Fashion

GLOBAL INVESTOR 1.16 — 49
T
he fashion industry is truly a
global industry with a rather long
and complex supply chain – from
fibers (natural and man-made)
and yarn production via fabric formation and
finishing to garmenting, designing and retailing.
Not too long ago, the fashion industry
was a rather “local” industry in the sense that
most textiles and garments were designed
and produced in relative proximity to the
end-consumer market – fashion products
bought by European consumers were mainly
produced within Europe and/or in the immediate
periphery, such as in Turkey or North
Africa. The same was true for North and
South America, Asia and Australia.
Since the late 1990s and early 2000s,
the fashion industry around the globe has
been faced with structural and rather disruptive
changes. These changes stem from
different directions – global economic integration
(globalization), technology (e-commerce,
digitization) and sustainability (social
and environmental concerns) – and are in
many ways interconnected.
Globalization
in North America with the North American
Free Trade Agreement (NAFTA).
In this context, an additional acceleration
and hence a disruptive change to the fashion
industry was certainly the phasing out of the
Multi-Fibre Arrangement (MFA) at the end of
2004, together with the accession of China
into the WTO in 2001. The MFA regulated
the world trade in textiles and clothing from
1974 through 2004 by imposing quotas on
the amount developing countries could export
to developed countries. After 2004, trade in
textiles and garments was not restricted by
quotas anymore, but integrated into the regular
WTO framework of tariffs. China’s entry
into the WTO marked another disruptive
change simply due to the fact that a country
with around 1.3 billion people suddenly became
part of the global economy.
The impact of these two major developments
for the fashion supply chain was farreaching.
Suddenly, an enormous pool of
highly motivated workers became available at
relatively much lower costs. As a consequence,
more and more retailers and fashion
brands around the world started sourcing in
Asia in general, and China in particular. In
1990, China’s textiles and clothing exports
amounted to USD 16.89 billion (8% of global
textile and clothing exports). In 2000, textile
and clothing exports had already reached USD
52.21 billion (15% of global textile and clothing
exports). Data from the World Trade Organization
show that by 2014, Chinese textile
and clothing exports had soared to USD
298.27 billion, or a global share of 38%.
According to the International Textile Manufacturers
Federation publication “International
Textile Machinery Shipment Statistics”
(2015), investments in new textile machinery
in China skyrocketed in the last decade. In
the year 2000, investments in new spinning,
texturing, weaving and knitting machines in
China’s textile industry represented around
20% of global investments. In the following
years, this number jumped to 50%–60% in
spinning machines, 65%–75% in texturing
machines, 60%–80% in weaving machines,
60%–75% in circular knitting machines and
40%–80% in flat knitting machines. In other
words, every year since 2004 on average
more than half of all new textile machines
were installed in China.
Technology
With the spread of the Internet in the 1990s
and the acceleration of the number of Internet
users together with a higher speed in the following
years, new opportunities opened up
for everyone. Suddenly, the Internet not only
offered possibilities to display products and
services, but products could also be increasingly
ordered online. While e-commerce
seemed initially to be limited to a few categories
of products like books, DVDs and CDs,
this changed tremendously. As a consequence
of continuous and significant technological
progress in the past 15 years with
regard to applying new technology (e.g. mobile
phones, touch screens, apps, 3D animations,
e-payment systems, etc.) people can
now buy all sorts of products and services via
the Internet, including textiles and apparel.
According to a 2013 report by Euromonitor
International on global apparel distribution and
market performance, Internet retailing of apparel
in 2007 was only 3% of total retail sales.
In 2012, this share had already doubled
A new wave of global economic integration
started after World War II with the establishment
of international institutions like the International
Monetary Fund (IMF) and the
predecessor of today’s World Trade Organization
(WTO), the GATT (General Agreement
on Tariffs and Trade). The main objective of
these new institutions was to facilitate
cross-border investments and trade of goods
and services among countries around the
world. Alongside these international institutions,
regional economic integration also intensified,
whether in Europe with the European
Economic Community (EEC) which
eventually became the European Union (EU),
or the European Free Trade Area (EFTA), or
Shipped short-staple spindles 2000–14
Following China’s joining the World Trade Organization in 2001, domestic textile production –
and as a consequence the requisite investment in new textile machinery – took an immediate and
sustained leap. Source: ITMF
in m
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2000 2002 2004 2006 2008 2010 2012 2014
World China