Bangladesh relaxed a nationwide curfew after deadly protests last week, allowing the key garment export sector and banks to reopen as the government tries to get the economy back on track and stem the declines in foreign exchange reserves.

Home Minister Asaduzzaman Khan announced the new measures after assuring garment factory owners of the security situation in a meeting in Dhaka Tuesday night. The authorities lifted the curfew from 10am to 5pm local time for Wednesday and Thursday and soldiers were still on the streets, diverting traffic from key government buildings.

Banks reopened and the Dhaka stocks fell the most in three months over the unrest. Broadband internet was restored in parts of Dhaka including diplomatic enclaves and commercial zones. Monitoring service Netblocks said social media and mobile data restrictions remained in place after the protests left more than 170 people dead.

The economic damage from the protests and the curfew over the past week has hit 100 billion taka ($850 million), according to initial industry estimates compiled by Bloomberg News. It’s a significant setback for Prime Minister Sheikh Hasina, whose government is negotiating with the creditors and the International Monetary Fund to bolster foreign-exchange reserves that have fallen to $21.8 billion last month.

The unrest, which stemmed from a controversial government jobs quota system, has affected the garments sector the most. It accounts for more than 80 percent of Bangladesh’s exports and contributes about a tenth of Bangladesh’s gross domestic product.

While the nation’s top court ruled to roll back much of the jobs quota system to placate the student protesters, the heavy-handed response from the government to quell the demonstrations has drawn criticism from the US, the biggest buyer of Bangladesh-made garments.

“The government should refrain from acts of violence against peaceful protesters,” Matthew Miller, spokesperson for the Department of State, told reporters in Washington. “We also remain deeply concerned by reports of ongoing telecommunications disruptions across the country.”

Security forces arrested about 3,000 people in the past week for their alleged roles in arson attacks and vandalism on property, including the state-run television building, a metro station, and countless government-owned cars, according to a count by the Prothom Alo newspaper.

Hasina blamed the opposition for capitalizing on the student protests and carrying out militant-like attacks after the court ruling. The unrest is the deadliest since Hasina extended her grip in power for a fourth term in elections in January.

Mirza Fakhrul Islam Alamgir, secretary general of the main opposition Bangladesh Nationalist Party, said his group had nothing to do with the violence.

While Hasina has overseen one of the fastest growing economies in the world and helped to lift millions out of poverty, critics argue that those achievements are overshadowed by her authoritarianism. They say the 76-year-old leader has used state institutions to stamp out dissent and stifle the media, something she denies.

Nobel Peace Prize-winning economist Muhammad Yunus, who faces time in prison and is seen as Hasina’s rival, had called on world leaders and the United Nations to help end the violence against those who are exercising the right to protest.

Hasina’s government hit back against Yunus a couple of days later.

“He has nowhere in the statement condemned the attack on the property of the state and people, but rather sought the intervention of foreigners in what’s going on in Bangladesh, which is an act of treason,” Foreign Minister Hasan Mahmud said.

By Arun Devnath

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Will Bangladesh’s Tainted Election Serve as a Wakeup Call for Fashion?

A vote widely seen as rigged could spark another round of protests and violence, with the country’s millions of garment workers on the front lines. The fashion industry has been reluctant to get involved, but may find it has no other choice.

Shares in French luxury giant LVMH fell more than 6 percent on Wednesday and were on track for their biggest one-day drop since October 2023 after its second-quarter sales growth missed consensus estimates.

The world’s biggest luxury group on Tuesday reported its quarterly sales rose 1 percent year on year to €20.98 billion ($22.76 billlion), undershooting the 21.6 billion expected by analysts polled by LSEG analysts.

The earnings miss also weighed on other luxury stocks, with Hermes down around 3 percent and Kering off by more than 4 percent.

Kering is scheduled to report second-quarter sales after the market close and Hermes reports on Thursday.

A lack of visibility for the second half of the year beyond the easing of comparative figures — as the Chinese post-pandemic lockdown bounce tapered off a year ago — is unlikely to improve investor sentiment regarding the high end sector, Citi analyst Thomas Chauvet said in an emailed note to clients.

“No miracle with the luxury bellwether; sector likely to remain out of favour,” Chauvet wrote.

Analysts from Jefferies said the miss came as investors eye Chinese shoppers for their potential to “resume their pre-Covid role as the locomotive of industry growth and debate when Western consumers will have fully digested their Covid overspend”.

LVMH shares have been volatile since the luxury slowdown emerged, and are down about 20 percent over the past year, with concern focused middle-class shoppers in China, the world’s No. 2 economy, who are reining in purchases because of a property slump and job insecurity.

By Dominique Patton and Mimosa Spencer; Editors: Jacqueline Wong and Jason Neely

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LVMH Revenue Slip Signals Continued Gloom for Luxury

The Louis Vuitton and Dior owner’s revenues fell for a second consecutive quarter, suggesting even the sector’s strongest players are struggling to buck a slowdown in demand for high-end brands.

Europe’s top asset manager Amundi and other LVMH investors want the $370 billion luxury behemoth controlled by billionaire Bernard Arnault to take more aggressive steps to monitor its suppliers’ treatment of workers after Italian prosecutors disclosed alleged sweatshop-like conditions at subcontractors for high-end brand Dior, three investors told Reuters.

The investigation into suppliers for LVMH’s second-largest fashion label, which Reuters revealed on June 11, has shone a spotlight on potential worker exploitation in the $1.6 trillion global luxury goods industry.

Amundi, which holds a 0.6 percent stake - worth $2.2 billion - in the Paris-listed parent to brands including Louis Vuitton and Tiffany & Co., said it contacted the French conglomerate after the investigation was made public, asking for more transparency on supplier audits and internal purchasing practices.

“We hope that these recent allegations will be looked at seriously and will speed up the improvement, within the sector of policies and practices to ensure proactive management of supply chain risks including those around working conditions,” Caroline Le Meaux, global head of ESG research, engagement and voting at Amundi, told Reuters on July 18.

CCLA Investment Management, another LVMH investor, told Reuters it wants the company to provide more public evidence of its efforts to ensure workers in its supply chain are fairly paid, while asset manager Robeco said it has been pushing luxury groups including LVMH to be more transparent.

Reuters spoke with four investors holding shares in LVMH after a Milan court placed an Italian subsidiary of Dior under judicial administration following the investigation into the supply chain of Dior and a dozen other fashion brands.

Flavio Cereda, co-manager of GAM’s luxury brands investment strategy, said while he did not see the probe as a “deal-breaker” when it comes to owning shares in LVMH, it is now no longer enough for brands to say a product is made in Europe and that they need to show they are “on top of [their] supply chain because in the end it falls on [them].”

Amundi leads engagement with LVMH on fair wages on behalf of the Platform Living Wage Financials, a group of large investors including Legal & General Investment Management and Storebrand.

The French asset manager voted against the re-election of Arnault as LVMH CEO at the 2022 and 2023 shareholder meetings due to what it said was the French behemoth’s lack of transparency on worker pay and conditions.

Italian prosecutors said Dior, headed by Arnault’s daughter Delphine Arnault, paid Italian subcontractors as little as 53 euros per Dior bag assembled, selling the same style bag in shops for 2,600 euros while failing to implement basic safety requirements, according to court documents reviewed by Reuters.

Dior said last week it has cut ties with the suppliers in question, that they were only partially assembling leather products and that reports of bags produced at “ridiculously low” costs were among “entirely false” information relayed by the media. Dior’s profit margin is “entirely in line with that of the luxury industry and nothing of the order indicated by these erroneous comments,” the label said. LVMH does not publish detailed figures about the financial performance of Dior or its other individual brands.

An LVMH spokesperson told Reuters the French conglomerate updated its supplier code of conduct in March and is working towards a homogenous approach across all its brands, but that the size and complexity of the group, which spans spirits to high-end hotels, mean this process is lengthy and challenging.

“This is a process of continuous improvement,” the spokesperson said.

In some cases, LVMH is also working with rivals who employ the same suppliers, to coordinate efforts to pay workers a living wage.

On Wednesday, Italian antitrust authorities launched a separate probe into whether Dior’s marketing claims touting the craftsmanship of its products mislead consumers. The probe also targeted Armani, which expressed confidence in a “positive result following the (antitrust) investigation.”

Italy accounts for 50 percent to 55 percent of the global production of luxury clothing and leather goods, consultancy Bain calculated, with thousands of small manufacturers supplying big brands and allowing them to sport the prized “Made in Italy” label.

Transparency Quest

Amundi has for years been asking LVMH for improvement in its wage policies. “LVMH continues to lack fundamental due diligence efforts that not only promote living wage, but also help to address key human rights risks,” Amundi said in a May 7 report on its engagements with companies.

“We understand their impatience, we are mobilised to move as quickly as we can,” the LVMH spokesperson said of investor requests.

The PLWF, which vets retailers annually on their policies and actions on fair wages, gave LVMH a rating of “embryonic” — the lowest of five grades — in its 2021, 2022 and 2023 reports.

“LVMH are a large fashion house, they have 75 different brands. Some of those are vertically integrated and have a lot of controls, and others don’t,” said Martin Buttle, Better Work Lead at CCLA Investment Management, another LVMH investor.

Dora Buckulcikova, lead portfolio manager at the Robeco Fashion Engagement fund, also an LVMH shareholder, told Reuters luxury brands have blind spots when it comes to “suppliers of their suppliers,” resulting in “not enough knowledge about where these are based and how they are audited”.

Robeco routinely pushes luxury companies including LVMH to publish more information about their suppliers, and to ensure factory audits are unannounced, Buckulcikova said.

Dior said it had audited the suppliers that prompted the probe but they had “evidently succeeded in hiding these practices.” “The Dior teams are working intensely on ongoing reinforcements of the existing procedures,” it said.

LVMH discloses very little about its sprawling supply chain in filings. The conglomerate is controlled by the Arnault family, which owns around 49 percent of the share capital and 64 percent of voting rights.

Antoine Arnault, Bernard Arnault’s son and LVMH’s head of image, told shareholders in April the group sought to do better.

“We cannot create products that make people want to dream without tangible improvements such as traceability and transparency,” he said.

By Helen Reid and Mimosa Spencer, additional reporting by Elisa Anzolin and Dominique Patton, Editing by Vanessa O’Connell and Lisa Jucca

Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders’ documentation guaranteeing BoF’s complete editorial independence.

Manish Malhotra’s entry into beauty was a long time coming.

Beauty has always played a role in the designer’s work, since his debut as a Bollywood costume designer in 1990, where he introduced the concept of “styling a whole look” to ensure the hair, makeup and nails matched the protagonist’s apparel. His styling of Sridevi in the film “Gumrah” in 1993 marked the “first time a Bollywood actress had one haircut throughout a movie,” he said.

“Makeup and hair has been a very important part of my work, it can make or break a look,” he said. So when he was approached by The Good Glamm Group (the company behind tennis player Serena Williams’ Wyn Beauty brand), Malhotra knew he had to do it.

Manish Malhotra Beauty launched in October 2018, with a collection dripping in glam and glitter—multi-textured eyeshadow palettes (in foil, metallic and matte), high shine lipsticks, nail lacquers, glosses and highlighters within a price range of 800 to 1500 rupees (about $9 to $18). Today, the brand is backed by investors such as Warburg Pincus, Prosus Ventures, L’Occitane and Bessemer Venture Partners and currently sells over 150 SKUs. It plans to expand further in India and internationally.

Indian couture designers like Malhotra, long restricted to runways or the niche customer base that can afford their prices, are finding ways to tap into beauty. Unlike Malhorta, however, most of these remain limited-edition partnerships: In October 2017, the designer Gaurav Gupta launched the scent “Again” in collaboration with fragrance brand The Perfume Library. In February 2019, Manish Arora designed skincare label Kama Ayurveda’s Valentine’s gift box. Last year, Payal Singhal partnered with Indian beauty brand Kiro Beauty to launch a range of matte nudes for Indian skin, whose previous collaboration with skincare brand Ranavat in 2020 saw a self-care collection packaged in her signature botanical motifs.

There was clearly an opportunity for more. The retail value of India’s beauty and personal care market was worth $16.5 billion in 2023 and is predicted to grow 11.5 percent to $18.4 billion by 2026, according to Euromonitor International.

Designer Masaba Gupta, who launched her cosmo-wellness brand LoveChild in August 2022 with lipsticks, nail colors and wellness-driven products like an anxiety oil, now does beauty full time besides running her fashion business. However, she realised soon after that focusing on colour cosmetics is the way to go.

“With skincare, we’re not a market that will read an article online and pick up retinol,” she said

Gupta’s products come clad in dopamine-inducing packaging, with bright illustrations and signature Masaba prints, and range between 175 and 2200 rupees ($2-26). “You will never mistake us for another brand if you see us on a shelf,” she said.

Today, the brand’s lipsticks form a major part of its best selling product portfolio, bringing in 75 crore rupees ($8.9 million) in sales annually..

Consistent Brand Identity

For Indian designers, who constantly work with models, makeup artists and brides, extending their ability to anticipate trends from fashion to beauty seems befitting. However, some observers sound a note of caution.

“Beauty is often seen as the moneymaker, which begs the question if the designer is genuinely interested in beauty, and are they investing the same principles, attention to detail, thought and time into their beauty offerings as they do with their clothes?” Vasudha Rai, author of beauty and wellness books “Glow” and “Ritual”, pointed out.

Maintaining consistency across both lines was key for fashion designer Sabyasachi Mukherjee when he launched a beauty line with Estée Lauder in March 2024.

“It’s important for me to create something timeless, and I’ve done that with my clothing,” said Mukherjee,in a February interview with Business of Fashion. “My hope is that a woman can find a [lipstick] shade in this [beauty] collection that they can stick with for years and years.”

Mukherjee also made sure the luxury feeling was retained in his beauty offering. His line with Estée Lauder features 10 lipsticks, encased in 24-carat gold-plated tubes and embellished with his design signature, the Royal Bengal tiger. They retail at a premium price of 5,400 rupees ($64) each.

For designers like Malhotra, the connection to Bollywood also helps create a selling proposition that translates across categories, because “Bollywood is what really creates popular culture in our country,” said Darpan Sanghvi, Good Glamm Group’s founder and CEO.

Dressed in glossy black and gold with curved edges, Malhotra’s beauty dispatch provides a double unboxing experience. The aim is to “relive the care with which you’d open a beautiful Manish Malhotra outfit,” said Sanghvi.

Catering to Local Audience

Still, for these brands to grow, they need to reach more than just the upper echelon of Indian shoppers. And when your consumer base diversifies and isn’t limited to the affluent, so should your communication and SKUs to meet their needs.

Gupta’s decision to use Hinglish (a blend of Hindi and English) in her communication stemmed from the need to communicate with a broader population and not leave those in smaller cities behind. Her product names too, are peppered with inherently Indian phrases, like the Nazar Na Lage (a Hindi term for evil eye to ward off evil) Kajal, or Rani (Hindi for a deep pink or queen) liquid lipstick.

Beauty standards can differ wildly from country to country, and more consumers are looking for authentic solutions based on the uniqueness of geography and culture. This is an area of opportunity for homegrown designers to highlight their roots. Plus, many Indians want to support homegrown beauty labels — according to a Mintel India report, 41 percent of Indian consumers strongly agree that it’s important to support local brands that understand their needs.

