A case for regulatory oversight of online apparel retailers
As a clothing manufacturer, there are a great many legal and regulatory hoops I must jump through in order to remain in operation without falling foul of the law. Like the government regulations, there are mandates from my customers around environmental and social standards. Environmental and social compliance are basic requirements of doing business in the RMG sector of Bangladesh these days, and I, personally, have no complaints if this means we are moving towards a more responsible industry. We must all play our part.
While manufacturers have been compelled to operate more responsibly over the past decade—otherwise they risk being closed down or losing business—the same cannot be said of retailers. Many fashion retailers have also become responsible and ethically minded in recent years, but there are others in the market who appear to be working to a completely different set of rules. And what's frustrating is that there appear to be no consequences.
I should clarify that my personal concern here is about online fashion retailers. This is an area where regulators appear to be failing to keep pace with its rapid development.
Let's take the example of the rapidly growing Chinese online-only fashion brand Shein, which is capturing market share from traditional rivals such as H&M and Zara. Shein is now valued by some analysts at more than USD 30 billion. And yet, analysis by international news agency Reuters found that Shein has not made public disclosures about the working conditions along its supply chain, despite such disclosures being a legal requirement in one of their key markets, the United Kingdom.
In addition, it has been found that, until recently, Shein falsely stated on its website that the conditions in the factories it uses were certified by international labour standards bodies. Shein sources from China.
Shein also claims that it never engages in child or forced labour, but the company does not provide the full supply chain disclosures required by the British law. In fact, unlike many major brands such as H&M, Shein does not share its supplier list with the general public.
I use the example of Shein, but this is not the only online fashion retailer that lacks transparency when it comes to ethical and environmentally responsible business practices. In fact, the advent of online buying has opened up the fashion industry to many smaller, online-only sellers who are able to use their fleetness to evade regulators on compliance issues.
The issue here is one of accountability, which sadly seems to be lacking in the online fashion space. Online brands can quickly become operational across multiple markets around the world, and the regulatory oversight of their activities becomes difficult—if not impossible. Where is their tax jurisdiction? Which environmental and social standards are they adhering to?
While some online-only retailers seem to operate to their own set of regulations, more established names continue to push the needle forward on sustainability. Big brands such as H&M have led the industry for years—be it by setting science-based targets around climate reduction, working with more sustainable materials, introducing consumer-facing transparency on products by providing better information on how and where the clothes are made, or by putting emphasis on bettering workers' rights in supply chains.
Meanwhile, as a manufacturer—certainly as a garment exporter from Bangladesh—it is difficult these days to operate irresponsibly. Our customers would simply shop elsewhere, and the many audits we have to undergo each year would soon expose and flush out the bad practices. We are under the microscope like never before, but at least that has the effect of raising standards.
There is a major difference in the online-only fashion space and it is that the public is the end customer. The problem is that end consumers often lack the knowledge or understanding to ask proper questions about the clothes they buy. It is easy for online sellers to pull the wool over their customers' eyes on sustainability issues; for evidence of that, one only has to look at the rapid growth of Shein these past few years.
The point, then, is that while manufacturers are accountable in areas of compliance, it is hard to say with a great confidence that it's the same for the rapidly growing online fashion space. Who is doing the audits in the online fashion market? Who is checking where their supplier factories are, whether they are sub-contracting, whether child labour is involved and whether these factories are even safe? The global apparel supply chain is huge. If one is not ethically minded, it is easy to cut corners.
There is always somebody who will produce for a lower price—especially if one is happy to not ask many questions about where and how their clothes were made. A new, online fashion seller could easily source irresponsibly and unethically, and there would likely be very few repercussions.
If fashion is to become more responsible, there must be consistency and a level playing field for all—this includes manufacturers, traditional brands and retailers, and the new breed of online-only brands.
A start here would be for the governments of major markets—such as the US and Germany—to make it mandatory that any online retailer selling to their respective general customer bases should be obliged to illustrate full supply chain transparency. This would include detailing the full supplier lists on their websites and adherence to appropriate industry standards. Do people buying from the likes of Shein have any idea about where their products were made, and under what conditions?
I am under no illusion that there are any easy solutions here. The broader point is that at a time when we, as an industry, are trying to drive improvement across the board, it is easier than ever to set up an online fashion business which has little or no regulatory oversight. I feel for responsible brands and retailers, which have spent years investing in doing the right thing, only to find that they are being undercut by newcomers who care little for ethics and sustainability.
There is only so much that such brands can do if new online operators simply refuse to play fair and by the rules. In such circumstances, they as well as we, responsible manufacturers, are dependent on firm, global regulations to ensure a level playing field for all.
A few cowboys cannot be allowed to undo all the good work we have achieved.
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).