The apparel and textile industry seems to be having a tough time as it is, with some bemoaning the upsurge of international online retailers, problems with excess stock leftover after the poor summer weather, and the general anxiety over consumers’ tight purse stings – but is it all bad? Senior industry analyst for IBISWorld, Naren Sivasailam, has spoken to Ragtrader about the future of the textile clothing and footwear (TCF) industry and sheds light into some of the area’s cracks.
From excess pressure on manufacturers to drop prices, to problems with attracting managerial talent to the TCF world, it seems clear that the sector faces a plethora of problems.
Sivasailam says he projects industry revenue to decrease by 6.3 per cent in 2011-12.
“Future projections for the textile fibre, yarn and woven manufacturing industry are not bright,” Sivasailam begins. “Conditions are expected to remain poor over the next five years due to ongoing structural changes within the industry, intensifying competition from overseas imports and uncertainty in the global economy.”
He says as in the past, industry revenue will be influenced by trends in real household disposable income, international demand for industry products, downstream clothing manufacturing levels, retail trade and general macroeconomic conditions.Sivasailam also says that despite falling revenue, profitability has remained relatively constant, largely due to the rise in higher value-added synthetic-fibre textile products that attract higher margins and are therefore more profitable.
But he says at the same time, the industry has struggled to ward off competition from low cost overseas suppliers. Sivasailam stressed that in particular, this has played a role in driving down prices.
“A fall in final consumption has placed extra demands on industry players as to sustain their own profit targets, downstream retailers have exerted considerable pressure on manufacturers to keep prices low,” he begins. “This has made it difficult for manufacturers to pass on any cost increases.”
Sivasailam also says that the international ‘over-capacity’ in the production of industry products has adversely affected the industry by reducing export sales, and that the emergence of textile industries in developing countries has caused the supply of industry textiles in the world to outstrip demand over the last five years.
As a result this has narrowed export opportunities and profits for the Australian industry.
In the five years to 2011-12, the value of the industry’s exports is projected to fall at an average annualised rate of 13.8 per cent.
Sivasailam says that larger companies, such as home-grown business Bruck, which began as a manufacturer and supplier of furnishing and apparel fabrics for fashion markets in 1946, were among the businesses that suffered most from the export declines in recent years.
Since 1970, Bruck has been the major supplier of combat and non-combat apparel fabrics for the Australian Defence Forces and is also a key supplier to Australia’s leading workwear brands that operate at both retail and institutional level.
Sivasailam says the industry has also suffered in recent years from a shortage of skilled labour as low wages, combined with unattractive working conditions, have discouraged skilled personnel from pursuing a career in textile manufacturing.
He also adds that at the same time, the perception of textile manufacturing as a declining industry has made the task of attracting managerial talent more difficult.
“This has reduced the industry’s scope for responding effectively to changing conditions and the scarcity of workers with post-school qualifications is symptomatic of the TCF sector’s failure to implement adequate industry-specific training,” Sivasailam says.
Sivasailam says that competing imports to the TCF industry are expected to decrease by an annualised rate of 2.4 per cent by 2016-17. “This is a much lower rate of decline than previously experienced due to the increasing potential for imports from China.
As many would agree, Sivasailam says that the state of the industry has changed significantly over the last five years.
He says that after a difficult decade, predominantly categorised by falling establishments, lower tariffs, increasing international competition and rapidly declining downstream demand from a shrinking Australian TCF sector, surviving companies have been those able to adapt to changing conditions and offer niche, innovative products.