“This sentiment is reflected in the growth of homegrown brands that offer products tailored to Indian beauty needs, such as makeup for Indian skin tones,” said Tanya Rajani, principal analyst, beauty and personal care, Mintel India.

Lovechild’s 18-shade foundations, launched in January 2024, took a year in the making and involved working with research agency NEPA to conduct a consumer study. The results claimed a 90 percent shade match to Indian skin tones.

That goes for marketing, too. The brand released a campaign in February 2024 with the Mumbai Indians women’s cricket team, which Masaba said is an example of the brand’s philosophy of making products for all of India. Lovechild saw sales and revenue grow threefold in the second half of 2023, owing to doubling down on bestsellers, full category play with makeup, maximizing on the festive period and scaling up at marketplaces.

Masaba’s highly targeted marketing approach has also served the brand well, she suggests.

“I’m very happy I don’t have a ton of followers [on social media], it’s sizable but a very meaningful following who believes me, likes me but will not blindly buy my product,” said Masaba.

Second-quarter net sales at Inter Parfums rose 11 percent to $342 million against the same period last year, beating a consensus estimate of $339 million. Its stock price rose 11 percent in pre-market trading.

Its European operations rose 14 percent, while its US arm rose 8 percent. Inter Parfums makes fragrances as a licensee for fashion house brands such as Jimmy Choo, DKNY and Karl Lagerfeld.

While robust sales were noted for its Lacoste, DKNY and Roberto Cavalli lines, chief executive Jean Madar noted that other brands such as Montblanc and Coach experienced softer demand, though Madar expects new launches and increased sell-out in the second half of the year to offset the impact.

The premium fragrance market has been especially buoyant in recent years – in the same quarter in 2023, Inter Parfums’ sales rose 26 percent – but Madar said the company was trying to achieve a more balanced pace of launches and promotional activity to ensure consistent performance.

Chief financial officer Michel Atwood noted that sell-in is growing slower than sell-out, with particular challenges in Eastern Europe, and said the company would not upgrade its conservative outlook, and reaffirmed its 2024 guidance of net sales of $1.45 billion.

In a note, Jefferies’ analysts were more upbeat. It upgraded Inter Parfums to “buy” earlier this month, and said Inter Parfums offers an attractive home for smaller brands that lack the capabilities to produce fragrances in house and that might be overlooked in a larger conglomerate portfolio.

In addition to a “blockbuster” new Lacoste scent slated for 2026, Inter Parfums said it had also renewed its Van Cleef & Arpels licence for a further nine years from January 2025, having held the licence since 2006, and renewed it once already.

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Luxury Brands Might Think Twice Before Buying Back Their Beauty Lines

In search of greater ownership — both of image and revenues — more fashion houses are wresting back control of their beauty licences. But running a beauty business can stretch otherwise well-resourced, powerful companies beyond their capabilities.

Halit Gumuser is prone to speaking plainly and directly. “Challenging the innovation and [production] capacity of China is difficult,” concedes the chief executive of Turkish manufacturer Kipas Textiles, a supplier to online fashion giants like Asos and high-street brands with a large footprint in Europe. Although China’s manufacturing strengths are obvious, he suggests, Turkey’s competitive advantage is obscured further upstream. “Textiles are the country’s leading export product [and that makes them] a ‘core position’ for us.”

The local textile economy is both ancient and deeply rooted. Vast amounts of fibres, yarns and fabrics were traded across the Ottoman Empire, Turkey’s predecessor state, for nearly six centuries and the Hittites were avid weavers on Turkish soil thousands of years before that. Fast forward to the present day and Turkey’s share of the global textile market has almost doubled over the past two decades, according to International Trade Center (ITC) data, with textile exports topping $15 billion in 2022.

One of the largest players in that export trade is Kipas. Established in 1984 in the small city of Kahramanmaras deep in Turkey’s Anatolia region, the firm has grown from its humble origins as a single yarn spinning facility to a multitude of vertically integrated factories including weaving, dyeing, textile recycling and garment production facilities. Like many of its peers across the country, it benefits from being part of a sprawling conglomerate. Parent Kipas Holdings, owned by the Gumuser and Oksuz families, has holdings in multiple industries including logistics, retail, energy and agriculture.

