How can a T-Shirt at discounter Takko only cost 3 Euros?

Posted: October 11, 2011 | Author: | Filed under: TV report | Tags: , , , , , , | 2 Comments »

Recently I reported about a ZEIT article that explained why H&M T-Shirts cost less than 5 Euros. Now we get even cheapter: The German TV show Galileo on the private channel Pro 7 recently examined products of the German textile discounter Takko. Takko has a turnover of over 1 Billion Euros and apparently has 1500 salespoints and opens a new one every three days.

The result is a quite interesting 17 Minutes TV reportage in which the reporters follow a 3 Euro T-Shirt to the production in Tirupur, trying to find out:

How can a T-Shirt be that cheap?

They calculate the costs of the T-shirt as follows:

  • Cotton: 0,60 Euro
  • Maschines and technique (I guess production overheads and profits): 0,55 Euro
  • Wages: 0,25 Euro
  • Transport to Europe: 0,10 Euro
  • Takko overheads: apparently 1 Euro
  • Takko profits: 0,50 Euro

The journalists argue that the price is not low due to poor quality, and to proove it, they have Intertek test the Takko clothes and more expensive products of competitors. The results show that the Takko products were as bad or better as the competitors’. In additino, they argue that an expensive Italian designer uses the same production unit in Tirupur, and conclude that the quality cannot be that bad. They further argue that the low price is not made through particularly poor working conditions, as the workers in the factory get the minimum wages, like those of competitors.

They underline that the low prices are certainly due to the T-Shirts being produced in a developing country with low wages and poor environmental regulation, as compared to Europe. However, as compared to competitors, who also produce under similar conditions, their arguments were:

  • Takko has lower risks than other companies, because they mainly copy designs and do not come up with innovative designs;
  • The shops are situated outside the cities, often close to Aldi and Lidl; according to the CEO this saves costs up to factor ten (they neglect that this produces negative externalities through urban sprawl with all consequences, which Takko does not pay);
  • Takko does not invest much in advertising;
  • The margins are relatively low; Takko makes profits through mass production – and indeed, the white T-Shirt they sold for 6 Euros together with a black one was sold 120.000 only in one week.

If these reasons (and not the wage costs) explain the low price for the clothes, why then does Takko not improve its working conditions and pay living wages? What is the logic behind not paying higher wages? Would consumers move away, if they had to pay 3,50 Euros for a T-Shirt? More interestingly: How much room for manouvre does a discounter like Takko have with its low margins to really improve social and environmental standards before it is thrown out of the market?

Can we make the cheapest products be the best regarding environmental quality (internalizing external costs), as Yvon Chouinard recently suggested in his HBR article “The Big Idea: The Sustainable Economy“.

Finally, I would support the argument that many clothes are well overpriced and that the price is often not correlated with the quality of social and environmental standards. However, I find problematic that the reportage uses a product with huge social and environmental externalities to suggest that T-Shirt and clothes, in general, are too expensive. I am still happy to pay more for clothes that were not produced in huge masses, that use organic cotton, that have better working conditions, and that are sold inside the city and not somewhere outside.

How Stiftung Warentest promotes fast fashion …

Posted: September 24, 2011 | Author: | Filed under: Uncategorized | Tags: , , , , , , , | 2 Comments »

… and calls it “truth”.

The German consumer magazine “Stiftung Warentest” (SW) is an opinion maker for many German consumers – apparently it influences the majority of German consumers in their purchasing decisions. In its current issue it tested the CSR commitment of popular jeans companies and titled pretty self-confident “The truth about jeans”.

The test evaluated the following criteria and weighed the factors: production (social) (35%), production (environment) (35%), brand (general policy) (10%), brand (CSR-info) (10%), transparency (10%). A company could get 0=no answer, and 1=poor attempts at CSR, …  5=very strongly committed. The results show that:

  • No company got the best marks 4 and 5
  • Mark 3 (committed): H&M and Zara
  • Mark 2 (attemts at CSR): G-Star, J&J, Kik, Levi’s, Nudie
  • Mark 1 (did not answer the questions): 7 for all mankind, Diesel, Hugo Boss, Kuyichi, Lee, Wrangler, Salsa, Jeans Fritz

Here you see what was tested (if this zoom from the article breaches any copyrighs, please tell me). I have some remarks:

  • I think that the fact that no company got a better mark than 3 does indeed reflect the current situation that working standards in most supply chains are still very poor. It is also good that critical issues like sandblasting etc. are mentioned critically in the report. But why did they not test a company that would very likely have resulted in a 5 (maybe Hess Natur)?
  • Why is Stiftung Warentest (SW) not transparent regarding the detailed criteria they used. The magazin is surely aware that the final mark will very much differ, depending on what criteria you use and how you measure it (the SW board is full of PhDs and Professors). Or did I miss this out in the 7-pages PDF? A magazine claiming to present “the truth” about Jeans should know better (I wonder, whether a company could sue SW for telling wrong facts). In order to better assess the test, I would like to know: What information did SW use from the companies’ reports and what from verification bodies? What information did they collect in personal interviews and who conducted these interviews (experts?!) in what way?
  • Why did SW not evaluate, a companies’ membership in an independent verification of the companies’ commitment (like FWF, FLA or even ETI membership)? Or did it? But why then, as Kristen Brodde asks, is Nudie only “making attempts” at CSR, even though it commits to the strong FWF standards and certifies its jeans according to GOTS? