Market Survey Textile Germany En

The European Union’s Tacis Programme for Moldova

Support to Export Promotion and Investment Attraction in the

Republic of Moldova

Export Marketing Survey:German Market for Textile and Clothing

June, 2010 Author: Jens Hauser

This project is funded by the European Union

A project implemented by GFA Consulting Group in consortium with IDI

This Project is financed by the European Union

Support to Export Promotion and Investment Attraction in

the Republic of Moldova

EuropeAid/126810/C/SER/MD

This Project is implemented by a Consortium led by GFA Consulting Group

Table of Contents

1 INTRODUCTION AND METHODOLOGY I

2 MAIN FINDINGS – EXECUTIVE SUMMARY III

3 OVERVIEW OF THE GERMAN TEXTILE AND CLOTHING MARKET V

3.1 PRODUCTION v

3.2 CONSUMPTION iii

3.3 PRICES v

3.4 TRADE - EXPORT and IMPORT vi

4 MARKET ACTORS AND ENTRY IX

4.1 Trade Channels and Market Actors ix

4.2 Retail Structure and Trends x

4.3 MARKET ACCESS REQUIREMENTS xi

5 EXPORT OPPORTUNITIES AND OBSTACLES XIII






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1 I N T R O D U C T I O N A N D M E T H O D O L O G Y

The following market survey has been produced within the framework of the European Commission project “Support to Export Promotion and Investment Attraction in the Republic of Moldova”. The project is implemented by a GFA Consulting Group led consortium. The project intervention areas are:

Component 1

Support to Ministry of Economy and Trade and its agencies in coordinating and improving Moldova’s export and investment promotion systems

Component 2

Support to Ministry of Agriculture and Food Industries in enhancing its system of testing laboratories

Component 3

Support to Moldovan enterprises in accessing export development financing

Component 4

Export promotion

Component 5

Investment Promotion

The market survey provides Moldovan producers of textile products (clothing, outwear) with an overview on the German market for the respective products. Furthermore trade channels and market access requirements are outlined as well as major market actors in Germany. In addition, the market survey findings are matched to the Moldovan production and export capacity in order to give recommendations on export opportunities and obstacles.

The survey starts with a general description of the German apparel market, outlining production and consumption of outerwear, as well as trends. The market description intends to provide a sectoral overview. At the end of the description the pricing and trade in the apparel sector will be highlighted.

In the following trade channels and practice, as well as market access requirements will be presented. This chapter aims to provide Moldovan clothing producers with information on the common trade practice and logistical requirements of importers, as well as legal and technical requirements formulated by EU and German policy makers.

Finally, using the information presented in the previous chapters, as well as information on the Moldovan garment sector, opportunities and obstacles for Moldovan producers will be formulated.

The information presented in this market study is based on quantitative and qualitative data, attained via desk research and interviews. Quantitative data sources include CBI (Centre for Promoting Imports from Developing Countries), Statistisches Bundesamt, EUROSTAT, as well as data from the German apparel associations. Interviews with German market actors have been the source for the qualitative data.

Methodology






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2 M A I N F I N D I N G S – E X E C U T I V E S U M M A R Y

Germany is the largest clothing and outerwear market in the EU with a total consumption of about 51 billion € in 2009. The German clothing industry is the second largest consumer industry, only excelled by the food and beverage industry.

Germany is the 3rd largest producer of clothing in the EU. For more than 30 years the German clothing sector is facing a far‐reaching structural change, mostly due to low‐cost competition from Asia. As a consequence most German manufactures have developed an outsourcing policy as part of their restructuring process. The clothing production has been relocate to countries with low overall manufacturing costs, while central functions like design, procurement and marketing are still based in Germany. Basically all German clothing manufactures have more or less turned into creative and flexible trading enterprises with external job order production. At the same time the German clothing companies orientated more towards foreign markets, nowadays having an export share of about 40%.

The trend in production goes towards the purchase of finished goods, while in‐house and job order production abroad is getting less. The concept of Fast Fashion is a clear trend in the production of higher quality clothing. The concept implies shorter intervals between collections / fashion lines, which in turn means that smaller, quickly changing lots of clothes are produced.

