Marc Höft has been working in the apparel industry for thirty years. With his German-based MH Clothes & More company he works internationally in the business of sourcing, production and design. Here, he shares his view on the current economic situation of the global and national fashion industry and what he expects from governments.
“Even though I have been in China quite often and have close contacts there, I would not have seen this Corona tsunami coming.
The shutdown in many countries has given the whole thing a momentum of its own that is very difficult to calculate, and so I believe that those governments that have decreed a shutdown for health reasons must also take full responsibility for the consequences - especially in economic terms.
The German government, for example, should still give a 100% guarantee for all damages – just as it did during the financial crisis ten years ago. Such a guarantee must be made very promptly now in order to avert further insolvencies and to ease the situation.
I myself work – via our producer in Egypt – with a well-known jeans manufacturer who is faced with exactly the problem caused by this lack of reliance by the state: if the financing is no longer secure due to the fact that a bank does not agree with the KFW credit guarantee of 80%, the brand might have to file for insolvency.
This would mean that this manufacturer would have to close down due to various other customer problems (payment defaults!) and 1,600 people would be laid off. Other operations of the customer would also be affected.
Thus, the State/KFW should guarantee 100% of the loans to bridge the deal. Otherwise the jobs of several thousand employees are in danger.
Of course, at the moment I can only refer my proposal to Germany, even if the whole issue must be seen globally, because everything is completely networked.
What also bothers me in terms of politics is the populism that arises when large companies, such as Adidas, for example, are unwilling to pay rents. Sure, in terms of marketing, Adidas has failed at this point. The company should have explained that parts of the rent savings are invested in suppliers to protect them from insolvency.
Of course, something must change, and that includes significantly inflated rents for commercial and private property.
Furthermore, one should finally try to sell products at the right time. If numbers are correct and we are in a position to throw away an estimated 20% to 30% of the ready-made-garments on a calculated basis, we could also produce less and pay more for it.
Then again, the producers could finally be paid fairly. Margins between manufacturing prices (FOB) and retail prices which vary between 1:3 up to 1:10 due to the whole calculation scheme, are not justified and outdated. As we all know in the industry, so far system errors have usually only been compensated for by even cheaper production, which in the end results in products of increasingly poorer quality. It is time to change that.
Last but not least, nowadays we can see how important global solidarity is. Each of us is a costumer and supplier in some ways. That means, we ALL HAVE DIRECT INFLUENCE on how the local, national and global economy works or not.
It depends on our decision whether the trade/everyone in the value chain generates sales and profits, whether the brands, suppliers and employees worldwide get their bills paid and can in turn act as customers and suppliers.
How shall we do it?
We should try to live the same life as before the crisis actually more or less from home (as long as governments dictate).
We should compensate the lack of consumption while supporting local, national and international online businesses, for example by buying vouchers.
It is time to maintain the entire value chain for the time afterwards.
Where does the money come from?
Based on scientific and social findings, politicians have decided to carry out the drastic shut down measures, for a certain period of time, in order to delay the corona pandemic and not to overload health systems and thus to protect older, vulnerable people in particular. This is good and correct.
At the same time politicians have accepted the economic misconduct that becomes currently visible, or will be becoming visible in the next months.
In order to limit the economic negative consequences for the future as much as possible, politics must guarantee to stand in 100% of all costs/missing sales during the shutdown period.
This must be done for ALL companies (no matter what size) and for ALL employees regardless of industries based on the respective average tax data as of 31 December 2019, for the entire shutdown period.
Speculators who are only out, to bet on the loss of other people, companies, countries should be completely exempt from any compensation.
Responsibility and implementation for the compensation lie with the politics and parliaments worldwide and must be worked out in detail as soon as possible. Due to the available digital systems, this should not be too difficult, since most of the tax offices have the data of citizens and companies.
For this purpose, world politics should do everything possible to generate quickly a new summit format, which should not be called G7, but rather G20 or now even G30 to tackle the problems worldwide, in addition to the national obligations.
The goal must be to avert maximum damage from all people.”