Stockpiled inventories of big names in US consumer markets like Walmart and Target have become a concern for RMG exporters in Bangladesh as the discounted sales of their products in the US will drastically lower the prices offered by the clients.
According to data compiled by Bloomberg, inventories rose $44.8 billion for US companies on S&P consumer indexes with a market value of at least $1 billion that reported earnings in May.
As the glut dented profits at some retailers, with Walmart Inc paying more for storage and Target Corp and Gap Inc cutting prices on key goods, they are considering clearing the clutter with hefty discounts.
Economists expected money allocated toward services would outpace merchandise as pandemic concerns subsided, but both categories have continued to move upward.
In the US, inflation-adjusted spending on services increased 0.5% in April from the prior month while goods rose 1%.
While that leaves plenty of demand for retailers, consumer tastes are changing. For example, shoppers spent more on back-to-work apparel and clothing for special occasions, instead of leisurewear and home goods that were popular earlier in the Covid-19 pandemic.
The companies will have to cut prices in slower categories to make room for in-demand items.
Major Bangladeshi RMG clients like Walmart, Macy's and Gap saw 30-40% rise in unsold inventories that the companies are planning to sell with slashed prices.
Commenting on the situation, managing director of RMG exporter Sasha Denims Shams Mahmud said, "Walmart will do discounting to get rid of the excess stock, this means their future orders will reduce dramatically."
He also noted that because of discounted prices other US buyers will be forced to reduce prices to compete.
"Which will mean lower prices for Garments manufacturers. Because of this most manufacturers will be fighting to get hold of European buyers by offering lower prices. Most European buyers also will reduce orders because of inventory issues and the looming recession," he told TBS.
Shams Mahmud further said turbulent times are ahead for Bangladesh's RMG sector and stakeholders need to coordinate and push forward carefully.
At present, Walmart possesses inventories worth the highest-ever $62.5 billion. RMG products are a significant portion of this clutter.