Germans spent less than 5% of their disposable income on clothing. Germany has an average price level for clothing in comparison with other EU countries. The market for clothing is becoming more mature and saturated, with abundance of producers and retailers offering fashionable clothes.

German consumers are price sensitive and are mindful of a good price‐quality ratio. Furthermore there is a clear tendency towards individualisation of consumption, leading to differentiated customer request.

The overall development of the market reflects the growing disparity between the different economic strata of German society, and the increasing number of poor and relatively poor German residents. Thus many German consumers with lower incomes seek low‐price clothes in a steadily growing discount sector. On the other hand, quality and convenience will become more important, and the youthful outlook of the older consumers will strengthen designer and sports labels.

The men’s wear market is expected to become the most dynamic, driven by the increasing number of men who are fashion‐conscious.

Germany is the largest importer of clothing in the EU, importing outerwear worth 18 billion € in 2007. Imports account for 90% of all outerwear sold in Germany.

67% of all imports derive from countries outside the EU. Leading exporters to Germany are China and Turkey. Import prices are under pressure and declined from 2005 to 2007. A further decrease is expected.

Germany is 4th largest exporter in the world, which derives from the fact that German apparel producers, due to their strong brands in the upper market and premium segments, successfully penetrated foreign markets. This internationalisation (see also chapter on production) is documented by the fact

Production

Consumption

Import and Export






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that the clothing export quota has increased from 10% in 1970 to 44% nowadays. German apparel brands, in particular, have a strong potential in the growing markets such as Asia or Eastern Europe. Exports by Germany include to a big extends so called re‐exports – imported products, which are exported to other countries, mainly EU. It is estimated that about 35% of German clothing imports are re‐exported.

The traditional functions of the different market actors are changing. There is the general trend of integration in the value chain, which means:

Forward Integration: more and more manufactures open their own brand stores (mono‐label) in order to control the point of sale (higher margins, better knowledge of consumer demand)

Backward Integration: retailers set‐up their own design departments and source supply with own buying departments or agents

With regard to the retail business textile discounters and the non‐specialists (hypermarkets with strong non‐food component) as well as mono‐label stores have shown a remarkable growth. Also globally operating apparel retail chains like H&M or Zara have enlarged their market share. In turn the formerly strong independent retailers as well as the department stores have declined strongly.

There are legislative (set by the EU and national government) and non‐legislative (set by the trading partner) market access requirements. With regard to outerwear these requirements are based on environmental, consumer health and safety, as well as on social concerns. There is no quality standard for clothing.

Opportunities for Moldova include:

Proximity to EU market which allows to benefit from the Fast Fashion trend

Upgrading within the textile value chain, using income and contacts gained from contract work: from CMT to value added production

Explore niche markets, e.g. work with own agents on commission

Obstacles Moldova face:

Limited investment capacity to upgrade production

Limitation of labour force and absence of design capacity

Missing business skills and contacts (e.g. sourcing) to upgrade within the value chain

Lack of sector support structure: efficient association, fashion centre and competence centre

Market actors and retail

Market access requirements

Moldovan export opportunities and constraints






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3 O V E R V I E W O F T H E G E R M A N T E X T I L E A N D C L O T H I N G M A R K E T

The following pages provide an overview of the German market for textile and apparel, focussing on clothing. The pattern and trends in consumption are outlined, as well as the business and strategies of the German clothing companies.

3 . 1 P R O D U C T I O N

The German textile and clothing industry, characterised by mid‐sized companies, is the second largest consumer goods industry only excelled by the food and beverage industry. The turnover amounted to 19.2 billion € in 2008, with textile production accounting for approximately 58%, and clothing for 42% of the total.

Basic Data of the German Textile & Clothing Industry

2000 2006 2007 2008 Change

2007 to 2008

Turnover

(in Mio. €)

26.409 19.742 19.949 19.169 ‐3,9%

Production

(in Mio. €)

16.375 12.820 12.863 12.213 ‐5,1%

Imports

(in Mio. €)

31.730 30.864 31.721 30.398 ‐4,2%

Exports

(in Mio. €)

18.943 21.395 22.618 21.833 ‐3,5%

Employees

(number)

185.195 104.299 102.020 97.026 ‐4,9%

Source: German Ministry of Economy, “Branchenfokus Textil und Bekleidung”, 2010

In 2008 both, the textile and the clothing industry, recorded a decrease in production, turnover, employment and number of companies:

