B2B Payments

Clothing Brands Want Steep Vendor Discounts To Keep Orders

Bangladesh, garment workers, coronavirus, factory, clothing, brands, western,

Big-name clothing brands are either canceling orders or demanding big discounts from manufacturers in Bangladesh, a South Asian country that is already deeply suffering because of the economic fallout from the coronavirus, according to a Reuters report.

Western brands that agreed not to cancel orders are now demanding discounts of up to 50 percent, hurting millions of Bangladeshi households that rely on the clothing industry for survival.

Factory owners said exports were down 84 percent in the first half of April and $3 billion in orders were canceled. Despite a government lockdown, hundreds of workers organized to protest the non-payment of wages.

"We are still observing their departure from original contract terms... which includes renegotiating prices as low as 50 percent of the original deal," Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, told Reuters.

Bangladesh is the second-largest clothing supplier to Western countries, behind China. Over 80 percent of Bangladesh exports are clothing and roughly 4,000 factories employ about 4 million people, mostly women.

"We are not aware of any other brand except one that has declared its plan in detail regarding delivery and payments centrally in black and white," said Huq, citing Swedish fashion giant H&M, the biggest buyer of garments from Bangladesh. "[The] rest have all been conditional, mostly based on deferred payments, discounts and deferred deliveries."

Reuters reported that a government official said it was unjust to cancel or renegotiate orders and “authorities were addressing the issue through diplomatic negotiations.”

Labor activist Kalpona Akter said that it would be the workers who would end up suffering from the renegotiated orders.

"We will be able to see the impact by next month, when workers will have to be paid their Eid bonuses and salaries," she said.

Garment makers in Bangladesh were laid off in massive numbers in March after $3 billion in orders were either canceled or put on hold. Some retailers have agreed to pay what they owe, but many have not.



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