The brand stood by us after the Rana Plaza disaster -- can it prove once again that it is a true friend of Bangladesh?
Over the past decade, Primark has been good for Bangladesh. And Bangladesh has been good for Primark. That’s how partnerships work.
The company is among several leading global brands which have helped turn Bangladesh into the world’s second largest exporter of apparel.
There are those who will say that Primark has always had the upper hand in the relationship of the two; and that it has used Bangladesh for cheap labour in order to churn out clothing at rock bottom prices.
I recognize these arguments, but the pragmatic side of me has always accepted that Primark has been a valuable customer for Bangladesh over the years.
In short, both parties have benefited.
In Bangladesh, we saw Primark as a friend. I know the business, and I know many of its people. I have watched its journey with interest. Back in 2009, around the time it entered Bangladesh, Primark had revenues of 2.3bn pounds.
Ten years later, in September of 2019, it posted revenues of 7.7bn pounds. It posted profits in the same period of 913m pounds -- or well over $1 billion.
This was in a flat market when many other retailers were struggling.
In that time, Primark is producing at more than 100 factories in Bangladesh. Bangladesh is not Primark’s largest supplier, but I am sure that even the company’s most hard-nosed executives would accept that Bangladesh has played its own, very important part in Primark’s extraordinary success story. The “Made in Bangladesh” label adorns Primark’s clothing in retail outlets around the globe.
Like I say, we saw Primark as a friend. But friends, as we all know, can let you down, which brings us to Covid-19. Amidst Covid-19, billions of dollars worth of clothing orders have been cancelled from Bangladesh, and Primark has cancelled more than $200m worth.
Many of these clothing orders are complete; many are partially complete.
While some brands have offered to pay for all cancelled orders -- whether complete or WIP -- Primark is offering to pay just the wages of affected garment workers on these orders. To offer some perspective here, this represents just 10-15% of the money they owe to their supplier factories.
The problem with this is that, while this money will cover wages, it will not cover the suppliers’ financial outlay in terms of raw materials and other overheads. If factories cannot pay these costs, they go bust and workers will lose their jobs. It’s that simple.
Offering to pay worker wages in isolation, then, does not help if workers will lose their jobs anyway.
Suppliers of Primark took orders in good faith. Many of these suppliers have been loyal to Primark for a decade and more.
Primark’s scale is such that it often requires up to 80% of a supplier’s production capacity. This means if Primark walks away from an order, that supplier is massively exposed and could easily go under.
As suppliers, we are asking for some loyalty from Primark. The other suppliers I have spoken to are not only fearful for the future, but they are also greatly saddened that a company they considered a business partner is not following the example of other brands such as H&M, Inditex, and VF Corp.
All these brands have offered to pay for all cancelled orders on original payment terms.
This move means so much to suppliers! If every leading brand could follow this approach -- including Primark -- the garment supply chain in Bangladesh might be able resume something like normal service in a few weeks’ time.
That’s what we all want -- brands and their suppliers.
The alternative is hundreds if not thousands of factories going bust and a fractured, disjointed supply chain when normal business resumes.
This is not good for suppliers, and it certainly won’t help Primark from a business continuity perspective.
Primark stood by Bangladesh in the aftermath of Rana Plaza, when other brands took cover. I call on it to do the same now, in this most unprecedented time of crisis, and show the world it is a true friend of Bangladesh.
Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). He can be reached at [email protected] This article previously appeared on Apparel Insider and has been reprinted by special permission.