Decrease in production, turnover, employment and number of companies

2007 2008 Change

2007 to 2008

Textile industry

Production (in billion €) 11.2 10.8 ‐3,4%

Turnover (in billion €) 11.6 11.1 ‐4,5%

Employees 68.152 65.155 ‐4,6%

Number of companies 496 481 ‐3,2%

Clothing industry

Production (in billion €) 1.63 1.4 ‐16,5%

Turnover (in billion €) 8.35 8.1 ‐3,1%

Employees 33.624 31.871 ‐5,5%

Number of companies 207 201 ‐2,9%

Source: German Ministry of Economy, “Branchenfokus Textil und Bekleidung”, 2010

Outline of the textile and clothing sector






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The following diagrams highlight the structure of the industry according to group of products

15

13

17

9

20

8

18

0 5 10 15 20 25

Ready made products

Non‐woven

Technical Textiles

Finishing / Processing

Weaving

Spinning

Others

69

13

7

2

4

4

0 10 20 30 40 50 60 70 80

Outerwear

Underwear

Hosiery

Warp‐and weft

Workwear

Others

Germany is the 3rd largest producer of clothing the EU after Italy and France. The turnover of the German clothing industry amounted to 8.1 billion € in 2008. The number of manufactures and employees in the clothing sector is in decline – from 1995 to 2006 minus 61% employees and minus 67% companies. The clothing business is geographically concentrated with 80% of all companies being situated in Baden‐Württemberg, Bavaria and North Rhine‐Westphalia.

Basically all German clothing manufactures have more or less turned into creative and flexible trading enterprises with external job order production. At the same time the German clothing companies orientated more towards foreign markets, nowadays having an export share of about 40%.

Production and procurement strategy of clothing companies are:

1) In‐house or job order production in Germany

2) In‐house production abroad ‐‐ establishing own factories abroad or enter into joint ventures in low‐cost countries

3) Job order production abroad ‐ Subcontracting, on basis of the following concepts:

Outward Processing Trade (OPT): most labour‐intensive work is relocated

Cut, Make and Trim (CMT): entire manual production is relocated, material purchase is held on to for efficiency and quality reasons

Free on Board (FOB): suppliers receive only product specifications (e.g. design, fabric), and then manages the production themselves

4) Imports ‐ purchase of finished goods

For more than 30 years the German clothing sector is facing a far‐reaching structural change, mostly due to low‐cost competition from Asia. As a consequence most German manufactures have developed an outsourcing policy as part of their restructuring process. The clothing production has been relocate

Structure of the German textile and clothing industry

Clothing manufacturers

Structural change and business strategies

Germany’s leading OPT in EUGermany is the leading EU country with regard to OPT, accounting for 42% of the total value of OPT in the EU. In 2007 the three main OPT import countries for Germany were Ukraine (141 Mo. €), Macedonia (128 Mio. €) and Bulgaria (100 Mio. €). It has to be noted though, that the proportion of OPT, compared to “normal” imports of clothing, is low






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to countries with low overall manufacturing costs, while central functions like design, procurement and marketing are still based in Germany.

Besides outsourcing the following business strategies are applied:

Branding & Quality Most German companies turn towards the up‐market / higher quality / premium segment

In the up‐market segment branding is literally necessity: brand affinity and product quality are the most important factors when shopping for clothing

A strong brand helps a company to protect itself against low‐cost competition, and allows to withstand the margin pressure from the retailers

Internationalisation With regard to production:

optimisation of production and procurement, balancing between costs and reliability

global sourcing systems that search for cost effective place for production, which are then integrated in the value‐chain management

With regard to sales and marketing:

Entry to and development of foreign markets, especially in Eastern Europe and Asia

Market entry often via own retail outlets (verticalisation)

Vertical Integration New trade channels: clothing companies establish own retail outlets

Broadening of the value chain, thus higher margins

Own experience at the “Point of Sale” allows companies to adjust collections closer to the consumers demand

There is a constant pressure for adjustment on the clothing business. A further decrease in the number of manufacturing companies is expected. At the same time there is a clear movement towards the purchase of finish goods, while in‐house and job order production abroad is getting less.

