“The mixed situation is difficult and dangerous for companies”

Germany's fashion industry is shrinking. In 2022, the number of domestic manufacturers with at least 50 employees fell by a good ten percent to just 82, according to the German Fashion industry association, with reference to current data from the Federal Statistical Office. But that seems just the beginning.

“In 2023, the negative consequences of the current crises will be felt even more,” fears Thomas Lange, the managing director of German Fashion. He expects bankruptcies, but above all operational closures because the business is no longer worthwhile for the company.

The background is less the first Corona years. Fashion retailers and manufacturers survived them comparatively well thanks to government aid programs. In the meantime, however, demand is falling as a result of high inflation, while at the same time the costs of energy, raw materials, wages and logistics are rising much faster than manufacturers can pass on to the market.

In any case, in 2022 the prices for clothing in retail have risen by an average of only 3.7 percent, according to the industry. However, producers had to pay almost 30 percent more for cotton, almost 24 percent more for man-made fibers and for gas, for example, many times the previous prices.

In the case of the so-called commercial credit insurers such as Atradius or Allianz Trade, which cover the risk of default on outstanding invoices in corporate customer business, the focus is on the fashion sector.

“An early indicator of problems is non-payment reports. And their number and amount has increased significantly since mid-2022, ”describes Michael Karrenberg, who is responsible for credit assessment at Atradius in Germany, to WELT. "We therefore look at companies from this area much more frequently than usual."

Atradius industry analyst Jens Stobbe also expects bankruptcies and closures. Above all, the medium-price segment, in which the majority of German manufacturers are located, has problems with an increasing reluctance to buy and at the same time increased costs. "The mixed situation is difficult and dangerous for the company," says Stobbe. He therefore expects significant traces in the numbers.

The insolvencies of important fashion retailers such as Galeria Karstadt Kaufhof or Peek show how tense the situation is now

"And in view of the expected reductions in space, increasing sales in Germany is becoming more and more challenging." According to an association survey, the assessment of the current situation has deteriorated, as have future expectations.

2022 describes Seidensticker, whose main job is managing partner of the shirt manufacturer of the same name from East Westphalia, but still satisfactory. Sales by domestic manufacturers increased by almost 20 percent to around 6.2 billion euros compared to the previous year, which was characterized by lockdowns. “However, due to increased costs along the entire supply chain, there have been few real gains.”

In addition, the numbers are still below those of the pre-Corona year 2019, adjusted for inflation by as much as seven percent. "The situation remains tense," judges Seidensticker, who also does not dare to make any specific forecasts for the current year.

In any case, he doesn't see much catch-up potential for German suppliers, who mainly deliver to neighboring German countries across the border, but also to Russia, albeit noticeably less than before the Ukraine war.

In Germany itself, clothing and textiles worth a total of 67.3 billion euros were sold in 2022, according to the Textile, Shoes, Leather Goods Trade Association (BTE). Around 30 billion euros, including their own e-commerce activities, were attributable to the specialist clothing trade with fashion houses, boutiques and textile chains.

The pure online and mail order trade came to a good 19 billion euros in the fashion sector, with "other" trade formats such as supermarkets and discounters or department stores, textile sales totaled around twelve billion euros and in the specialist trade with home and household textiles it was around six billion Euro. The specialist trade is still below the level of 2019, the online trade far above. Amazon, Zalando and Co. have recently weakened and launched austerity programs.

And there doesn't seem to be any improvement in sight, especially for stationary shops. "Fashion retail is currently struggling with numerous challenges across the board," says Aurélien Duthoit, industry expert at Allianz Trade. The risk of insolvency in the textile retail trade will therefore remain high in the coming years in view of reluctance to buy, price increases and growing pressure on gross margins.

“The camps are bursting at the seams almost everywhere. However, retailers can only sell the excess goods at large discounts.” The risk is particularly great for companies that only rely on one mainstay – whether stationary or online.

The most important production country for clothing sold in Germany in 2022 was China, which has pushed Bangladesh back into second place. They are followed by Turkey, Vietnam and India ahead of Pakistan, Italy and Cambodia.

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