This article of @voguebusiness explains that retailers are busy right-sizing their inventory. That doesn’t bode well for garment workers, who may be even more vulnerable amid rising prices and stagnant wages than they were early in the pandemic. [Retailers, facing an inventory crisis, are cancelling orders again – Vogue]
Brands and retailers are struggling with rising costs, excess inventory and unpredictable consumer demand. Researchers, labour advocates and trade union representatives say garment workers are paying the price as retailers resort to cancelling orders in order to get costs and inventory levels under control. For many, it’s déjà vu.
“We know what workers have been through during the pandemic, in terms of how hard they were hit financially. Now the cost-of-living crisis — I don't think I can overestimate how significantly this is impacting workers,” says Thulsi Narayanasamy, director of international advocacy at the Worker Rights Consortium.
Amid the retail shutdown early on in the pandemic in 2020, fashion brands faced global backlash for order cancellations and delays that left suppliers on the hook for millions of dollars and countless workers in manufacturing countries, from Bangladesh to Ethiopia, without pay. A coalition of non-profits including Remake launched a campaign, #PayUp, calling on brands to pay their suppliers; and many did, campaign organisers say. Despite backlash around brands legally avoiding paying for their own orders, and suppliers making the unprecedented move of speaking publicly about their struggles, the industry dynamics that created the situation in the first place did not change.
While brands may have stringent social and environmental standards on paper, it’s up to suppliers to actually meet them, and on the whole, there’s been a downward shift in what brands are willing to pay suppliers, according to researchers. That limits what suppliers are able to do for both their environmental footprint and their employees. And, while fashion brands are increasingly setting lofty sustainability goals, the spotlight is usually on things like emissions targets, and the wellbeing of supply chain workers rarely features prominently in ambitious sustainability strategies. The Bangladesh Accord, a binding agreement that measurably improved factory safety after the Rana Plaza disaster in 2013, expired last year. Many international brands have yet to sign on to the renewed version — and even as the only major effort targeting social standards in the supply chain, it focuses on factory safety, not on worker wellbeing and wages.
Now, orders are once again being cancelled and labour advocates are worried about the implications for workers, particularly amid such rapid inflation. Retailers including Target, Walmart and Macy’s have said during recent investor calls that they are cancelling or reducing orders as they struggle with losses and excess inventory. Those conversations do not detail how those actions impact suppliers — if the companies pay factories for orders they’ve cancelled, for example — and spokespeople for the companies did not respond to or declined to answer questions about whether they paid suppliers for cancelled orders. Paid-for cancelled orders would be an improvement over past order cancellations without pay, but experts warn that there are still ramifications for suppliers.
A slowdown will have ripple effects for workers, who will inevitably see a reduction in hours. “If you were doing a lot of overtime, of course it’s exhausting but the income helps you adjust for that inflation. It’s really the combination of inflation and the cutback in hours — that’s what’s devastating,” says Mark Anner, labour and employment relations professor at Penn State University and director of the Center for Global Workers’ Rights.
Other groups, including Remake, Worker Rights Consortium and the Business & Human Rights Resource Centre, report that, based on supplier surveys or reports from field researchers, wage theft and other worker abuses are on the rise in Bangladesh, India, Pakistan, Cambodia and elsewhere. These are actions that take place at the supplier level, which researchers say are a direct result of the position that brands put suppliers in through their buying practices.
While inflation is causing hardship worldwide, it impacts vulnerable populations disproportionately. With no reported increase in wages and some still trying to recover unpaid wages, and food and fuel prices rising fast, garment workers are facing a perfect storm.
“Wages haven’t gone up since 2018, and everything we know about inflation — not only is there not an increase, but there’s devaluation of currency and suppliers pay for materials in dollars but workers are paid in the local currency,” says Anner. “It’s just another way to squeeze down on labour. They pay the biggest burden of the current downturn we’re seeing.”
Foreboding quarterly earnings
On their August earnings calls, Macy’s and Target both acknowledged struggling with excess inventory. In an effort to align inventory levels with consumer demand, “We effectively pulled the appropriate levers to manage inventory productivity while flowing fresh inventory to meet our customer needs,” Macy’s chairman and CEO Jeff Gennette said during a call with investors in August, adding that they still have “opportunities to improve our inventory balance” by channel, store, brand and category.
