Cheap fashion comes at high price for local clothing sector

In a shop brimming with rails of high-end clothing brands, shoppers browse through an array of international labels selling at massively discounted prices.

The retailer is one of the growing outlets operated by parallel importers, selling European high street fashion and names such as Tommy Hilfiger, Michael Kors and Ted Baker to local consumers. It’s a business that has disrupted the local retail space, presenting further challenges to the already distressed local clothing manufacturing sector.

Parallel importers such Discount My Fashion (DMF) and Fashion Brand Outlet (FBO) have set up shops across Johannesburg and Pretoria, in what may be a major win for penny pinching consumers, but a potential death knell for local businesses. 

The clothing manufacturing sector has come under immense pressure in recent years, with companies battling to keep up with the rising tide of cheap imports, which have contributed to large-scale job cuts and led to factory closures. The arrival of international fast fashion retailers, with no local manufacturing hubs, is still a sore point to the ailing sector. Now a fresh blow has been dealt in the form of parallel imports.

According to the Trade Marks Act as well as the Consumer Protection Act, parallel importation is not illegal. The Consumer Protection Act states that traders of goods that bear a trade mark, but have been imported without the approval or licence of the registered owner of the trade mark, "must apply a conspicuous notice to those goods in the prescribed manner and form".

It's a loophole that some importers are exploiting.

Swedish retailer H&M, which entered the local market in 2015, does not source its goods locally, apart from a recent partnership with a local designer, but its garments can be found at discount shops.

In a statement to Fin24, the company acknowledged that its merchandise was "sometimes subject to unauthorised use in different ways". 

"We have systems in place when this happens, and we put a lot of work into protecting our brand and its value," the company said, without going into further details.

Bang for your buck

A frequent shopper at one of DMF's outlets in Woodmead, Johannesburg, who says she was attracted by lower-priced goods, says she has not returned to mainstream retailers since coming into contact with the shop nearly two years ago. 

"It is amazing what you can get here, the shop takes away any desire of ever setting foot in a regular shop," said Marcelle Kleynhans.

"In these tough economic times, one must make smart choices on how to spend money. These shops have made life easier and the clothes are not counterfeits," she said, as she browsed through tightly-packed rails of clothing.

DMF, which calls itself an "off-price retailer", launched in 2014, and the company now has seven stores between Johannesburg and Cape Town, with plans to open more this year, according to its website. 

Operators of the store could not be reached for comment.

Local producers hurting

But while importers are cashing in, the Southern African Clothing and Textile Workers' Union (Sactwu) is not happy about what they say is unfair competition presented by the influx of lower priced imports entering the country in different ways.

The union argues that the impact of this practice undermines local manufacturing capacity and jobs. 

"The perceived benefit of having cheaper items of clothing is far outweighed by the problems which occur as a result, the loss of jobs, the loss of industrial capacity and investment, and the increase in poverty," said the union.

According to Sactwu, cheap imports pose additional risks including customs fraud, such as under-invoicing, false declaration of goods as well as the rerouting of goods via third countries.

"The practice undermines the structures and industrial policy programmes put in place by government to support and develop local jobs and factories," Sactwu said.

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