The start of 2014 has proven to be an extremely difficult period for businesses involved in used clothing and textile collections, with a number struggling not to go over the proverbial precipice.
The value of used clothing has dropped by around 10 to 15% and collectors are reporting low demand and full warehouses, mainly with lower quality winter grade clothing.
Several factors have come together to create the perfect storm. This includes the comparatively warm European winter which has resulted in a lower demand for clothing in this important market. With an expected influx of more winter wear from charity shops as unsold stock gets passed on to merchants, this issue is set to deepen. The view is that even if we were to get a significant cold snap, it has come too late to make any significant difference.
Quality has also been driven down by the proliferation of competition that flourished during the good times. Competition from Eastern European businesses increased dramatically following expansion of the EU in 2004. Many regard this as the catalyst for the unrelenting eight-year rise in used clothing values which started in 2005. Cash for clothing stores popped up throughout the country, creaming off the better items.
In addition, following the economic crash of 2008, charity shops saw a drop in their donations as well as a fall in quality. They had to eke more value out of their donations by rotating more unsold stock between their stores before selling items on as charity shop grade. This resulted in a continual decline in the quality of clothing from this route, whilst prices that collectors had to pay were still going up. More recently charity shops have reported increases in direct donations again. This is a good thing.
At the same time Chinese clothing producers are struggling to shift their items, putting downward pressure on their prices and quality. This has resulted in a double whammy, with new Chinese clothing competing with used clothing for buyers, and when this clothing has been used by its initial buyer, its quality is inferior.
Currency fluctuations are also proving to be a major headache. The positive outlook for the wider UK economy has resulted in a strengthening of the pound, making our goods more expensive to export. Ghana is an important market and its currency has declined by around 29% against the pound in the last year, whereas Kenya’s currency has declined by around 20%. Importers cannot simply afford UK clothing for the quality they are getting and are looking to other countries where exchange rates are more favourable.
Demand from Eastern Europe is also under constant pressure from general improvements in living standards. Many businesses that use to just sell straight onto Eastern European retailers are now sorting there and exporting goods onwards to Africa. This is resulting in a larger global supply of flocking, wipers and jumpers, and a lowering of values for these grades.
The inevitable consequence of all this is that the amount that used clothing collectors can pay their charity or local authority partners is falling. Some more businesses will also disappear.
It’s widely believed that cash-for-clothing operations will decline. Collectors are reporting that many of these operations are telephoning around desperately trying to get the best price for clothing that they themselves have already bought of the public. Many have been caught out and are now taking losses.
Charities, local authorities and other contractors are also going to have to get use the new reality of declining prices. Used clothing is no longer a cash cow. As one industry insider said “We need to batten down the hatches as we are in for a rough ride.”
If there is any positive spin to come out of this, it could be that rates of theft might decline. If thieves do not have an outlet at which they can sell the stolen goods for profit, it is not going to be worth their bother.
Alan Wheeler, director, Textile Recycling Association