articles of clothing like basic shirts, dresses, and jeans worn regularly is driven by price attractiveness and relative durability. There is very little regard for brand influence. Most Bangladesh garment exports fall into this category, as noted in a recent ADB report. The demand is influenced by levels and changes in two important variables – price and consumer income. As income rises, people spend a smaller portion of their income on these types of garments.
Like many top exporting countries, Bangladesh has increasingly started supplying garments to the very active second category. Known as “fast fashion”, it is defined as “low-cost clothing collections that mimic current luxury fashion trends. Fast fashion companies thrive on fast cycles: rapid prototyping, small batches combined with large variety, more efficient transportation and delivery, and merchandise that is presented “floor-ready” on hangers with price tags already attached. The idea is to provide consumers with accessible and affordable clothes at convenient prices, marketed as highly wearable, on-trend apparel that makes the impression of being here today but probably gone tomorrow. H&M, Mango, Uniqlo, Gap, Topshop, and Forever 21 are some of the prominent brands that stand out in the global fast fashion landscape; most of these companies have seen their sale almost double between 2008 and 2014.
While fast fashion has exacerbated something like the ‘Kate effect’, by nature the fashion business is a classic “buyer-driven” global value chain. Unlike producer-driven value chains—where scale, volume, and technology are major determinants of profits—the buyer-driven global apparel value chain brings profit opportunities for specialized services at the beginning and end of the processing. In other words, retailers, designers, advertisers and marketers leverage their talents in high-value research, design, and retail services. It has enabled major advertisers to pierce layers of reason that govern normal spending habits and tweak the average person’s common-sense approach to shopping for apparel.
Moreover, this changing structure of demand relative to price and income sensitivities has an important bearing on trade opportunities for Bangladesh garments. If it keeps exporting the same category of apparel to its traditional markets, even if income rises in those markets, the demand for Bangladesh basic garment exports is unlikely to increase.
To benefit sustainably from its garment export performance, Bangladesh should shift its production capabilities to cater to the higher value-added category of clothing demand. But this may prove very difficult because of the segmented nature of the value chain.
One possibility is to shift gears toward the domestic market, by beginning lines of fashion that can appeal to the growing and vast Bangladeshi middle class. With exposure to media, they can hit the styles for younger people that also appeal to their sense as individuals. An average Bangladeshi spends almost 5% of per capita income on clothing, while the average Japanese and American (whose per capita incomes are 12 and 17 times, respectively, more than that of a Bangladeshi) only spend 2.2% and 2.6%, respectively.
More importantly, this would be a way of developing the types of skills that will allow Bangladesh to move to the “retail” end of the fashion value chain. This has been done in other sectors, like Watsons with appliances by producing refrigerators with features that cater specifically to typical Bangladeshi households, but increasingly using reverse engineering skills to expand to air conditioners, televisions, and motorcycles.
The fragmented nature of this individuality-driven apparel category, in turn, makes for a good environment to use branding to drive demand. Particularly for income-insensitive but socially conscious consumers, branding could also be a vehicle to push issues that go beyond the product itself, like ensuring that clothes are produced in ways that ensure decent working conditions for garment workers, particularly women, as discussed in a recent ADB employment report.
Consumers who find cheap bargains irresistible may not want to be reminded about the labor and compensation practices in developing countries where their shirts and jeans are made. The “Made in Bangladesh” campaign has tried to bridge that image gap somewhat, by creating some doubt, juxtaposing a pretty Bangladeshi model who looks like a factory worker in a provocative pose and tight jeans. The idea is to remind consumers where their clothes are made, and perhaps appeal to a sense of social responsibility that could trump the urge to look trendy.