The concept of Fast Fashion is a clear trend in the production of higher quality clothing. The concept implies shorter intervals between collections / fashion lines, which in turn means that smaller, quickly changing lots of clothes are produced.

According to the association “textile + mode” the German clothing industry is prepared for competition due to its strong brands and innovative design.

Production trends






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3 . 2 C O N S U M P T I O N

Germany is the largest clothing and outwear market in the EU with a total consumption of about 51 billion € in 2009. Thus Germany accounted for 19% of the total EU clothing and outerwear market, worth 268 billion €.

Consumption of outwear in Germany, 2003‐2009, in € million

2003 2005 2007 Change 2003 to 2007 in %

2009

(estimated)

Total outwear

of which:

50.54 49.91 50.86 +0,2% 51.10

Clothing accessories

1.56 1.68 1.73 +2,8% 1.80

Leather garments 487 442 455 ‐1,1% 500

Total clothing 58.05 57.39 58.38 +0,1% 59.00

Source: CBI Market Survey “Outwear Market Germany”

The average per capita spending for outwear in 2007 was 618€. Every German household1 spent in average 888€ for outwear, whereas a family with 2 kids on average purchased outwear worth 1.452€. Germans, however, spent less than 5% of their disposable income on clothing.

German outwear consumption by gender, 2003‐2009, in € million

2003 2005 2007 Change 2003 to 2007 in %

2009

(estimated)

Total outwear 50.54 49.91 50.86 +0,2% 51.10

Women’s outwear 28.79 28.375 28.875 +0,1% 28,90

Men’s outwear 15.01 15.11 15.35 +0,6% 15.00

Children’s outwear (<15) 6.74 6.42 6.63 ‐0,4% 6.70


The trend towards casual clothing found expression in men’s wear in the form of jeans, other cotton trousers and outdoor jackets. Suits for young men were also in demand in the fashion sector. Women took out their purses for cotton trousers, dresses and skirts, light knitted fashion, fashionable blouses and accessories.

Sales of outwear by type of clothing behaviour, 2003‐2007

Women Men Children

2003 2007 2003 2007 2003 2007

Formal 43% 42% 40% 38% 4% 4%

Casual 32% 33% 33% 34% 73% 73%

Leisure 21% 21% 21% 21% 18% 18%

Active Sports 4% 4% 6% 7% 5% 5%


1 average houshold size in Germany is 2,15 persons






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Consumption trends The market for clothing is becoming more mature and saturated, with abundance of producers and retailers offering fashionable clothes.

German consumers are price sensitive and are mindful of a good price‐quality ratio. The consumer behaviour also tends towards “cross‐shopping”, meaning that the customer makes use of various sales channels (e.g. online‐shopping, discounter, single brand store).

Furthermore there is a clear tendency towards individualisation of consumption, leading to differentiated customer request. Especially the sale of clothing accessories benefit from this trend, as many consumers rely on fashion accessories to embellish an outfit to distinguish them from others.

The market saturation and trend individualisation of consumption is leading to “fast fashion” ‐ a rapid change of fashion collections . For instance, the average number of collections on sale in 2007 was 4,7 whereas in 2010 manufactures and retailers will present up to 6,8 collections (of which 80% are upmarket articles).

The outwear market in wide spread, reaching from high price luxury and upper middle price segment (together approx. 20% market share) to low middle and very low price segment (approx. 50% market share). The overall development of the market reflects the growing disparity between the different economic strata of German society, and the increasing number of poor and relatively poor German residents. Thus many German consumers with lower incomes will continue to seek low‐price clothes in a steadily growing discount sector. On the other hand, quality and convenience will become more important, and the youthful outlook of the older consumers will strengthen designer and sports labels.

The men’s wear market is expected to become the most dynamic, driven by the increasing number of men who are fashion‐conscious. This is one of the major factors, besides also demographic changes, to boost the growth of sports and leisure wear.

Furthermore the demand for plus size / oversize clothing is expected to increase in the coming years.

Price-quality ration

Individualisation of consumption

Fast fashion

Growing low-price segment

Dynamic men’s wear market

Increasing demand for plus size






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3 . 3 P R I C E S

The diagram below indicates the development of Germany’s consumer price index for clothing and shoes during the last decade.

