The ‘risky and unbalanced’ trade connections between brands and manufacturers on the continent are described in a new report about fashion production in the European Union as being characterised by small, quick, and inexpensive orders that are hatched under erratic purchasing conditions.
The study, which was released by the Fair Trade Advocacy Office and is based on fieldwork done by Clean Clothes Campaign Europe, uses interviews with suppliers, experts, and trade union representatives in Bulgaria, Romania, Croatia, the Czech Republic, Italy, and Germany to ‘paint a clear picture’ of a general trend of lowering prices, shortening lead times, lengthening payment terms, and increasing ‘hidden’ costs, like initial sample production, being pushed onto garments.
The research claimed that because they are unable to fund investments or make payroll, suppliers are put in danger financially.
The study discovered that written contracts between suppliers and purchasers are uncommon in the clusters it looked at, and when they do exist, they frequently strongly favour brands and shops.
According to the report, the pandemic merely made the power disparity worse. Brands frequently take legal action against suppliers that violate contracts, while the opposite seldom, if ever, occurs.
Price fixing is a contentious issue when it comes to unfair commercial practises. Purchase prices are frequently put out by purchasers or through online auctions with pre-set limits. They often begin by determining the price at which a product must be sold in order to be both widely available and profitable. The study found that sometimes the cost of labour, electricity, raw materials, logistics, and even compliance is overlooked.
The report also noted that providers may be hit with unexpected charges after delivery. They could involve paying the brand back for supposed repairs or fines, or fixing returned deliveries. Payments can be rejected if there are difficulties with quality, according to brands and retailers.
Another issue is the payment conditions. According to surveyed suppliers, a number of companies are increasingly exploiting payment timing to control their cash flow, with delays of up to 120 days after the receipt of goods.
The groups encouraged the European Union to pass a legislation that forbids unfair business practises in the clothing industry, including unreasonable payment delays and markdowns below the cost of manufacture.