US professors blame retailers for garment industry's cut-throat prices
By Simone Preuss
29 Jun 2015
Two US professors put the blame on retailers for cut-throat prices and stiff competition among garment manufacturers, showing how drastically apparel prices have fallen in the US in the last few years and how retailers are taking the major share of the profit.
“The retailers can squeeze the prices as the competition among the apparel manufacturing countries is very stiff and as there is smaller number of apparel retailers in the world against a large number of manufacturers,” opined Mark Anner, associate professor of labor studies and employment relations at Penn State University, and Jennifer Blair, associate professor of environmental sociology and gender at the University of Colorado.
The two professors presented the results of their study "Prices and Development in the Global Apparel Industry: Bangladesh in Comparative Perspective" at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) in Dhaka last Thursday, June 25th.
'Monopsony' puts pressure on apparel makers
They termed the imbalance between apparel retailers and manufacturers ‘monopsony’, noting how the situation helps big buyers to put pressure on apparel manufacturers to reduce prices. As an example, they quoted the prices of men's and boys' cotton pants produced by Bangladeshi RMG factories, which have fallen by 41 percent in the last 14 years, and that despite inflation.
To withstand this pressure, the apparel manufacturers have to increase their efficiency in order to stay competitive and survive. However, the gains in efficiency are captured at the top of the supply chain, not at the bottom or at consumer level, the professors argue. To break up the monopsony, they suggest that market players should share information and establish coordination so that weaker actors get to address this power imbalance in the supply chain.
Consumers should also put pressure on brands and retailers and request ethical and better prices for clothing found the Bangladeshi researchers present and requested the professors to disseminate their findings among US consumers.
“The US government has a role to play. It can help increase the prices of Bangladeshi RMG products as the buyers are paying lower prices to the manufacturers and selling the clothing at higher prices to the consumers,” said Nazneen Ahmed, senior research fellow of the Bangladesh Institute of Development Studies (BIDS). Since consumers are not getting the benefits of buying products at lower prices and the brands are making hefty profits, the US government should take the matter into its own hands, she added.