The complex relationship between distance to market issues and other sales boosting factors is also illustrated by the experience of Turkey in the recession.
Here, lacking a vast domestic market such as China’s, Turkish producers have had to focus on quality and speed to maintain their position in Europe and also have looked to sales in neighbouring countries, where factories can respond to orders quickly.
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Turkey’s US$13.3bn garment and ready-to-wear sector was adversely affected by the financial crisis. Demand for Turkish clothes and textiles slumped in Europe and the US, dropping 15.5% in 2009 on the previous year, said the Aegean Clothing Manufacturers Association (EGSD).
But while Turkey’s higher priced products cannot compete price-wise with Bangladesh, China or south east Asian countries, manufacturers have been focusing on geographical proximity’s ‘fast fashion’ and long standing relationships with European buyers to bolster exports.
Overall, Turkish garment exports dropped across the board in 2009 on 2008, with denim down by 19.9% and T-shirts and sports apparel down 17.4%, according to the EGSD.
However, some product groups were relatively immune to the crisis, such as knitted men’s and boys’ suits, jackets, trousers, swimwear and woven scarves, according to Zuhal Bilek, director of the Istanbul Textile and Apparel Exporters’ Association (ITKIB).
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By GlobalDataTurkish competitiveness
The EU has become an increasingly important market for Turkey ever since quotas on Chinese products were (largely) abolished for all WTO members under the Agreement on Textiles and Clothing in 2005.
“Turkish competitiveness provides opportunities for the European market, whereas in the US market, Turkey is losing ground because of competition with China and other low-cost manufacturing countries. The main reason behind this is that the EU and US markets have different characteristics in terms of distribution channels, consumer demands and buyer characteristics,” said Bilek.
Indeed, while overall exports to Europe declined 15.1% on 2008, it was exports to the US, Canada, Mexico, Norway and Switzerland that witnessed the biggest slide, down 29.7%, according to the EGSD.
“The traditionally good commercial ties between the Turkish garment industry and European buyers has continued thanks to geographical proximity, helping the Turkish garment industry to resist the economic climate in the EU market,” said Bilek.
“However, proximity alone cannot be the main reason of being competitive in one market. Turkey’s competitiveness in the EU market is based on the dynamic and flexible production environment within the industry, its capacity to respond to small orders and that the industry has adapted itself to ‘fast fashion’, which means it can respond to orders at any season of the year.”
On average, Turkish manufacturers take four months to deliver items to European markets, and can also work at shorter notice: they can design, manufacture and deliver orders anywhere between one and three months, a distinct advantage over cheaper manufacturers in the likes of Bangladesh and China.
“The preparation process of a collection can be as short as four weeks starting from design to production and delivery. This period may be even reduced to three weeks (again for Europe) if the firm uses the fabric which has already been produced,” said Bilek.
“Turkey is maintaining and further expanding its competitive features through investing in design and innovation. The apparel industry has been operating as a full package supplier for a long time, and in the last decade the industry has initiated effective steps in order to develop a fashion concept with designs, brands and collections. These features of competitiveness put Turkish apparel industry one step ahead of its competitors.”
Turkey’s advanced design capabilities, and its skills in dyeing, washing and making accessories, puts the industry in a good position to meet the demand of European retailers concerned about high inventory and not wanting to order too many items in the current economic climate.
Furthermore, (and critically for Europe) Turkey is producing goods in conformity with harmonised EU standards and is catering to the rising demand for more sustainable, ethically produced and environment-friendly goods.
Emerging markets
However, with the downturn in exports to the EU and the US, Turkish clothing exporters have looked to emerging markets to pick up the short fall, particularly Africa, central Asia and the Middle East, taking advantage of free trade agreements in the region and Turkey’s strong brand presence – especially in denim – in the Levant.
“Comparing to 2008, in 2009 clothing exporters have realised a growth in African countries and Middle Eastern countries,” said Nedim Örun, president of the board of the EGSD.
Manufacturers are upbeat that demand will increase this year.
“It seems there will be increase in exports in 2010,” said Örun. “Europe and the US have started to recover from the effects of the global economic crisis and we think that this should also effect positively on orders.”
Moving forward, relative exchange rates with the Turkish Lira will become an increasingly important factor for exporters.
By Lee Adendorff in Lucca, Italy; Wang Fangqing in Shanghai; and Paul Cochrane in Beirut.
