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“The Low Price” of the textile discounter KiK – consequences for labour conditions in textile factories in Bangladesh: Difference between revisions
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“The Low Price” of the textile discounter KiK – consequences for labour conditions in textile factories in Bangladesh (view source)
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===== The Bangladeshi garment and textile Industry ===== | ===== The Bangladeshi garment and textile Industry ===== | ||
“Since 1990, Bangladesh has experienced a spectacular growth in the area of clothing and textiles. Whereas the value of exports amounted to 600 million US dollars in 1990, this rose to nearly eight billion US dollars in 2006. The reason: Bangladesh is one of the poorest countries in the world and, in the past, with favourable customs regulations, was able to export clothing to Europe and the USA without quantitative restrictions. However, in other countries, the bulk buyers, in accordance with the Agreement on Textiles and Clothing of the World Trade Organisation (WTO), restricted imports through quotas. Bangladesh was able to take advantage of this trading advantage, in order to establish itself alongside the textile giants China, India and Hong Kong on the world market.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 29).</ref> The export products of Bangladesh shifted from raw material, like jute, and jute products (90%) to clothes based on cotton. The problem is that cotton has to be imported first before it can be part of the garment production. “Bangladesh’s clothing industry did not collapse after the phase out of the Agreement and its preferential treatment.” “In most factories, labour laws are being massively violated. Thus, the extremely low wage level is the main reason for contracts with buyers from the EU and the USA not being lost. Low wage costs make it attractive, i.e. cheaper, for buyers to allow production to continue in Bangladesh – at the cost of the workers, who, with these wages are barely able to survive.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 30)</ref> | “Since 1990, Bangladesh has experienced a spectacular growth in the area of clothing and textiles. Whereas the value of exports amounted to 600 million US dollars in 1990, this rose to nearly eight billion US dollars in 2006. The reason: Bangladesh is one of the poorest countries in the world and, in the past, with favourable customs regulations, was able to export clothing to Europe and the USA without quantitative restrictions. However, in other countries, the bulk buyers, in accordance with the Agreement on Textiles and Clothing of the World Trade Organisation (WTO), restricted imports through quotas. Bangladesh was able to take advantage of this trading advantage, in order to establish itself alongside the textile giants China, India and Hong Kong on the world market.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 29).</ref> The export products of Bangladesh shifted from raw material, like jute, and jute products (90%) to clothes based on cotton. The problem is that cotton has to be imported first before it can be part of the garment production. “Bangladesh’s clothing industry did not collapse after the phase out of the Agreement and its preferential treatment.” “In most factories, labour laws are being massively violated. Thus, the extremely low wage level is the main reason for contracts with buyers from the EU and the USA not being lost. Low wage costs make it attractive, i.e. cheaper, for buyers to allow production to continue in Bangladesh – at the cost of the workers, who, with these wages are barely able to survive.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 30).</ref> | ||
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===== In general : How discounter determine the prices ===== | ===== In general : How discounter determine the prices ===== | ||
"The retail houses and discounters have developed enormous economic power. They are able to determine the prices and are interested in keeping them down. Producers in Asia, Latin America and Eastern Europe are powerless. They have to swallow whatever the corporations dictate.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 8)</ref> | "The retail houses and discounters have developed enormous economic power. They are able to determine the prices and are interested in keeping them down. Producers in Asia, Latin America and Eastern Europe are powerless. They have to swallow whatever the corporations dictate.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 8).</ref> | ||
“In 1992, Germans spent 64 billion Euros on clothing, but only 56 billion Euros in 2005. This lower expenditure, however, does not mean that, in terms of volume, less is actually being purchased. Indeed, the very opposite is the case.” “In other words, we are consuming<br>more, but more cheaply. More and more goods are on offer for ever-decreasing prices.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 10)</ref> | “In 1992, Germans spent 64 billion Euros on clothing, but only 56 billion Euros in 2005. This lower expenditure, however, does not mean that, in terms of volume, less is actually being purchased. Indeed, the very opposite is the case.” “In other words, we are consuming<br>more, but more cheaply. More and more goods are on offer for ever-decreasing prices.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 10).</ref> | ||
“The largest discounters pay their suppliers up to 15-20 percent less for their goods than normal department stores (ActionAid,2007, p.16). Because of the great amounts of goods they can order, they are able to force down purchasing prices to an enormous extent.”<br>”Suppliers in developing countries are becoming increasingly dependent on a few multinationals and their importers. With continually decreasing prices, they force down wages. Ultimately, it is the garment workers in the factories who suffer.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 10)</ref> | “The largest discounters pay their suppliers up to 15-20 percent less for their goods than normal department stores (ActionAid,2007, p.16). Because of the great amounts of goods they can order, they are able to force down purchasing prices to an enormous extent.”<br>”Suppliers in developing countries are becoming increasingly dependent on a few multinationals and their importers. With continually decreasing prices, they force down wages. Ultimately, it is the garment workers in the factories who suffer.”<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 10).</ref> | ||
