Nine apparel exporters in a tight spot as German retailer yet to clear dues

Nine small and medium-sized garment factories are in big trouble as a German retailer is not paying them on the pretext of being hit by the coronavirus pandemic although the buyer received the goods before the crisis began.

Colloseum bought t-shirts, polo shirts and sweaters worth $15 lakh from the Bangladeshi suppliers between December last year and February this year through its Hong Kong vendor Asia Today Ltd.

The suppliers are Kappa Fashion Wear, Base Fashion Wear, Dynasty Sweater (BD), Bakhrabad Knitting Industries, Anzir Apparels, IRIS Fashions, Gramtech Knit Dyeing & Garment Industries Ltd, Seo Wan Bangladesh and Disney Sweater.

The German retailer owes a few lakh dollars to some buying houses as well.

The retailer is not making the payment despite being served with legal notices. It, however, is purchasing goods from Bangladesh in another name, several suppliers say. 

"We were ready to settle at 50 per cent payment. But there are no responses from the buyer," said Ahmed F Rahman, chairman of Fatullah-based Kappa Fashions Wear.

Many buyers have offered a deferred payment to suppliers following consensus. However, Colloseum did not give any timeframe when it would be able to make the payment, said Rahman.

The entrepreneur has been supplying t-shirts and polo shirts to the retailer for the last five years. Rahman exports $10 million worth of garment items every year and 5 per cent of the consignment goes to the stores of Colloseum.

Rahman, who started garment business in 2006 and employs 1,000 workers, said he is in trouble now. In another blow, the central bank will accuse them of money-laundering if the payment is not realised on time, he said.

Another supplier Md Ehterab Hossain sold $5.66 lakh worth of t-shirts and polo shirts, the highest amount among the nine suppliers. A consignment involving $96,000 was brought back from the Chattogram port's store after paying Tk 2 lakh in demurrage in the last moment.

"Because of the nonpayment, I have been facing a lot of difficulties to run my factory," said Hossain, managing director of Gazipur-based Base Fashion Wears Ltd, which employs 1,000 workers.

"Colloseum received the goods but is not making the payment. This is not right in the business relationship," he said.

Mohammad Hatem, vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association, said the association has received complaints against Colloseum from its members.

"I will send emails to the buyer serving show-cause notice soon," he said.

Many local suppliers have been facing similar problems related to payment but the nine suppliers shipped goods to the buyer before the crisis unfolded, he said.

He said small and medium-sized garment factories are suffering the most from such a situation because their financial ability is not as strong as the bigger units.

"Buyers are not paying them on time while banks are not cooperating because of the fallouts from the pandemic."

KI Hossain, president of the Bangladesh Garment Buying House Association, said many buying houses are facing the challenge of non-payment.

Sales in western countries are returning to normalcy with the reopening of stores. So, retailers and brands should honour their purchase orders accordingly, he said.

Every supplier should know about their retailers and brands before supplying goods, he said. "Many retailers and brands may take advantage of the situation, accept the shipment from suppliers and may not pay timely."

Asia Today, the German embassy in Dhaka and the head office of Colloseum did not reply to email messages requesting for comments.

Colloseum, the Oberhausen-based group of companies, mainly consists of the non-operating holding company F1RST Retail AG, the operating Fashion FC Club GmbH and UFB Germany GmbH.

A vertical fast-fashion retailer for young and price-conscious women with a total of 1,450 employees and a turnover of approximately 80 million euros, it has been declared insolvent and sold to Schulz Fashion GmbH, according to the website of Acxit Recovery Management.

Acxit Recovery Management acted as the exclusive merger and acquisition adviser to Fashion FC and the preliminary insolvency administration.

The new owner would take over 104 of the 136 stores operated as of July 1.

The overall difficult industry environment, frequent changes in management as well as an unfinished, initiated restructuring process in combination with the severe cutbacks in the retail sector caused by the coronavirus pandemic forced F1RST Retail and Fashion FC to file for insolvency on March 30, 2020, said Acxit Recovery Management.

Some German media outlets also published reports about the development.