Challenges and opportunities for the clothing industry in Eastern and Southern Europe

Citation

Riddle, L. (2007), "Challenges and opportunities for the clothing industry in Eastern and Southern Europe", Journal of Fashion Marketing and Management, Vol. 11 No. 1. https://doi.org/10.1108/jfmm.2007.28411aaa.001

Challenges and opportunities for the clothing industry in Eastern and Southern Europe

Dramatic change is transpiring in both the production and marketing arenas of the global apparel industry. The predicted “seismic shift” of apparel sourcing post-2005-quota-elimination has begun as retailers in the major clothing importing nations rationalize their supply chains (Ellis, 2003). Struggling to survive in an increasingly competitive world marketplace, many clothing exporters are seeking new market frontiers.

The bulk of the discourse in academic and trade publications concerning this new competitive landscape has centered on a handful of extreme cases. Analysis of national industries that obviously benefit from the elimination of quotas (e.g. China) or those that clearly are harmed by their demise (e.g. sub-Saharan African countries) dominate production- and trade-related discussions. Most market-related investigations focus primarily on developments in the major importers, the EU and USA.

Scant attention has been paid to the plethora of other apparel producing and consuming nations around the globe, such as those in Eastern and Southern Europe. Apparel production is a vital industry in the national economies in this region; yet, uncertainty about how the region will continue to respond and fare in a post-quota competitive environment looms large. At the same time, the market for apparel goods within the region is also increasing, particularly in the transition economies and within specific product categories, such as children’s wear and high fashion.

I have been fascinated by developments in this region for many years and I have spent much of the past decade examining the development of the textile and apparel industry in Turkey (e.g. Gillespie and Riddle, 2004; Riddle, 2001, 2006; Riddle and Gillespie, 2003). Turkey is an interesting example of the importance of the clothing industry in this region. The textile and apparel export industry is critical to the Turkish economy; it accounts for approximately 10 percent of GDP, 18 percent of industrial production, 20 percent of the manufacturing labor force, and generates 32 percent of Turkey’s export earnings (www.itkib.org.tr/).

At the dawn of quota elimination, there was wild speculation about Turkey’s future, and Turkish business associations were at the forefront of an international movement organized to persuade the WTO to postpone quota elimination. A survey I conducted among Turkish clothing exporters in the first weeks of January 2005 revealed that most Turkish apparel exporters expected that their market share in the EU and USA would increase or at least stay the same in 2005 (Riddle, 2006). Survey results also indicated that many firms had made strategic preparations for the post-quota competitive environment (e.g. increasing production capacity, integrating production capacities, decreasing turnaround time, upgrading production technology, expanding product line, increasing sales and marketing staff, developing a branded line of apparel for export, or becoming a new licensee for a foreign company). Most firms, however, only had made these changes within the year before quotas were eliminated.

By mid-2005, it had become clear that export windfalls would not emerge, and many small Turkish apparel exporters were fighting for survival. By the end of 2005, the Turkish apparel industry had suffered losses in its two key export markets, and production had sharply declined. Losses were less severe in the proximal and more critical EU market, providing evidence to earlier hypotheses about the importance of geographic proximity and turnaround time in the post-quota competitive environment. But questions about the future of the Turkish apparel industry remain.

This issue

The articles in this issue shed light on recent developments in the clothing industry in Eastern and Southern Europe. The contributions explore a wide territory, covering both production and trade-related changes in the region, as well as market-level characteristics and dynamics.

Several papers explore the impact of quota-elimination on national industries within the region. For example, Kilduff and Chi’s paper (“Analysis of comparative advantage in the textile complex: a study of Eastern European and former Soviet Union nations”) examines patterns of trade specialization among Eastern European and Soviet Union nations. They find that during this decade, production shifted from higher income to lower income nations. Morever, higher-income nations have become more specialized in upstream sectors of production, while lower-income nations have become increasingly specialized in downstream sectors.

EU sourcing patterns are examined in-depth by Wong and Au (“Central and Eastern European countries and North Africa: the emerging clothing supplying countries to the EU”). They note that rising wages and competition from other developing countries has exacerbated sourcing delocalization among EU apparel importers. First-tier production sites, such as Hungary and Poland, have lost ground to second-tier producers, such as Romania, Turkey, and Morocco as importers seek to gain even greater cost advantages in lower-wage countries.

