United States (US) and European Union (EU) buyers cancelled apparel orders worldwide amounting to at least $16.2 billion during April-June when the pandemic was at its peak, painting a deeply disturbing picture of irresponsibility at a moment of global crisis, according to an analysis of trade data.
The clothing retailers even refused to pay for goods they asked suppliers to manufacture, according to the research by the Centre for Global Workers' Rights and the Worker Rights Consortium.
In the initial weeks of the coronavirus crisis, the buyers reneged on their financial commitments on roughly $40 billion in orders, the two global organisations estimate.
However, according to OTEXA and Eurostats data, apparel businesses in the US and the EU have plummeted by $17.25 billion during the period year-on-year, while Bangladesh lost $4.34 billion in exports.
In the April-June this year, US brands and retailers took shipments worth over $10 billion from the global suppliers, which was 49% less than they did in the same period a year ago.
During the period, the EU buyers imported $13 billion worth of apparel goods, down by $7.55 billion from the amount in the same time last year.
The trade data analysis on apparel imports was conducted by Mark Anner, professor and director at the Centre for Global Workers' Rights, and Scott Nova and Liana Foxvog at Worker Rights Consortium.
"Given the lead time on apparel orders, the only plausible explanation for most of this drop was brands' failure to pay for apparel they ordered before the crisis – most of which suppliers and workers had already produced," the analysts of the trade research on apparel imports told Just-Style, a UK-based news portal.
According to the Bangladesh Garments Manufacturers and Exporters Association (BGMEA), the apparel industry has faced about $3.18 billion worth of cancellations and withdrawals by international brands and buyers due to the global pandemic.
In Bangladesh alone, more than one million workers were adversely affected, with many being sent home from work without severance or furlough pay, the report reads.
Due to the cancelations, the country's garment exports fell by 85% in April compared to the same month of last year. The exports also fell by 62% and 7% in May and June, respectively, compared to the same period of last year.
BGMEA officials said as of September, about 90% of held-up and cancelled orders have been reinstated. But, the prices of these work orders have shrunk by up to 15% upon the buyers' demand. The buyers are also deferring payments up to 180 days.
Kutubuddin Ahmed, chairman of Envoy Textiles Ltd, said, "From July, we have been getting a lot of inquiries from brands, but order placement was not like that due to the pandemic situation."
The prices that the buyers are now offering have dropped to less than the average production cost, he added
Most of the buyers are concerned about the second wave of the pandemic. That is why they are not placing orders as they did in the pre-pandemic period, Kutubuddin also said.
The research analysts also noted the drop cannot be blamed on government-imposed lockdowns rather than cancelled orders, since figures show substantial losses in export value in countries with strict lockdowns and those without strict lockdowns.
Another finding is a bigger-than-expected decline in unit prices in the US, which fell between seven and 40 cents per unit in March through June 2020. In terms of the $12.2 billion calculated in lost value, "from January through June 2020, there was a net loss of $1 billion due to the decline in prices".
The report added, "While unit prices for apparel tend to decline modestly year over year...The decline in 2020 over 2019 is vastly larger than normal and is driven by the industry's response to the pandemic."