“The phase-out of quotas led to price reductions and strong competition among the poor countries that export clothing and whose national income is heavily dependent on exports.” “The poor countries, competing to retain their clothing industry, try to offer the lowest wages. If, however, one looks at the various cost components from the viewpoint of the buyer/company, wages only account for 0.5-1 percent of the ultimate selling price of the product, as the following chart illustrates. In contrast, marketing and advertising, as well as the profit for the company in Germany/ Europe amount to about 25 percent of the endselling price. An increase in wages is, therefore “peanuts” in the eyes of the buyer.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 13)</ref><br><br> <br> | “The phase-out of quotas led to price reductions and strong competition among the poor countries that export clothing and whose national income is heavily dependent on exports.” “The poor countries, competing to retain their clothing industry, try to offer the lowest wages. If, however, one looks at the various cost components from the viewpoint of the buyer/company, wages only account for 0.5-1 percent of the ultimate selling price of the product, as the following chart illustrates. In contrast, marketing and advertising, as well as the profit for the company in Germany/ Europe amount to about 25 percent of the endselling price. An increase in wages is, therefore “peanuts” in the eyes of the buyer.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 13).</ref><br><br> <br> | ||
[[Image:Costs.jpg|frame|center| | [[Image:Costs.jpg|frame|center|600x300px|Costs.jpg]] | ||
This figure is adapted from the brochure of the CCC.<ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 13).</ref> “Only around 14 percent (factory and wage costs) remain in the country of production, e.g. Bangladesh.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 13).</ref> | |||
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===== Purchasing practises of business companies: three tendencies ===== | ===== Purchasing practises of business companies: three tendencies ===== | ||
<u>1) Cheaper: </u><br>• Prices are dictated, the producer in Bangladesh take such small prices because they otherwise loose the job. “Suppliers are threatened with being removed from the lists, if they do not reduce the price.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 16).</ref><br>• Although the costs for energy have raised, the prices for garment still decline. <br><u>2) Quicker: </u><br>• “Collections change more and more frequently: In the past, there was a change twice per year; today, depending on the retailer, such a change can take place up to 12 times per year.”<br>• “Delivery times are becoming shorter and shorter.”<br>• “Today, buyers, with the help of global electronic networking, are able to control the entire value chain. In the internet, contracts are awarded with the help of “online reverse auctions”. Those wishing to make an offer can see what price the others are offering, leading to scandalous underbidding. Interested parties have to act quickly since a contract can be awarded within a few hours. The supplier, therefore, does not have much time to make his calculations.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 16)</ref><br><u>2) Risk-shifting:</u><br>• “Suppliers have to adjust to the fact that merchandise, depending on sales levels, can be ordered at short notice. Companies reduce their stock levels to a minimum in order to cut costs. “Quick response” is a form of information technology, which functions as follows: “Once per week, usually on a Sunday after weekend trading, the company sends an order to the supplier, who receives it on Sunday evening. He then has to deliver the goods by Wednesday.” (Abernathy et al 2005). The company not only saves storage capacity, but also passes on all risks to the suppliers (that have costs for the purchase of materials).” <br>• “Suppliers are increasingly being forced to take on more tasks formerly carried out by the textile trader. Thus, more and more suppliers have to buy cloth and yarn and other accessories (buttons, zips, etc.) at their own risk. Buyers are, thereby, able to reduce delivery times and cut costs.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 16).</ref><br><br> | <u>1) Cheaper: </u><br>• Prices are dictated, the producer in Bangladesh take such small prices because they otherwise loose the job. “Suppliers are threatened with being removed from the lists, if they do not reduce the price.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 16).</ref><br>• Although the costs for energy have raised, the prices for garment still decline. <br><u>2) Quicker: </u><br>• “Collections change more and more frequently: In the past, there was a change twice per year; today, depending on the retailer, such a change can take place up to 12 times per year.”<br>• “Delivery times are becoming shorter and shorter.”<br>• “Today, buyers, with the help of global electronic networking, are able to control the entire value chain. In the internet, contracts are awarded with the help of “online reverse auctions”. Those wishing to make an offer can see what price the others are offering, leading to scandalous underbidding. Interested parties have to act quickly since a contract can be awarded within a few hours. The supplier, therefore, does not have much time to make his calculations.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 16)</ref><br><u>2) Risk-shifting:</u><br>• “Suppliers have to adjust to the fact that merchandise, depending on sales levels, can be ordered at short notice. Companies reduce their stock levels to a minimum in order to cut costs. “Quick response” is a form of information technology, which functions as follows: “Once per week, usually on a Sunday after weekend trading, the company sends an order to the supplier, who receives it on Sunday evening. He then has to deliver the goods by Wednesday.” (Abernathy et al 2005). The company not only saves storage capacity, but also passes on all risks to the suppliers (that have costs for the purchase of materials).” <br>• “Suppliers are increasingly being forced to take on more tasks formerly carried out by the textile trader. Thus, more and more suppliers have to buy cloth and yarn and other accessories (buttons, zips, etc.) at their own risk. Buyers are, thereby, able to reduce delivery times and cut costs.” <ref>Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf (p. 16).</ref><br><br> | ||