economic crisis 2009 india

economic crisis 2009 india

Global Outlook: What Can The Apparel Industry Expect In 2009?

Background

At The Beginning Of 2008, The Apparel Industry Was Focused On Fears That Chinese Prices Would Go Through The Roof As Rising Wages, New Labour Laws, Worker Shortages, The Appreciation Of The Yuan And Higher Exporting Costs Took Hold -Sending Many Buyers In Search Of Cheaper Suppliers Elsewhere.

Three Major Regulatory Threats Also Topped The International Apparel Trade Agenda: The End Of US Safeguard Quotas On Some Chinese Textile And Apparel Imports, The Risk Of Anti-Dumping Actions Against Certain Apparel Categories From Vietnam, And The Imposition Of Import Monitoring On Shipments Of Apparel From China To The European Union (EU).

Just 12 Months Later, Though And It’s A Very Different Picture. The Global Economy Has Ground To A Halt. The US, Japan, Most Of Continental Europe, Parts Of Asia And Possibly Australia Are Expected To Join The UK In Recession This Year; Growth In Most Emerging Markets Is Faltering; And The Currency Markets Are In Chaos, With The British Pound Sitting At A 23-Year Low Against The US Dollar.

Among The Hardest Hit Are Clothing Stores, As Shoppers Largely Cut Back On All But Essential Purchases And Trade Down To Discount Brands. Official Figures Published By The Commerce Department, For Example, Show US Retail Sales Fell By More Than Expected In December As Shoppers Cut Back Over The Holiday Shopping Period. Sales Fell By 2.3% At Department Stores, While Clothing And Accessories Purchases Dropped 2.5% And Are Now 7.1% Below The Level Seen A Year Earlier.

Governments Around The World Are Using Every Weapon At Their Disposal To Fight The Crisis, With Economic Stimulus Packages And Cuts In Interest Rates Aimed At Rousing The Financial Markets And Encouraging Consumer Spending. But All These Efforts Are Going To Take Time For Consumers To Feel The Benefit And To Start Shopping Again In Any Meaningful Way.

Not Surprisingly, The Sourcing Landscape Is Changing Too. Retailers Are Overstocked; They Have Too Much Inventory, And Are Cancelling Orders. In Future, It Seems, Buyers Will Want Smaller Quantities, On Shorter Lead Times -Which Mostly Means Trying To Find Value For Money Sources Closer To Home.

Retailers And Importers Are Also Faced With The Pressure That The Financial Turmoil And Economic Recession Have Weakened Their Purchasing Power. Input Costs Have Come Crashing Down And China’s Share Of Western Clothing Imports Has Risen There Are Fears Of Widespread Civil Unrest In Supplier Countries, Including China, As Hundreds Of Thousands Of Workers Are Laid Off And More And More Young People Join The Labour Force With Little Hope Of Finding A Job. Measures Taken By Individual Countries To Shore Up Their Clothing Exports-Such As A Series Of Tax Rebates On Chinese Exports-Also Substantially Change Their Relative Competitiveness.

The US Textile And Apparel Industries Also Have To Deal With The Uncertainties Of A New Administration In Washington For The First Time In Eight Years. The Election Of New US President Barack Obama, Who Took Office On 20 January, Has Given Rise To Fears Of A Protectionist Stance Against Foreign Clothing Suppliers Like China.

Even Though Times Are Tough, There Are Still Opportunities To Be Had. Retailers That Have A Clear Idea Of Who Their Target Market Is, And Can Give Their Customers What They Really Want, Will Be Best Placed To Ride Out The Storm And Could Even Gain Market Share.

Setting The Scene

The Fallout Of The Global Banking Crisis Has Already Taken Some Fashion Victims, With Mervyns, Steve And Barry’s, Woolworths And Marchpole Holdings Falling Into Difficulties Last Year. There Was No Reprieve For Retail Businesses In The Final Week Of 2008 Either, With Chains Including Adams, The Officers Club, Morgan And USC All Filing For Administration During The Festive Period.

“The Fashion Retail Sectors Have Already Shown That They Are Not Immune To The Global Banking And Economic Crisis” According To The Ian Mcgarrigle, The Chair Of The World Retail Congress Advisory Board.

He Also Said “We Have Seen To What Extent They Have Been Affected By The Series Of Trading Updates That Were Released At The End Of 2008 By Retailers In Europe And The US. Even Inditex And H&M Have Reported A Dramatic Slowdown In Their Growth.”

Difficulties Ranging From Attaining Credit To Reducing Operating Costs Are Set To Continue This Year, With The Weaker Companies Likely To Fall By Wayside In A Tough Marketplace.

Undoubtedly Apparel Retailers Are Feeling The Effects Of The Banking Crisis Because So Many Are Carrying High Levels Of Debt. The Rapid Expansions That Have Seen Over The Last Five Years Or More Have Been Fuelled By Companies’ Ability To Raise Money From Banks.

It Is Inevitable That The Global Financial Crisis, Which Is Leading To The Recession In UK, And US Will Result In Much More Consolidate Marketplace. Whats More, Larger And More Resilient Players Like Nike, VF Corporation And Inditex Group Will Be Able To Pick Up Business Units For A Bargain Prices.

Unfortunately, This Consolidation, Together With Tighter Inventories, Store Closures And Cost Reductions, Are All Likely To Result In Job Redundancies Typically Associated With Recession.

“The Banking Crisis Will Undoubtedly Lead To Casualties In 2009 As Consumer Spending Continues To Fall Away As Many Predict. What We Will Also See Is That, Just As With Woolworths In The UK, Even If A Business Or Consortium Wants To Buy A Failing Retailer, The Banks Will Be Very Unwilling To Finance The Deal. So, The Traditional Pattern Of Consolidation And Takeover That We Have Seen In Other Recessions May Not Happen As Businesses Simply Go Under And Disappear,” Says Mcgarrigle.

It Was A Week That Will Go Down As One Of Wall Streets Worst And Global Stocks Were Sent Tumbling. Eventually, Three Of The Iceland’s Largest And Most Highly Indebted Banks- Kaupthing, Glitnir And Landsbanki- All Collapsed Amid The Turmoil And Were Nationalized By The Icelandic Government.

The US Government Formulated A US$700bn Bailout Package For Its Financial Institutions, But Much Of The Damage Is Done For Many Listed Companies And Their Consumers. However, Government Bailouts For Car And Steel Manufacturers Raise The Prospect Of These Safety Nets Being Extended To Other Industries Too.

Looking Ahead To 2009, Retailers Will Be Forced To Continue To Make Cut Backs, But They Will Resist As Long As Possible, Reducing Staff Levels In Store Where They Can Make A Real Difference In Winning Business. For Some Retailers This Might Mean Cutting Back Or Postponing International Expansion Plans.

“But There Are Enough Examples Now Of Retailers That Are Seeing Strong Growth Rates From Their International Operations Compared To Their Domestic Business, To Show The Way Forward For Retailers.”

The BRIC (Brazil, Russia, India, China) Economies Remain The Favoured Destinations Even Though Russia And India Have Seen Slowdowns In Their Economy. But Compared To The Rest Of World, Their Growth Makes Them Highly Attractive Still, Coupled With The Fact That The Rise Of Property Prices There Has Now Stopped And Is In Decline.

The Apparel Industry Is More Prepared For A Slowdown In Consumer Spending Than They Have Been In Previous Years. Advancement In Technology, Inventory Control And Product Life Cycle Management Tools Will Help Companies Be More Responsive To The Economic Climate. Those With The Best Product Life Cycle Management And Inventory System In Place Will Fare Better.

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Article By Fibre2fashion

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