International retailers demand discount from RMG exporters

With dwindling demands in Western markets international clothing retailers and brands are demanding up to 5 percent discounts from Bangladesh’s apparel exporters.

The RMG sector that is already under pressure due to the high cost of doing business faces new challenges for the suppliers who are already grappling with multiple issues amid a volatile global economic scenario.

Some knitwear exporters said the buyers are compelling the suppliers to accept the lower prices warning retailers will not continue placing orders with them if they don’t agree to the new prices. They say sometimes the prices offered are lower than the production cost.

The knitwear exporters said that under the current cost of production situation, local manufacturers need a profit margin of 20 percent to 25 per cent instead of the current 10 per cent to 15 percent.

With a high profit margin the manufacturers would be able to pay living wages to the workers. However, if buyers demand is accepted the gross profit go down to 10-15 percent and net profit would go down to 2 percent an exporter revealed.

The exporters urged the brands and retailers to follow ethical and responsible business practices as local suppliers have spent billions of dollars to strengthen workplace safety in line with the recommendations of the Accord and the Alliance, the two factory inspection agencies backed by global buyers.

They said despite paying a higher tariff for gas and power and spending heavily to establish the safest factories in line with global standards, local textile and garment suppliers are getting the lowest price from buyers.

RMG exporters have also warned that retaining last year’s export earnings would be difficult this year because of the current downward trend of exports induced by the severe fallout of the Russia-Ukraine war. Labor representatives pleaded that the dignity of workers needs to be ensured.

They said buyers need to play a major role to ensure the wage rise by increasing the prices of goods, they said. Brands are making profits whereas workers are facing difficulties, they complained.