The main challenge that the global sourcing service companies are facing amid the COVID-19 pandemic situation is a gradual shift from a reduction in the production of raw material to cancellation of orders. This is leading to a massive loss of many apparel sourcing companies in the shadow of COVID-19. In a lot of apparel sourcing companies, a majority of them from the United States, the apparel selling shops are closed due to the global lockdown rules, thereby making the retailers have no other option than to cancel the sourcing orders or to the minimum, postpone the orders.
Because of a trade analysis model following the recursive dynamic model, analyzed throughout the planet, along with the latest databases and outcomes, the impact of COVID-19 situation has had three scenarios. Although they are disgusting, they are most likely to happen in the current year. The countries mainly focused upon are China, United States, and other Asian countries as they are considered COVID-19’s epic-centers. Apart from this factor, the main reason behind focusing on these countries is that they will be economically hit harder in comparison to the rest of the countries in the world during this pandemic situation.
Based on this trade analysis model, there are four preliminary findings. In this context, you will gain insight into the four findings.
- First and the foremost thing that the global sourcing service companies will find is the volume of the apparel trading companies getting hit harsh due to the situation. The global lockdown rules have forced the clothing stores to go under a complete shutdown situation which have directly affected the workers of these stores and companies. The retailers, besides losing their jobs are also financially struggling to earn their daily bread. This tough situation has demanded the top two apparel consumption markets of the world, the United States and the EU to expect a sudden, yet sharp drop. As founded from the trade analysis model, for every one percent drop in the GDP of the US and the EU states will lead to a two to three percent drop in apparel import’s value in the year 2020. Notably, the financial crisis during 2008, had led to a drastic decrease in the apparel value by as much as 11.5% and the GDP had suffered negative growth.
- Secondly, the decline in the apparel import’s value in the US and the EU states will hit China the hardest. The scenarios estimated by the trade analysis model, have found that China will experience the most significant drop in the apparel import’s value. There is a threefold reason behind it: the first factor will be the size effect- because of the large geographical extension it is often expected to fulfill a large and volume sourcing order for the US and the EU states. Therefore, the unparalleled production capacity of this country is considered the biggest reason that will experience a drop. The current situation will call for a majority of order cancellation by the retailers, thereby leading to a disproportional loss of China’s apparel exports. The second reason is the variation in categories covered by the Chinese apparel export. Due to large volume, the China apparel export is expected to cover various sectors and aspects which has also exposed China to cancellation of orders for the US and the EU states. Furthermore, the US-China trade war of 2019 coupled with the COVID-19 outbreak early this year has caused most fashion brands of the EU and the US states to shift their sourcing orders to other Asian countries from China. The sourcing services companies of the US and the EU states will accelerate the shifting process to prioritize the limited resources of the other Asian countries in this difficult situation.
Another severe drop that the US and the EU states will experience is a decline in export from the apparent exporting countries like Bangladesh. Since Bangladesh is another leading exporting country like China, it might as well be exposed to the threat of order cancellation
- Thirdly, the countries that export apparels will be the next sectors affected notably due to a drop in the US and EU apparel imports. It has been calculated that a drop of ten percent in the apparel export’s value typically results in a nine percent change in the garment employment. As a rule, should the EU and the US states suffer a loss of ten percent in the apparel export, the apparel exporting countries like Cambodia, Vietnam, and Bangladesh will have to cut about nine percent of jobs in their apparel sector, accordingly. Moreover, the garment sector is considered the only largest job creator sector in the developing countries, for the local creators like women. Therefore, the main concerning factor for the sourcing services companies during the outbreak of COVID-19 situation is the highly increasing job losses.
- Fourth and the final finding being a change in the apparel trade’s pattern due to the economic performance in China, Us, and the EU states this year. The results of the first and the second scenarios are quite close to each other, suggesting that the three country’s economic cloud will far exceed altogether as compared to the rest of the world. The apparel supply chain across the globe could also experience a turbulent time in this pandemic situation. This experience might as well continue for the next two to three years, even if the pandemic situation gradually tends come under control in the other half of 2020. It is clear from the economic crisis that had occurred in the year 2008, the apparel export’s value dropped by 12.8 percent in the year 2009. However, the growth rate was surprisingly recovered by 11.5 percent in the following year of 2010. Likewise, if the apparel export’s value for the US, the EU, and China increases by the year 2021, both the garment factories and importers will have to deal with another round of labor shortage, which will lead to a decrease in production capacity and increase in the price of raw materials.