Inditex, the world’s largest ready-to-wear group, reduced its purchases from Turkey, one of its top 4 suppliers, by 15 percent due to price pressure. Apparel exports to Spain declined by 300 million dollars due to this development. Sector representatives expect a revival in the second half of the year.
Spanish Inditex Group, which is the world’s largest ready-to-wear clothing group and includes brands such as Zara, Massimo Dutti, Pull&Bear, Bershka, Stradivarius, Oysho, Lefties and Uterqüe, reduced its purchases from Turkey by 15 percent last year. Stating that Inditex shifted its purchases especially in basic products to rival countries where labor force is cheaper due to the high costs in Turkey compared to rival countries, sector representatives expect a similar decrease this year.
The development also manifests itself in ready-to-wear exports to Spain. According to TIM data, ready-to-wear exports, which amounted to USD 2.57 billion in 2022, decreased by 12.4 percent to USD 2.25 billion in 2023. With the effect of the development, the ready-to-wear sector, which realized the highest exports to the country in the previous year, lost the leadership to the automotive industry.
Ramazan Kaya, President of the Turkish Clothing Manufacturers’ Association (TGSD), emphasized that this decline does not mean that Inditex withdrew from Turkey and said, “Inditex reduced its purchases by 15 percent compared to the previous year. But the previous year is not a very accurate year for comparison. Because there was a crazy business in the exit from the pandemic that year. Since Inditex is price-oriented, it went to cheaper countries like Morocco, Tunisia and Portugal. These figures are very optimistic. The rate of decline in slightly higher segment brands reached 30-40 percent.”
Closed 632 stores
According to 2022 figures, Inditex brands have a total of 5,815 stores worldwide, 202 of which are in Turkey. The previous year, the group had 205 stores in Turkey and 6 thousand 447 stores worldwide. This means that the Spanish company closed 632 stores in a year. Most of these stores consisted of Russian operations. In 2022, the group recorded a revenue of EUR 32.6 billion and USD 1.35 billion of this revenue was from Turkish market. In other words, Turkey’s share in the group’s global sales hovers around 5 percent. Again, when we look at Inditex’s supply from Turkey, the figures are much higher. Inditex has nearly 200 suppliers and contracts nearly a thousand factories for manufacturing in Turkey. Currently, Turkey has a share of around 23 percent of the group’s total supply. The numerical equivalent of this is approximately USD 2 billion. This figure corresponds to about 10 percent of Turkey’s ready-to-wear exports. In 2022, Inditex worked directly with 1,729 suppliers in 50 markets, while these suppliers used 8,271 factories to produce products, providing jobs for more than three million people. In 2022, 49 percent of the factories producing garments for us were located in Spain, Portugal, Morocco or Turkey.
May return in the second half
As part of its strategy, Inditex first collects the products it receives from supplier countries in its own warehouses and then resends them to the countries where it has stores. The group recently purchased the warehouse rented to Primark in the Netherlands for 121 million dollars. Seref Fayat, Chairman of the TOBB Ready-to-Wear and Apparel Sector Assembly, said, “The biggest warehouses are in La Caruna and Valencia. There is no question of Inditex stopping its purchases from Turkey. I have a business visit as well to sell products to an Inditex brand. But they have serious reductions from Turkey in basic products with prices ranging around 8-9 Euros. We are expensive in that segment, we cannot keep up with the competitive price. For these products, the group prefers countries like Bangladesh and Egypt.” Regarding his expectations for this year, Fayat said, “In the second half of the year, when interest rates fall and business picks up, we will see that they will allocate their short-term budgets and start buying from us.”
On the other hand, the rising tension in the Red Sea due to the Gaza War has led to both increased costs and longer transportation times in world trade. This led Western brands to seek alternatives. TGSD President Ramazan Kaya stated that the brands started to ask Turkish manufacturers for prices but the developments have not yet turned into purchases.
TOBB Ready-to-Wear and Apparel Sector Assembly Chairman Fayat also gave a similar statement: “There has been a serious price questioning especially by British basic product brands. It is a 1-week and 10-day development. If negative situations such as the bombing of the ships are prolonged, depending on the size of the situation, there may be a movement in price-oriented groups.”