The scale of the company is vast, with its facilities producing 330 tonnes of yarn per day, and 80 million metres of fabric per year. Yet Kipas is just one of 19 similarly large Turkish factory groups operating in the same cotton sub-sector: denim. With deep pockets and even deeper know-how, many of these vertically integrated giants look increasingly attractive to fashion brand and retail leaders who need to diversify some of their production away from the Far East.

How Turkey measures up

Only China and Turkey rank in the top five countries by value for both textile and garment exports, but the former is clearly in a league of its own. In 2022, China led the world’s textile and clothing exports, with 43.6 percent and 31.7 percent share of global markets respectively. Turkey’s comparative figures were 4.6 percent and 3.5 percent, placing it fourth for textiles (behind the European Union bloc, India and China) and fifth for clothing (behind Vietnam, Bangladesh, the EU, and then China, at number one).

Where Turkey struggles to compete with China — beyond production capacity — is on price, with a significant contributing factor being labour cost. The monthly minimum wage in Turkey is around $500 (17,002 liras), compared to $220-$324 (1620-2360 yuan) in China’s major garment production province, Guangdong.

“China is the destination for sourcing basic items with long lead times. We [in Turkey] are good at offering good service, plus design and fashion(-led) items, taking on the smaller portion [of brands’ product range],” said Selman Bilal, chairman of Bilsar, a Turkish garment manufacturing company established in Istanbul in 1947 that has grown to export more than three million shirts a year to Europe and the US.

Weighing in on the price premium of ‘made in Turkey’, Murat Arioz, sales and marketing group director at Kipas Textiles, explains that outsourcing arrangements with third countries can make for a more direct comparison to sourcing from China on a cost and capacity front.

“Most of the big suppliers, including Kipas, have their garment assembly facilities in Egypt, which is operating at a lower cost, so it’s Turkish fabric and Egyptian production for the mass volume business,” said Arioz, explaining that an additional advantage is that ex-Egypt exports to the US market are duty-free. By contrast, exports directly from China to the US are not.

Furthermore, producing in a country that is geographically within or nearer to markets in Europe, such as Turkey, usually means faster deliveries, lower shipping cost and lower or no tariffs, compared to similar fashion made in China. Consequently, even if Turkish or European-made products are significantly more expensive on a per-unit basis than Chinese products, the landed price difference tends to “even out”, according to a recent study by supplier database solution Productmkr.

Brands adopting such nearshoring strategies have noted opportunities for trimmed-down inventory, seasonal ‘trend-led’ production in smaller order quantities (compared to China), and vastly improved supply chain traceability and compliance.

Harnessing nearshoring opportunities

While the historic might of Turkey’s manufacturing sector is based on cotton products, across both woven fabrics and knitted jersey, it is now repositioning itself to meet the production opportunity created by the expansion of athleisure brands looking to source synthetic textiles nearer to market. The country’s thriving textile machinery manufacturing sector and robust textile engineering skill base are two other strengths in its ecosystem.

“Turkey is building the whole textile infrastructure,” said Stefan Hutter, textile engineer and founder of Singapore-based global trading company Saentis Textiles, describing Turkey as “the textile manufacturing base of Europe”.

Indeed, European affordable and high-street fashion giants with a global footprint rely heavily on sourcing from Turkey. Spain-based Zara-owner Inditex, Swedish group H&M and Belgium-based C&A are just a few that list multiple manufacturing partners in the country.

An annual sourcing survey conducted by supply chain compliance giant Qima revealed record levels of nearshoring intent in 2023, with one-quarter of Europe-based brand respondents listing Turkey alone as a crucial local sourcing partner. It also showed that European brands’ volume of apparel sourcing from Turkey surpassed that of Vietnam for the first time in several years.

