In developing the activities of the LATIA Export Development cluster, it is important to assess the climate of the entire European and Lithuanian clothing and textile business after the quarantine introduced due to the pandemic COVID-19. In the main export directions of Lithuanian clothing and textile companies, the declining consumption in the markets automatically reduces the income of business in this field in Lithuania. This industry of Lithuania exporting 80 percent of products directly depends on the health of foreign markets. Meanwhile, the turnover of this sector in Europe that amounted to EUR 162 billion in 2019, due to the impact of the COVID-19 pandemic in 2020 will shrink by as much as 50 billion euro according to the forecasts of the European Clothing and Textile Organization EURATEX.
The Lithuanian Association of Clothing and Textile Companies (LATIA) already at the beginning of April forecasted that up to a third of Lithuanian companies in the clothing and textile sector could go bankrupt, and a quarter of people working in this industry would lose their jobs.
"The COVID-19 pandemic relentlessly hit the competitiveness of the European clothing and textile industry and Lithuanian manufacturers. With this in mind, in the short term, companies need to be given urgent support to survive for the next 6 months. LATIA welcomes the Government's post-quarantine assistance measures, in particular subsidies for up to 6 months. In order to maintain sustainable jobs, the share of support provided could be higher, especially in the fifth and sixth months. In addition, the amounts of export guarantees are insufficient, and there is too little support for companies that have more than 250 employees,” Kęstutis Daukšys, President of LATIA says.
In Lithuania, due to business restrictions related to COVID-19, the production volumes of the sector have recently decreased significantly. Lithuanian clothing and textile companies export most of their products (up to 80%). Most of the exported products are sold in Europe, concentrating on only a few markets. For example, Lithuanian tailors sold 70 percent of their production in 2019 in 5 countries: Germany (about 24% of the sector's total exports), Sweden (13%), the United Kingdom (12%), Denmark (11%), Norway (10%). These export markets of the main Lithuanian clothing manufacturers have been taking this place for almost a decade, the search for new markets and business diversification has been slow and difficult.
Any negative change in consumption in these markets means reduced orders for Lithuanian clothing manufacturers. During the pandemic, the significant decline in the consumption of clothing products in markets such as Germany had a negative impact on the performance of many Lithuanian clothing and textile companies. In Germany, one of the most important markets for clothing produced in Lithuania, consumption has currently declined significantly. Traders of this country forecast a recovery in sales no earlier than at the end of the year. One household in this country spent on average € 760 on clothing in 2018 (European Union average: € 600). It is forecasted that the purchase volumes will return to the previous ones not earlier than after six months. The situation is similar in other EU markets.
It is important for business in Lithuania to diversify its activities
Exporting clothing and textile companies, members of LATIA, react in different ways to the current situation, but agree on the worrying situation and the importance of diversification.
"The situation of the clothing and textile business is changing grandly during the pandemic and after the end of quarantine. The orders have decreased significantly. In our area, the medium and luxury segment of the fashion market, production and, respectively, orders have shrunk four times. In our view, England is most affected, followed by France and Sweden, and the German market is now beginning to be affected. In this uncertain situation, our customers are playing in the market. Some are restrained, do not produce much, others take risks, produce more and hope to win a bigger market bite,’ Vidas Butkus, the Head of “Kauno Baltija” AB says.
According to him, there is currently a stagnation in the field of fashion, but casual, casual wear is currently in high demand. The businessman predicts a tough fall and believes the recovery could begin in November if there is no second wave of the pandemic. In order to stabilize the income, the company “Kauno Baltija” started to produce work and medical clothing and took care of the certification of this type of production.
‘Business changes due to the pandemic are not yet clear. We still have some large customers abroad this fall. Our specifics are casual wear, and in this area there is no decrease in demand and, consequently, production. We work in Europe, historically our market was Scandinavia, but in the last six months we mainly export to Germany. There are also individual orders in exotic countries, yet we focus mainly on the European supply chain.
What our company will have in autumn will largely depend on the weather and the pandemic. Sales in our product markets are largely driven by the weather, unless the pandemic results in very high unemployment. In order to ensure stable operations, we are constantly looking for new markets, customers, developing new products. In our company, the fall in results due to the pandemic was relatively symbolic, we forecast a decrease of 20 percent in sales revenue in the first half of this year,’ Audronė Pocienė, Chairman of the Board of “Omniteksas” UAB says.
‘In the summer, the clothing market traditionally has a lot of orders. That is exactly the case this year. Neither the volume of our work nor our income has changed during the quarantine. We did not use any state aid either. In a more difficult situation, you need to think a little in search of customers and opportunities and everything is solved. Experience shows that it is important to produce different products. If the demand for one type declines, then the other types remain stable. Diversification of activities brings a lot of stability. If the pandemic recurs in fall, it will be bad. This time, the quarantine did not last long before we implemented the orders, and it has passed,’ Vladimir Ivliyev, the Director of “Tuma” UAB says.