Curran’s paper examines the impact of quota elimination on developing country clothing suppliers, including those in Eastern and Southern Europe (“Clothing’s big bang: the impact of the end of the ATC on developing country clothing suppliers”). Her analysis confirms that although China and India are the main winners of quota-elimination, most developing countries have suffered losses as a result of the removal of quota restrictions. Developing country supplier losses in the EU were fast and substantial – but not as large as many predicted. Many developing countries facing losses in the EU were able to offset those losses somewhat through increased market penetration in the USA (with the exception of Turkey).

Other papers examine trade-related issues at the firm level. For example, Eusebio, Andreau, and Belbeze focus on two major clothing clusters in Southern Europe: Catalonia in Spain and Lombardia in Italy (“Internal key factors in export performance: a comparative analysis in Italian and Spanish textile-clothing sector”). Their comparative study examines the main factors affecting export intensity in these regions. International experience, geographic dispersion of sales, and R&D investment are isolated as key drivers of export performance in their findings.

Johnsen’s case studies among Italian and Thai silk suppliers reveal that in many production clusters, a single supplier plays a very large role in the internationalization of others within their strategic network (“The role of focal suppliers in strategic networks for internationalization: perspectives from SME Italian and Thai silk suppliers”). Johnson explains how certain suppliers – usually those with substantial export experience – play a paternalistic role within their network. These focal suppliers encourage relationships between firms within their network and build their confidence and exporting know-how, thus serving as internationalizing catalysts for the cluster as a whole.

The fact that the region is attractive not only as a source of apparel production but also clothing consumption is addressed by other papers in the issue. For example, Karpova, Nelson-Hodges, and Tuller examine the unique perceptions of clothing attributes among young consumers in Russia (“Making sense of the market: an exploration of apparel consumption practices of the Russian consumer”). The authors note that consumer attitudes toward clothing are often viewed from a Western perspective and argue that these assumptions may be misleading in a transition economy. They contend that income constraints and an under-developed banking system in Russia limit the types of products that Russians can consume publicly. In this context, clothing has become a high-involvement product purchase, often the result of joint decision making between a husband/wife or boyfriend/girlfriend. Product quality – communicated through retail outlet and country of origin rather than brand – is a critical factor in the purchase decision because product quality signals information to others about the purchaser’s social and financial status.

Cheng and Freeman explore the dynamics of consumer behavior and market composition in women’s clothing in Kazakstan (“Fashion marketing to women in Kazakstan”). They isolate five distinct segments in the market: the “business lady,” “lady boss,” “fashion conscious,” “sociable woman,” and “country folk.” They explain that Kazak women want to be pampered during the shopping experience and readily respond to the concept of a sale or discount. Brand-name recognition is increasing in the market. Kazak female consumers are willing to pay more for brand names – even though the lack of copyright laws results in rampant production and availability of counterfeit goods in the market.

Factors that structure the purchasing decision of high-fashion goods in Greece are detailed in Kamenidou, Mylonakis and Nikolouli’s paper (“An exploratory analysis on the reasons for purchasing imported high fashion apparels”). Their study reveals four factors are critical: “status and image,” “quality of the product,” “marketing reasons,” and “in fashion.” Imported high-fashion is often preferred over Greek high-fashion products because they are perceived to have better fit and manufacturing quality (better sewn and comprised of better and more durable textiles).

Insight into the market for an understudied product segment – children’s clothing – is the focus of Koksal’s paper (“Consumer behavior and preferences regarding children’s clothing in Turkey”). This clothing segment is particularly important for countries, such as Turkey, with notably young populations. Koksal’s investigation reveals that there is no set purchasing period for children’s clothing in Turkey; parents purchase clothing for their children on an as-needed basis only. Despite supermarket, catalog company, and retail internet efforts to penetrate this market, most Turkish parents prefer to purchase children’s clothing from independent, brick-and-mortar stores. Price, quality, ease of shopping, and payment options are more important than branding and fashion in this product decision. The study also reveals that between the ages of six and ten, children begin to assume a larger role in the purchase decision-making process.

Nine papers in total, this collection generates critical insights into the rapidly changing business and market environment in the clothing industry of Eastern and Southern Europe.

Liesl RiddleGuest Editor