97

98

99

100

101

102

103

104

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Source: Statistisches Bundesamt

Germany has an average price level for clothing in comparison with other EU member states. Above the EU average are for instance the Scandinavian countries, the Baltic states, Austria and Italy. Whereas Ireland, UK, Czech Republic and France are below the average.

The margins at various levels of distribution are influenced by several factors (e.g. volume of order, competition, product/market combination), therefore it is almost impossible to draw up a schedule of margins. Nonetheless, fact is that margins at all levels of the distribution chain are under constant pressure, due to increasing competition, integration and consumer demand for lower prices.

The development of the average import prices for selected apparel products – shown in the following diagram – indicates the negative pricing development for producers. In fact import prices were 4,6% lower in 2007 than in 2005. A further decrease is expected, which will force German apparel companies to look for further low‐price sourcing opportunities abroad.

Margins under constant pressure

Import prices






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3,504,004,505,005,506,006,507,007,508,008,509,009,50

10,00

2005 2006 2007

Cotton shirts(men)

Cotton shirts(women)

Lightweight tops(women)

Cotton trousers(men)

Cotton trousers(women)

Cotton skirts

3 . 4 T R A D E - E X P O R T a n d I M P O R T

Germany is the largest importer of clothing in the EU, importing outerwear worth 18 billion € in 2007. From 2005 to 2007 imports on average increased by 7%, with a particular strong increase of knitted outerwear (+9%). There has also been a strong increase in cotton products, rather than man‐made fibers. Basically imports account for 90% of all outerwear sold in Germany.

Imports of outerwear into Germany, 2003‐2007 in million €

2003 2005 2007

Total outerwear 16,880 16,814 17,984

Knitted outerwear 6,795 6,981 7,608

Woven outerwear 9,444 9,497 10,037

Leather garments 441 336 339

Source: CBI, “The outerwear market in Germany”, 2008

67% of all imports derive from countries outside the EU. In particular imports from Asia grew by more than 20%, with China accounting for more than 60% of the growth. But also countries like India, Vietnam, Bangladesh, Pakistan and Sri Lanka increased their share. Leading exporters to Germany are China and Turkey.

Leading suppliers of outerwear to Germany 2007

Total outerwear

1. China, 23%

2. Turkey, 13%

3. Bangladesh, 7%

4. Italy, 5%

Woven outerwear

1. China, 28%

2. Turkey, 8%

3. Bangladesh, 5%

4. Romania, 5%

Knitted outerwear

1. Turkey, 20%

2. China, 16%

3. Bangladesh, 10%

4. India, 4%

Source: CBI, “The outerwear market in Germany”, 2008

German exports






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Germany is the 2nd largest export of clothing in the EU, after Italy. In 2007 its exports amounted to 9.9 billion €, which makes Germany the 4th largest exporter in the World (after China, Hong Kong, Italy).

Exports by Germany include to a big extends so called re‐exports – imported products, which are exported to other countries, mainly EU. It is estimated that about 35% of German clothing imports are re‐exported.

Germany positions as 4th largest exporter in the world derives from the fact that German apparel producers, due to their strong brands in the upper market and premium segments, successfully penetrated foreign markets. This internationalisation (see also chapter on production) is documented by the fact that the clothing export quota has increased from 10% in 1970 to 44% nowadays. Also German exports have increased by 17% between 2005 and 2007. German apparel brands, in particular, have a strong potential in the growing markets such as Asia or Eastern Europe.

At present German exports mainly go to EU countries and about 25% of the products are sent to destinations outside the EU.

Inter-nationalisation of German apparel producers






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4 M A R K E T A C T O R S A N D E N T R Y

The following section provides an overview of the functions of the relevant market actors in the clothing retail. Also the market access requirements – legislative and non‐legislative – are described. A list of important German market actors can be found in the annexes.

4 . 1 T r a d e C h a n n e l s a n d M a r k e t A c t o r s

The following diagram shows the trade channel structure with the different sales intermediaries. It is possible for a sales intermediary (e.g. importing manufacturer) to take over the functions of others, in order to improve competitiveness and sales margin (vertical integration).

