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By summer coronavirus will cause sourcing problems in fashion

By Lisa Dartmann

Mar 9, 2020


German exports are growing internationally, but the coronavirus is dampening the mood within the fashion industry. Sourcing bottlenecks in China are causing delivery delays and delivery dates are being postponed.

Until summer, the whole supply chain will work relatively normal, but the autumn/winter 2020/21 season will be fully affected by the virus. A quick survey by the GermanFashion Association has shown that disruptions and delays of up to two months are expected when it comes to delivery dates.

In times of corona, nothing can be predicted

A short ‘hello’ and a nod - in times of the coronavirus, the participants of the GermanFashion press conference greet each other from a polite distance. Gerd Oliver Seidensticker, president of the GermanFashion Association and managing partner of the Seidensticker Group, returned from Asia a few days ago and talked about the professional arrangements and checks that are being made there in public spaces. Marks are worn at the slightest hint of a cold as a courtesy to others and there are hygiene containers at the entrances to Seidensticker's four production facilities. Employees have their temperature checked regularly and anyone who coughs or sneezes is sent home. "Everything is running relatively normal but we have to check processes every week anew", says Oliver Seidensticker.

Image: Gerd Oliver Seidensticker, president (left) & Thomas Lange, CEO of GermanFashion (right)

But in times of the coronavirus, nothing is predictable anymore. The outbreak of the corona virus has hit all industries internationally that are producing in China, but also those in Germany, quite unexpectedly. "The export markets continue to present themselves as pleasantly strong, while we have to deal with a difficult situation particularly when it comes to sourcing", says the president of the GermanFashion Association. That was the reason it carried out a quick poll among its 350 members; 77 companies took part and answered questions until the end of February. About the participants: While 58 percent of the participating companies produce menswear, 21 percent produce womenswear. A quarter of the participants have their own production facilities abroad, 46 percent buy finished products and the remaining 29 percent use subcontractors.

Less than one third of all Chinese manufacturers operate with a full workforce

How bad are the consequences and what is the assessment? Less than a third of all production facilities in China are currently operating with a full workforce. Participants are divided when it comes to the situation in China: As a sourcing country, China cannot be replaced in the short or medium term, especially not through rash replacement solutions. "Some companies will certainly consider in the future how they can make their highly developed supply chain insensitive to disruptions like this", explains Thomas Lange, CEO of GermanFashion.

The good news is that the delivery for the current spring/summer 2020 season is relatively unaffected. In the second half of 2020, however, fashion companies will have to prepare themselves for considerable market disruptions. Forecasts for autumn/winter 2020-21 are muted and uncertainty is high. Around 55 percent of those surveyed expect deliveries to be delayed by more than two months. Lost revenue is correspondingly high, as the amount of production cancellations will hit companies hard in the winter months. Subcontractors will also be hit by revenue loss. With regard to sourcing prices, almost two thirds of the companies expect low to medium increases.

Few can change sourcing structures at short notice. Many fashion companies are thinking about moving to other international markets. A relocation of production to Europe would only affect small quantities of the entire production process, as capacities for large-scale production are not available, shows the evaluation of the GermanFashion survey.

Export: German brands are popular the world over

With a decrease of only one percent last year, the German apparel industry got off lightly in 2019. It generates an estimated turnover of around 11 billion euros per year. "With a slight loss of around one percent in 2019 compared to the same period last year, the overall sales of the apparel industry show a situation in line with the moderate expectations of last year," describes Gerd Oliver Seidensticker the economic framework.

With a slight increase in 2019, China continues to lead the list of major apparel importing countries. Bangladesh remains firmly in second place according to import statistics, followed by Turkey, Italy, India, Vietnam, Cambodia, Pakistan, the Netherlands and Poland.

With a plus of 5.6 percent, apparel exports continue to be the pillar of the German fashion industry. On the non-European market, German manufacturers achieved a sales increase of two percent. "With their quality, good fit and design, German brands enjoy a very good reputation and hold their own against international fast fashion suppliers," emphasizes Gerd Oliver Seidensticker.

The ranking of the top ten exporting countries is as follows: Switzerland, Poland, Austria, France, Netherlands, Italy, United Kingdom, Belgium, Spain and Czech Republic. The forecast: The GermanFashion Association does not expect sales to increase this year, as developments are constantly changing. Consumers would certainly not notice any of this.

Click here to see the latest updates on how Covid-19 is affecting the international fashion industry

This article was originally published on FashionUnited DE. Edited and translated by Simone Preuss

Photo: Unsplash