According to Bilal, a key edge that Turkish companies like Bilsar have over Asian manufacturers is just-in-time production for high quality output and design, with lower minimum order quantities. “We have ten days [lead time] from order to fulfilment in Europe [for core products],” explains Bilsar’s chairman.

This demonstrates the advantage nearshoring gives to brands for restocking inventory in step with demand fluctuations in an era of intense global supply chain pressures and consumer volatility.

Speed to market was a critical factor for Asos to choose Turkey for some of its production. “The lead time is reduced from 150-170 days in the Far East to under 50 days in Turkey,” said Shaun Ghori, Asos’s head of fabric and trims. “[And] it’s [only] seven days on the truck from Turkey to the UK. Price is the only slight disadvantage at this stage, but [seasonal] fashion is style-driven, so for us we want to be relevant, and [therefore] have a relevant product for our customer [at the right time].”

Asos is willing to pay a premium for the design-led and quality-driven products that Ghori says only Turkey can produce with shorter lead times, supply chain traceability and textile innovation. “They have the right mindset to bring new developments and R&D [in denim, and] that is the unique point Kipas has,” he said, describing the company as a “one-stop-shop” for sourcing.

Tapping into enhanced transparency

“With Turkey, transparency is easier, but in China, you could buy a fabric through an agent who works with many fabric suppliers, then it is dyed somewhere else [making traceability difficult],” Ghori added.

Like many Western brands, Asos does not source cotton from China because of forced labour reported in the country’s Xinjiang region, where much of the fibre is grown. A United Nations report finding human rights violations urged international businesses to take additional measures across business activities, including enhanced due diligence, and to report on supply chains transparently.

In response to this significant compliance risk, fashion companies made swift withdrawals from cotton sourcing in China. “Big brands pulled out of China due to Xinjiang and this was to the benefit of Turkey,” said Hutter.

The fact that Turkey is the seventh largest grower of cotton globally, according to the International Cotton Advisory Committee (ICAC) means local companies have been able to build strong supply chain integration from tier 5 (raw materials) through to tier 1 (garment production). The country is also benefiting from the so-called ‘friendshoring’ movement, where brands reduce their exposure to disruptions caused by geopolitical tensions by moving supply chains to ‘friendlier’ sourcing hubs.

Even China-founded fast fashion giant Shein, which is under intense scrutiny ahead of a planned IPO, has expanded its sourcing from China to Turkey, following the establishment of supplier partners in India and Brazil. Talking to Reuters, Shein executive chairman Donald Tang said the volume of Shein products made in Turkey is currently insignificant compared to China but is growing fast.

“Politics, duties and what’s happening in the US [regarding trade restrictions] are factors, but [high] volume [orders], in my opinion, will always be sourced in Asia,” said Hutter. “Cost is always the [key] factor.”

Turkey’s record on human rights is also marred, including its unlawful deportation of Syrian refugees, many of whom were recruited for ‘informal’ work in the textile and apparel sector, sparking intervention by the Ethical Trading Initiative between 2014 and 2018. In 2018, a new agreement was established between the International Labour Organization (ILO) and the Istanbul Apparel Exporters’ Association (IHKIB) to establish formal and decent work for Syrian refugees (a population of 4 million at the time) in Turkey’s garment industry.

On the environmental sustainability front, Turkey has an impressive rate of renewable energy adoption, leaping ahead of China in 2015 and still outpacing it in 2023, according to the site Our World in Data. Adoption of renewable energy at supplier facilities in Turkey was cited by Cherie Nelson, senior head of buying and sourcing at Urban Outfitters, another brand that Kipas supplies, who says “expansion and investment in onsite renewable energy is becoming fairly standard for [Turkish] mills.”

China continues to use more coal, powering 53.9 percent of energy there, compared to 32.9 percent in Turkey, a figure firmly at odds with global climate targets. In terms of textile impacts, with traceability to cotton growers both in-country and overseas, Turkey provides end-to-end visibility for environmental data collection and social and environmental auditing due to its significant buying power and direct trading relationships, coupled with end-to-end vertically integrated production.