ExportingManufacturers ‐ inside and outside EU

ImportingWholesalers

ImportingManufacturers

Agents

Importing Retailers

Non‐importing Retailers

Department Store

ClothingMultiples

Home Shopping

BuyingOrganisations

Outerwear Trade andDistribution Channels

Source: CBI „Outerwear Market in the EU“

The functions of the different sales intermediaries between industry and retails are:

Importing Wholesalers

Buying on his own account, the wholesaler takes title to the goods and is responsible for their further sale and distribution

Development of a successful working relationship between exporting manufacturers and a wholesaler or importer can lead to a high level of co‐operation with regard to appropriate designs for the market, new trends, use of materials and quality requirements

Wholesalers cater both to the specialist shops and to the department stores and multiple chains

The trend of retailers to avoid pre‐ordering and rather sell from stock, is






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reinforcing the wholesalers’ position

Importing Manufacturers

Have their own designers, apply various production and procurement strategies (see chapter on production)

Penetrate the retail business by opening own shops (vertical integration)

Agents

(sales representatives)

An independent intermediary between manufacturer and retail

In general the agent receives a commission from the manufacturer

More and more agents sell from stock, to meet short‐term demands. Stock forming occurs on consignment basis

Agents mainly work with brands

Differing from the sales agent is the buying agent. The buying agent is located in supplying countries and acts on instructions of his client, mainly retail organisations

Importing Retailers

Bigger retail organizations import via their own buying / sourcing departments, and thus cut out intermediaries

They purchase finished products via direct imports (sourcing ready‐made products) from low‐wage countries and sourcing products made according to their own design (backward integration)

There is the general trend of integration in the value chain, which means:

Forward Integration: more and more manufactures open their own brand stores (mono‐label) in order to control the point of sale (higher margins, better knowledge of consumer demand)

Backward Integration: retailers set‐up their own design departments and source supply with own buying departments or agents

4 . 2 R e t a i l S t r u c t u r e a n d T r e n d s

The following diagram illustrates the development of the market share of the different actors in the German apparel retail:

6% 9% 10%

18% 16% 16%

10% 9% 9%

15% 14% 14%

39%34% 32%

12% 18% 19%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999 2003 2005

Textile discounters & non specialists

Independent retailers

Department stores

Home shopping

Clothing mutiples

Verticals

Remarkable is the growth of textile discounters and the non‐specialists (hypermarkets with strong non‐food component) as well as the rise of verticals (mono‐label stores). Also globally operating apparel retail chains like H&M or Zara have enlarged their market share. In turn the formerly strong independent






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retailers as well as the department stores have declined strongly, with the share of independent retails being only around 23% in 2007.

The market conditions are in general in favour of those retailers who can respond to consumer demand more quickly and at lower cost. These companies (verticals and global retail chains) are particularly adept at understanding what consumers buy in real time and responding quickly to sales trends and customer feedback.

The rise of the retail chains has consequences for manufactures as the chains try to limit their number of suppliers, and have a strong position in price negotiations and delivery conditions.

There is the trend toward more collections per year (fast fashion), which implies for manufactures that they have to be able to respond quickly.

4 . 3 M A R K E T A C C E S S R E Q U I R E M E N T S

Market access requirements are set by the EU and national government (legislative requirements), and by the trading partner (non‐legislative requirements). With regard to outerwear these requirements are based on environmental, consumer health and safety, as well as on social concerns. There is no quality standard for clothing.

Apparel manufactures exporting to Germany and the EU have to comply to a few mandatory, legislative requirements. The mandatory requirements for Germany are set in the:

Textilkennzeichnungsgesetzt

(textile labeling law)

Manufactures and traders of textile products have to indicate the fibre used, as well as the percentage of the fibre (in relation to the weight of the final product)

The consumer has to be able to identify the raw materials the final product is made of

The official language of the importing country has to be used

Bedarfsgegenständeverordnung2

(consumer goods regulation)

The consumer goods regulation are in parts relevant for clothing

Certain dyestuff, flame retardants, formaldehyde and other chemicals are not allowed in clothing products

Care‐labeling and washing instructions, as well as the country of origin marking are not mandatory.

Another relevant EU ruling is REACH, the Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals. REACH applies to most chemical substances, whether on their own, in mixtures or used in products (e.g. clothing), that are manufactured or used in, or imported into, the EU in quantities of over one ton per annum.

