*Elizabeth L. Cline
Publish: 10 May 2020, 09:02 pm
“Buyers paying up now will make the difference for suppliers of going out of business or surviving.”
In March, brands and retailers cancelled orders worth billions. Now, as countries ease out of lockdowns and the apparel industry scrambles to make up for lost sales, the story is one of clothing companies demanding steep discounts of their factories and holding payments for completed goods. It’s a problem that’s much harder to track than outright order cancellations, but manufacturers say it’s just as harmful.
“If I don’t get my money back, I will not have a factory,” says Mostafiz Uddin, a denim supplier in Bangladesh whose buyers, he says, include Peacocks, Global Brands Group, which produces wholesale products for brands including Jones New York, and Arcadia Group, which owns a number of retailers, including Topshop, Topman, and Burton Menswear. Uddin says he is owed $10 million in total from buyers and was forced to accept a 30% discount on a large order of jeans already completed and shipped for Burton Menswear, putting him at a loss. “That means I am making the jeans for free and my workers made the jeans for free. It’s blackmail.”
These companies have not returned requests for comment.
With bills stacking up, and months of slow to no work ahead of them, a number of factories in Bangladesh say they are at risk at going under in the very near future, putting a 4.1 million-person workforce at risk and threatening to erase the nation’s climb out of poverty. Uddin has launched a donation fund to pay his staff and his bills. His fabric suppliers are starting to shake him down for money that brands owe him. And across Bangladesh, factories are owed a staggering $5 billion for orders, most of which are already completed and shipped (that’s 15% of the country’s annual apparel exports), according to new estimates by The Daily Star.
Most anywhere you look in garment-making countries, the story is the same: Brands continue to view pushing their financial problems onto factories as a viable way to shore up their flailing businesses. “I am losing hope,” says Uddin.
Some clothing companies maintain they’re going to pay their suppliers, but on-the-ground reports show that when and how much brands agree to pay makes the difference between survival and closing up shop.
In a report in The Daily Star, interviews with over two dozen local suppliers reveal that clothing companies are demanding up to 50% discounts on already shipped goods and six-month delays in payment for completed orders. Perhaps most surprisingly, they are also refusing to pay for orders until after they are sold in stores, and based only on a percentage of sales, which could mean factories not getting any money until the end of the year.
What all of this adds up to is factories operating without cash. Mass layoffs have begun and increasing social unrest is just around the corner warns The Daily Star’s executive editor Syed Ashfaqul Haque, in a text to me via WhatsApp. “They won't be able to pay workers if these payments are not released right away.” As garment workers head into the EID religious holiday, on the weekend of May 23, he foresee more demonstrations and increasing violence, as factories are unable to pay wages and bonuses.
Most suppliers in Bangladesh are fearful of speaking out against their buyers, especially big brands. “I talked with over two-dozen factories. All of those were asked to stay ‘shut-up’ [by brands] if they want to continue business,” says Haque. Uddin is one of the only factory owners in the world naming brands and describing in detail what’s happening to his factory and to others. He fears that he’s been blacklisted from future business as a result.
In this environment, it’s virtually impossible to know when factories are agreeing to renegotiate terms because it’s tenable for them versus those that are being coerced or have no choice but to accept some money over no money. We may only find out as factories start to close for good. And unlike in the West, there will be no bankruptcy proceedings to save them.
According to a Brand Tracker, regularly updated by the Worker Rights Consortium, over a dozen large companies, including Uddin’s buyers, as well as Primark, Bestseller, Walmart (Asda), Under Armour, Kohl’s, Ross Dress for Less, Urban Outfitters, and Gap Inc. (Old Navy, Athleta, Banana Republic), among others, have cancelled orders or renegotiated payment terms to demand discounts and payment delays.
Some, like Gap Inc., a major buyer in Bangladesh that, in April, cancelled orders through the fall, is now asking for 10% discounts on shipped goods, according to a local supplier in Bangladesh who wishes to remain anonymous. When contacted for comment, a representative sent a statement saying the company is “identifying those products we can sell in the short-term, those we can store now to sell later, and those orders we need to cancel.”
Other companies, like Walmart, which owns Asda (its George brand cancelled orders, according to the WRC Brand Tracker), say they’re working with suppliers “on a case-by-case basis.” But consumer activist groups, like Remake, are pressuring companies through its #PayUp social media campaign to keep their original purchase order terms, including paying in full and on time.
“It’s clever PR,” says Ayesha Barenblat, Founder and CEO of Remake. “We’re running out of time, and these brands are forcing factories out of business by asking for discounts and renegotiating terms on original contracts.
Labor rights experts agree that buyers negotiating with individual suppliers can be a way to cover up putting pressure on factories. “A better approach is to make one clear, public commitment to pay in full for all liabilities for in production and completed orders,” says Mark Anner, Director of the Penn State Center for Global Workers’ Rights, and who helps update the Brand Tracker.
To date, there are 13 large brands and retailers who are paying in full and according to the terms of the original purchase orders, including global giants H&M, Zara, Nike, Target, VF Corporation, PVH, UNIQLO, and Adidas. Anner says these commitments has helped unlock an estimated $600 million owed to Bangladesh’s factories and as much as $7.5 billion globally. (Disclosure: I have joined the calls for brands to honor their contracts and pay factories in full and based on the original terms of their purchase orders.)
The list of brands that have cancelled or have asked for discounts and delayed payments is much longer. We may never know the list in full. But Anner says that it’s not too late for any of the clothing companies to make their factories whole. “Buyers paying up now will make the difference for suppliers of going out of business or surviving.”
* She is a journalist, public speaker, and the author of Overdressed. Her writing has appeared in The Los Angeles Times, The Atlantic, The Nation, and The New Yorker.