Adding value through innovation

Urban Outfitters’ Nelson believes that Turkey’s advantages “have really come to light recently”. Suppliers are “highly aware of the incoming expectation of supply chain due diligence [and they] believe in it, support it and are highly aligned with it,” she adds, noting that Turkey is particularly appealing since cotton traceability auditing now extends back to the gins where harvested cotton lint arrives from cotton farms for pre-processing “making fibre to finished product traceability easier.”

Recently, Kipas developed a new range of denim products with Asos containing regenerative cotton traced back to the farm in Brazil, combined with recycled cotton Kipas spun, weaved and dyed in-house, resulting in a significantly lower footprint across all facets of the product, according to Ghori. That integrated impact reduction does come at additional cost, though.

Textile engineer Hutter developed a novel mechanical cotton recycling machine now in use at Kipas. Interestingly, he built the first iterations in China in 2016, before exiting the country when brands withdrew due to Xinjiang human rights breaches. Kipas Textiles took on the nascent machine in 2018, commercialising it to create RCO100 yarns since used in products for brands including Tommy Hilfiger (through Tommy Jeans), Calvin Klein Jeans and Lacoste.

Next for Kipas Textiles, Gumuser is set on offering textile innovation for value-added materials and products, attracting startups that need to incubate and develop their solutions.

“When European brands use the Turkey supply chain, innovation between startups and the supply chain happens, because we can overcome problems and bottlenecks more easily [due to] our expertise and vertical integration”. As an example, Gumuser says “when Renewcell launched [their recycled textile fibre] Circulose we bought 4000 tonnes to hold in stock so brands were able to test it [without needing to commit to orders of the raw material themselves].”

Challenging macroeconomic environment

Despite this investment willingness, economic conditions in Turkey are challenging with record inflation of 75 percent in May this year, devaluing the Turkish lira and sending the cost of living surging.

The country’s economic crisis, which began in 2018, has impacted most industries including the local fashion manufacturing and retail sectors. Last year’s earthquake also hit factories in the affected region. Turkey’s inflation rate cooled for the first time in eight months last month, though it is too early to tell whether the finance minister’s recent claim on X that “the worst is behind us” is an accurate assessment of Ankara’s turnaround plan launched a year earlier.

According to Arioz, Kipas is well positioned to weather the turbulence, due to its integrated facilities allowing for flexible resource allocation and production, as well as being buoyed by parent company Kipas Holdings’ diversified and multi-sector interests. But it remains true that with local inflation rates, the company’s margins will inevitably be hit by holding firm on its unit prices for brands.

The road may not be so easy for Turkey’s SME’s, though, who without vertical integration cannot offer pricing stability for brands sourcing from Turkey. “For SMEs, if there’s a yarn price change [for them], they have to change the unit price [for their customer] immediately — we cannot immediately change the customer prices, but when there is a point where we can’t avoid price increases, the customer already knows this is coming [because] they have had it earlier from other [suppliers],” said Arioz.

According to the Turkish Statistical Institute, Turkey has 581 large scale textile and 395 large-scale apparel businesses. The Istanbul Textile and Raw Materials Exporters Association (ITHIB) lists companies including Kipas Holding, Sanko Holding, Zorlu Holding, Aksa and Sasa as prominent examples of these businesses. In contrast, most businesses in this sector in Turkey are SMEs (92,583 in total), employing fewer than 250 people and with net revenue or balance sheet not exceeding 250 million Turkish lira ($7.7 million).

The position that Turkish giants like Bilsar and Kipas Textiles have — expertise, integration, flexibility, traceability and sustainability investments — steer and solidify their ‘beyond-transactional’ relationships with brands. Gumuser says “mutual benefit” for suppliers and brands will continue to be key to Turkey’s offering as a sourcing hub, and Kipas for one appears well positioned to deliver that.