Experts from the apparel sector revealed that the current challenges faced by the industry surpass even the hardships witnessed during the COVID-19 pandemic and the 2008 financial crisis. A combination of factors, including economic indicators, geopolitical issues, and the evolving landscape of global supply chains has contributed to the crisis that demands strategic adaptation for survival.
MAS Chief Growth Officer Malik Ahamadeen, expressed concerns about the impact of high-interest rates in major markets. “The high-interest rates in the US and Europe have put significant strain on consumer spending, leading to challenges in our order books. This is a hurdle that is arguably more formidable than what we experienced during the pandemic,” stated Ahamadeen. The ripple effects of this economic strain have affected several high street brands, with the industry grappling to sustain demand.
The rising inflation rates and their subsequent impact on consumer spending have added to the industry’s woes. Ahamadeen noted, “Inflation is a silent killer for consumer purchasing power. While some larger retailers may weather the storm, many high street brands are facing difficulties in maintaining profitability.”
Ahamdeen was speaking on November 28, to Capital Alliance on their webinar ‘The Future of the Apparel Sector in Sri Lanka’.
Ahamdeen said, “All the guys in Colombo are overexposed to the West.”
Unemployment rates, a crucial factor influencing consumer demand, were highlighted as a pivotal concern. Positive trends in reducing unemployment have historically been associated with increased consumer spending.
“Reduced unemployment is typically good news for our industry, but in the current scenario, the challenges seem to outweigh the benefits,” Ahamadeen added. The discussion also touched upon the evolving dynamics of global supply chains, with the “China Plus One” strategy taking center stage.
The discussion emphasized the need for diversification and explored the potential opportunities for Sri Lanka to attract business, particularly in the wake of increased wages for apparel workers in Bangladesh due to protests. Ahamadeen commented, “This presents a strategic window for us. Brands are reconsidering their reliance on Bangladesh, providing us with a chance to offer alternative sourcing options.”
The crisis also prompted discussions on the potential of opening up sampling capacity through development centers in China. This move could expedite product development and capture demand in China, adding a layer of complexity to the ongoing industry transformation.
Amid these challenges, the experts addressed the impact of talent migration out of Sri Lanka, particularly during a time when retaining skilled individuals is crucial for navigating the industry’s turbulence.
Hela Apparel Private Label CEO Viraj Fernando speculated about potential expansions into Africa. Fernando hinted at the possibility of exploring new markets and diversifying sourcing locations.
This strategic move could provide a lifeline for the beleaguered apparel sector, opening up avenues for growth and resilience in the face of unprecedented challenges. TP
