Business is going better again at German fashion chains. But the industry is struggling with the subdued buying mood. Some large companies have recently gone bankrupt.
Corona has taken a toll on fashion companies: rising prices, a lack of raw materials, supply chains that no longer work. But now there seems to be a trend reversal. Last year, some unfavorable developments calmed down again, reports the President of the German Fashion Association GermanFashion, Gerd Oliver Seidensticker. Sales have increased.
Seidensticker speaks of an increase of 10.8 percent. “Both the logistics costs and the raw material prices have fallen to a tolerable level,” says Seidensticker. This means investments are possible again. Staff has been hired. According to evaluations by the Federal Statistical Office, the number of employees has increased by almost four percent.
Rather bleak prospects
However, these figures cannot hide the fact that the industry is facing major challenges. Overall, after a difficult 2023, things will continue to be difficult in the fashion industry this year. Large chains such as Peek & Cloppenburg, Bree, Gerry Weber, Hallhuber and Galeria Karstadt Kaufhof have had to file for bankruptcy in the past few weeks and months. The fashion chain Sør, whose headquarters is in Mönchengladbach, was also recently affected. Sør cites the energy crisis and reduced purchasing power among consumers as the main reasons.
“The increase in sales and the achievement of the pre-pandemic level is fundamentally a good sign, but the mood is depressed due to the economic situation,” said Seidensticker: “A representative survey among our members shows stagnating sales expectations for 2024 with simultaneous negative developments of earnings. Overall, the assessment of the economic prospects for 2024 is worse than at the beginning of last year.”
More flexible supply chains
But there are also success stories. The Dutch-German fashion chain C&A wants to expand its branch network in Germany. According to its own information, the textile retailer currently operates 388 branches nationwide and will soon have more than 400. The goal is also to become more flexible in the procurement of goods. “We want to become less dependent on Asia,” said C&A Europe boss Giny Boer.
The reason for this is the vulnerability of the supply chains. “We have seen how fragile they are more often recently: in the pandemic, because of the blockage of the Suez Canal and now because of the attacks in the Red Sea,” said the C&A boss: “In order to be able to react more flexibly, we want to sell our goods in the future a wider range of countries.” In addition, C&A has reduced its range by 30 percent.
Strong competition from Asia
When it comes to supply chains, Western companies also have to prepare for a completely new form of competition from Asia. The rapid rise of Chinese online textile retailers such as Shein is putting local fashion chains under increasing pressure.
Shein, like other Chinese competitors, contrary to usual practice, initially accepts small initial orders, which are then increased depending on demand. With this flexible supply chain, they can implement a completely different business model than the fashion retailers from Europe. They try to predict what will be particularly trendy and align their production accordingly in advance.
The challenges are very different in the different segments. The tie industry recently reported a dramatic slump because people are dressing more and more loosely in the office. According to figures from the Federal Statistical Office, which were provided by the fashion association GermanFashion, imports to Germany fell by two thirds between 2014 and 2023.
Exports are rising again
Overall, exports for clothing manufacturers are going better again. Due to the development of new markets and an intensification of exports to proven markets, an increase of almost eleven percent was achieved, reports GermanFashion. According to General Manager Thomas Lange, exports account for almost half of total sales at 43 percent. “This makes it clear how export-heavy the clothing industry is,” says Lange.
The most important export countries for Germany are Poland, Switzerland, Austria, the Netherlands, France and Italy. However, less was imported. The reason for this is that a lot of goods were produced in 2021 and 2022. A lot of inventory was therefore delivered to the stores in 2023. The most important production countries in the industry are particularly affected by this minus, namely China, Bangladesh, Turkey, Vietnam and Italy.