India’s Covid Crisis Has Ripple Effects On The Garment Industry Around The World
As the coronavirus pandemic ravages India, forcing garment factories to close or half-work to stem new cases, retail suppliers scramble to move production to China. But with trade war tariffs still in effect, the change could mean higher prices for American consumers.
Infections have increased in India since February, with more contagious variants spreading as massive crowds gather for religious festivals and political rallies. With around 22 million confirmed infections, health experts have warned that the worst is yet to come.
While clothing suppliers say they can absorb costs in the short term, analysts say retailers will eventually have to raise prices, unless suppliers can find less labor and production options. dear.
“Once India reopens, things will come back because the consumer cannot be touched,” Brett Rose, CEO of United National Consumer Suppliers, an international wholesale and distribution company, told NBC News. “Now more than ever we want to buy new shirts, new pants and new bags. A closed factory doesn’t help that.
As the number of virus cases in the United States continues to decline, spending is increasing in anticipation of in-person socialization, office life, and in-person return to school. Consumer spending, which accounts for two-thirds of economic growth, rose 10.7% in the first quarter, according to the Commerce Department. Stimulus checks have inflated some wallets and personal household income is at an all time high. Growth in gross domestic product reached 6.4% in the last quarter.
“It’s just a perfect storm right now,” said Rose, whose partner factories in India are not expected to resume production until June 7. “We just must be running out of fabric.”
India accounts for about 16% of textiles imports to the United States and about 5% of clothing and accessories, according to an analysis of United States International Trade Commission data by the Peterson Institute for International Economics. Although the country accounts for a lower fraction of imports than China, it still plays an important role in some sectors, including raw gemstones, making it difficult to move supply chains outside the country, said Mary Lovely, principal investigator at Peterson. Institute and professor of economics at Syracuse University.
“If India were to disappear from the face of the world, you would definitely notice an impact on manufactures, textiles and industrial products and things like fabrics and towels,” she said. “You don’t just move supply chains. They are not like pins on a map.
Gap Inc. CEO Sonia Syngal told investors last week that the company faces supply chain and raw material issues in countries where it sources, including India.
“We are taking a close look at all of this and are working hard to do what we have done, which is to use our pricing power to compensate for all these problems,” she said.
Williams-Sonoma, Inc., which owns West Elm and Pottery Barn, also reports that it has “increased” backorders related to production issues in India, Laura Alber, CEO of Williams-Sonoma, said at the meeting. ‘a call for results last week.
The global pandemic has put additional stress on the already strained fast fashion workers. Gokaldas Exports Limited, an apparel maker that supplies retailers such as H&M, Gap, Walmart and Abercrombie & Fitch, closed one of its factories last year and laid off more than 1,200 employees as customers canceled orders and dealt with excess inventory starting in the spring of 2020.
As another wave of the virus forced factories to close, Gokaldas CEO Sivaramakrishnan Vilayur Ganapathi told investors in May that the company was “exploring options” for working overtime or on weekends for respect the order deadlines after the blockages imposed by the State have been lifted.
“The clothing industry has traditionally been a labor-intensive, low-wage industry,” Ganapathi said. “It requires a highly efficient manufacturing capability and supply chain management capability to handle the large number of SKUs that we produce. “
Orders to India that typically ship within 30 days now take 70 days, Rose said. Not only are Indian factories at a standstill, freighters are overloaded as companies rush orders across seas to fill store shelves, driving up shipping prices.
However, this latest increase in pressure on manufacturers is expected to ease in a few months, Rose said.
“There’s going to be an inflection point where businesses can only bear a certain load,” he said. “Something has to give for the consumer. “