Target’s extra inventory “would have presented an ongoing burden to our supply chain and store teams”, chairman of the board and CEO Brian Cornell said on the company’s August call with investors, and instead of taking a “passive position, our team chose a more decisive path, aggressively reducing the inventory we already owned and cutting back on receipts for the back half of the year”. Walmart “cancelled billions of dollars in orders to help align inventory levels with expected demand”, executive vice president and CFO John David Rainey said on an August investor call, in addition to discounting merchandise to help clear excess existing inventory.
Target declined to answer questions about how it has reduced either inventory or commitments, including whether it has avoided taking ownership of products it had previously ordered. The company also declined to comment on the broader concerns of workers' rights advocates that order cancellations ultimately result in worker exploitation or wage theft; or on inflation and what, if anything, the company is doing to ensure workers in its supply chain are receiving a living or even minimum wage. A spokesperson shared a press release from June detailing Target’s inventory optimisation plan, which included “additional markdowns, removing excess inventory and cancelling orders”, saying the company has nothing more to share at this time. Macy’s declined to comment, saying it has nothing to add beyond what was said during its Q2 earnings call and sharing a link to its supplier code of conduct. Walmart did not respond to requests for comment.
Brands and retailers have been heavily discounting products as a way to deal with the excess inventory. Gennette of Macy’s talked about markdowns and promotions and anticipating a need to liquidate “aged inventory” during the call with investors, for example. And Nike is planning aggressive liquidation, in addition to staying “on the offence” and monitoring the effects of inflation on consumer demand.
Brands’ ability to discount at will and influence consumer behaviour for the benefit of their bottom lines underscores the power differential between brands and suppliers, labour advocates say, with workers paying the steepest price. Wages are often regarded as more malleable than suppliers’ many other fixed costs, and there is no real hard cap on the number of hours people can work, in the way there is a firm limit to how far fabric can be stretched or how much dye is needed to produce a garment. This leaves labour as the only place where factory owners can find corners to cut, say supply chain researchers — and they do so because their relationships and contracts with brands and retailers leave them little other option.
“Brands have been discounting as a way to entice people to purchase more clothes, and I think that's really telling because they’re not taking into account that it is putting incredible strain at the bottom of the supply chain. There’s absolutely no indication that brands are increasing their costs to ensure that labour’s covered,” says the Worker Rights Consortium’s Narayanasamy.
Research carried out by the Business & Human Rights Resource Centre, according to the organisation’s labour rights project manager Natalie Swan, shows that even normal wages for garment workers are, on average, more than four times less than what they need to live on.
The impacts that workers are experiencing now are compounded, in many cases, by the financial setback they faced when order cancellations two years ago caused widespread layoffs, which the Worker Rights Consortium said in an April 2021 report was followed by widespread wage theft. Some of those cases have been resolved, says Narayanasamy, with brands ensuring that workers received the money they were owed. Others, including Nike and Uniqlo owner Fast Retailing, have yet to resolve claims of wage theft that arose early in the pandemic, according to the Business & Human Rights Resource Centre. Nike did not respond to requests for comment, and Fast Retailing declined to comment beyond what it told the BHRRC in July, when it said it had verified that the factory completed workers’ payments in accordance with the ruling of the supreme arbitration tribunal.
“We’re still working on multiple severance cases where workers lost their jobs — and even if they got new jobs, they didn’t get what they were legally owed. That’s put workers in a really precarious position,” says Narayanasamy. “It is part of the long-standing impacts that have come from the retroactive cancellation by brands. That was never made up for. They bounced back, they started dispersing profits to their shareholders even while workers hadn't been paid.”
It’s the ongoing pattern that has advocates worried: while brands have recovered from early-pandemic struggles and have begun cancelling orders again to stay ahead of shifting demand projections, workers are facing another wave of challenges similar to those they endured two years ago — with little recourse and without the benefit of global attention on brand behaviour, which is what enabled the PayUp campaign to score the wins it says it did.
“We didn't learn anything from March 2020. We are just at the beginning of this economic worry, and it's worse now than it was at the start of the pandemic,” says Ayesha Barenblat, founder and CEO of Remake. “Every time a brand faces any economic pain, it's pushed on the workers.”