Companies and manufactures based outside the EU do not have direct legal obligations under REACH. But as their first tier customer (e.g. importer) may do

2 Link to download the regulation: http://www.gesetze-im-internet.de/bedggstv/index.html.

Quick response to consumer demand

Legislative requirements






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have obligations, exporting companies might be required to be compliant to REACH (e.g. documentation of chemicals used, etc.).

Besides the legal regulations, literally all of the potential business partners in Germany have their own, individual specifications and requirements, which should be met by the suppliers / clothing manufacture. These individual specifications focus on quality and business procedures, labeling, packaging, consumer safety, as well as environmental and social sustainability. The business requirements may include the following:

Technical requirements

The technical specification outline the product and production related demands of the business partner, and can include the following:

Product specification (design, fibre to be used, etc.)

Quality requirements

Production volume and delivery time

Payment procedures and communication

Code of Conduct (CoC)

(process related)

A CoC is a set of rules outlining the responsibilities of or proper practices for an individual organization

CoC are individual and voluntary, and vary between organisations

CoC are based on internationally conventions (e.g. International Labour Organisation), implementation according local legislation

Labels and certification

(product related)

Labels certify that goods are produced according certain standards (e.g. Öko‐Tex 100, EU Ecolabel)

Labels are getting more and more popular among consumers as they are seen as an evidence that the product s are harmless to personal health, the environment

Moldova benefits from having Autonomous trade preferences (ATPs) for imports into the EU. The ATPs allow for unlimited and duty free access to the EU market to all products originating in Moldova, except for certain specific agricultural products.

Non-legislative requirements

Tariffs and quotas






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5 E X P O R T O P P O R T U N I T I E S A N D O B S T A C L E S

In the following possible opportunities and obstacles for Moldovan apparel producers to export to Germany are presented. The opportunities and obstacles have been formulated on the basis of the information provided in the previous chapters.

Opportunities

EU Trade PreferenceProximity to

EU Market

Upgrading in the value

chain

Exploreniche market

Local Market?

Being the second largest export industry after wine, the clothing industry is of high importance to the Moldovan economy. Moldovan clothing producers are already linked to EU and German apparel companies, mainly working on contract and OPT basis. These existing business linkages can provide the basis for a further development of the sector. The following opportunities and steps are seen as important to, first of all, secure and further develop the position of the Moldovan clothing sector: Proximity to EU market Fast Fashion – the closeness to the EU market allow to

serve for quick and flexible demand Short travel distance for business partners (e.g. quality control visitors) No time difference to business partner, and common cultural background

Upgrading the value chain Upgrade within the textile value chain, without neglecting the contract work / using the income and contacts from contract work Develop the capacity to fabricate value added products Move up from CMT to FoB according importers specifications Establishing of Moldovan brands and retail chains to target domestic market

Explore niche market Target smaller chain stores or buying organisations Work with agents on commission (see chapter 4 Market Actors) Work for high quality apparel segment (using the advantage of market proximity)

Opportunities






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Constraints

Currency rate

Limited investment

capacity

Laws andregulations

Business Skills &

ContactsSkilled

labour force

Despite its importance for the Moldovan economy the clothing sector seems to lack the necessary support to explore opportunities and to move up from contract work to value added production. In parts this relates to laws and regulations (e.g. taxation of cutting remnants), but also to the level of self‐organisation of the clothing sector. For instance an efficiently organized industry association – which can lobby the Government in policy issues, improve the image of the industry and offer services (e.g. market information, channel donor support, etc.) – is not in place. Further constrains are: Limited investment capacity

Low margins in contract work limit the capacity to invest in value added production schemes

Skilled labour force Vocational training system does not target the work skills need for value added production Skilled labour force is moving to better paid jobs Lack of design capacity

Business skills and contacts Knowledge and contacts for sourcing and supply is missing (as it is not needed for contract work) Market information and marketing skills are not developed A Fashion Centre, providing the apparel industry with fashion trends collected from various sources is not in place Competence Centre, which offers technical services for improving technology and management skills in the industry, does not exist

Constraints

Market Survey Textile Germany En

Documents

Transcript of Market Survey Textile Germany En