The corona pandemic is hitting developing countries with full force. Affected by the general lockdown and confronted with major uncertainties – for example in terms of demand and cash flow – major Western textile companies have already cancelled orders worth several billion US dollars. In countries such as Bangladesh, India and Vietnam, there is not only the growing threat of many production plants going bankrupt, there is also a looming humanitarian catastrophe. How are Otto Group companies dealing with their suppliers?
Otto Group companies, like all other textile retailers, are suffering from the changing customer demand during the ongoing corona pandemic. There is still a strong demand for comfortable, sport-oriented fashion, but selling fashionable spring/summer textiles or even beachwear is something that even our companies are finding difficult to do. And this has a knock-on effect in terms of orders from sourcing countries.
India and Bangladesh in lockdown
On the other hand, several developing countries currently find themselves in lockdown, with India, for example, imposing the world's largest curfew. Since 24 March there has been a nationwide lockdown across India, which has now been extended until 3 May. Factories in regions such as Karnataka and Tamil Nadu have been closed. As domestic transport has also largely been suspended, hundreds of thousands of migrant workers are stranded on their way home. Without work and often without access to central state services, non-governmental organisations are reporting catastrophic conditions. On top of this, many workers are still housed on factory premises, thereby increasing the risk of infection due to the limited space available to practice any form of social distancing.
In neighbouring Bangladesh, a country-wide lockdown is also currently in force, but this does not explicitly include factory closures. There, major industrial organisations have solely issued a recommendation for members to close down their factories. An exception to this are the production of current orders or protective clothing. More than 2.2 million workers are affected by the cancellation of orders worth several billion US dollars by major textile chains - and the trend is rising.
With an eye on India and Bangladesh, but also on other developing and emerging countries, it is clear that we could be heading for a humanitarian catastrophe. For many people, it is not 'only' the virus that is a problem: they are also having to face a curfew, declining orders from abroad and at home and the associated layoffs or suspension of wage payments, combined with the question of how they are to earn a living and feed themselves and their families.
Fair and cooperative interaction with suppliers
In a situation like this, responsible action is particularly paramount. The Otto Group sources most of its textiles and goods from countries such as China, Turkey, India and Bangladesh, and is in constant discussions with its suppliers on a groupwide basis to try to find the best solutions in order to manage possible production stoppages and delays and handle deliveries ordered, and to do this in a manner that is fair and partnership-based. A wide variety of measures are being discussed, such as postponing production – either due to changes in customer demand on our part or to unfeasible production due to lockdowns in various countries on the part of suppliers.
"We are currently seeing that the corona crisis is engendering special solidarity and mutual mindfulness as business partners in many of our supplier relationships, some of which are grown over a long period of time," explains our CEO Alexander Birken. "These days, we are also learning that it is not only us who are concerned about the well-being and survival of our suppliers, the suppliers themselves are coming to us with suggestions on how the challenges that arise can best be shared, minimised or balanced.” The goal is to master the crisis with the suppliers together in the best possible way: goods already manufactured will not be cancelled; cancellation of goods not yet manufactured are only made in the rarest cases.
Support measures for the workers
In addition, the Otto Group and its Group companies are in concrete discussions with various initiatives to support workers in sourcing countries who have been particularly affected by the Corona crisis with targeted measures. The intention is to participate in a ‘rescue package’ planned by the German Federal Ministry for Economic Cooperation and Development to provide speedy compensation for workers’ wages lost in sourcing countries. In addition, the Group is participating in emergency measures as part of an initiative of the Textile Alliance to ensure that migrant workers in Tamil Nadu, India, are supplied with food. In Africa too, the Otto Group is supporting supplies to cotton farmers and their families with emergency aid measures organised through the Aid by Trade Foundation, such as distributing soap and other hygiene products.
Even in difficult situations such as the one we are experiencing today, the Otto Group attaches great importance to fair and collaborative exchange with its suppliers. And it is relying even more intensively on collective activities with other partners in order to cushion the impact for all those involved as far as is humanly possible.
Retailers and brands of the Otto Group keep their customers up to date:
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Frankonia (in German)
Hanseatic Bank (in German)
Heine (in German)
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Mytoys (in German)
OTTO (in German)
Quelle (in German)
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