Changing scenario: Knitwear demand growing, woven goods under pressure

The pandemic-driven "New Normal" has altered the apparel and fashion industries, as demand for woven garments has decreased while demand for knitted garments has continued to rise.

To meet export deadlines, many Bangladeshi knitwear exporters have engaged in subcontracting to others.

With lockdowns at major export destinations, overall, knitted garments such as T-shirts, track pants, shorts and athleisure wear are selling more than woven wear such as denim pants.

Woven makers said they are waiting for the movement restrictions to be lifted soon, as  European countries and the USA continue mass Covid-19 immunisations.    

In the meantime, apparel makers – both knitwear and woven – have accepted the fact that they will have to do business at the lowest profit margin if they want their production units to keep running.

Some manufacturers, however, opt for running factories at lower capacity, or to suspend production instead of compromising on prices.        

Fazlee Shamim Ehsan, chief executive officer at Narayanganj based Fatullah Apparels, told The Business Standard that his factory had been running at 75% of production capacity for the last couple of months, which has resulted in Tk2 crore loss per month.

"Even with the recurring losses, I will not take any order below the breakeven cost. We prefer giving our workers some rest rather than awarding foreign buyers cheap clothes," said Ehsan, also a director of the International Apparel Federation (IAF).

Fazlul Hoque, managing director of the world's greenest knitwear factory, Plummy Fashions Ltd, said knitwear garment makers are not getting a decent price as yarn prices have on average gone up 60% to 70%.

Fazlul, former president of the Bangladesh Knitwear Manufacturers and Exporters Association, said yarn price accounts for nearly 50% of a product. "But most buyers are not willing to pay more while some offer only 5% of the yarn price hike," he commented.

He said some factories have already shut their production due to the lowest of profit margins, while a number of factories are running at half of their production capacity.

In the meantime, woven sector entrepreneur Imranur Rahman said woven makers ramped up their capacity before the pandemic, riding on export growth, and the enhanced capacity is now mounting pressure on them.  

Imranur, managing director of Laila Group and also  director of the Starling Group, said he has a total of 20,000 employees at eight factories.  

"Most of apparel makers accepted orders below the profit margin only for survival," said Imranur, a newly elected director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Apparel entrepreneurs say if the lockdown in export destinations continues, woven makers will suffer more.  

Mostafiz Uddin, managing director of Denim Expert Ltd and also founder CEO of Bangladesh Apparel Exchange, said woven items like denim will not see the usual demand until the lockdowns are lifted in foreign markets.

Mostafiz explained that people usually wear denim to go to the office, bar, pubs, and clubs. The stay-at-home order means people are okay with fewer denims in their wardrobes.  

Asif Ashraf, managing director of Urmi Group and also a BGMEA director, said they are hopeful about lockdown withdrawal in export destinations soon, as the UK has already initiated measures to lift movement restrictions.

BGMEA Vice president Shahidullah Azim said they are trying to keep the factories running. "If we can survive the pandemic, the sector will benefit in the coming days," he added.

According to Export Promotion Bureau (EPB) data, the apparel sector – the lifeline of Bangladesh's export earnings – has experienced 2.55% negative growth in the nine months of  fiscal year 2020-21.

The readymade garment sector – knit and woven together – fetched$23.48 billion. Knitwear posted 5.85% growth and even exceeded the strategic fiscal target, earning $12.65 billion in July-March.

But the growth was overshadowed by a whopping 10.83% decline in the woven segment, which fetched $10.83 billion.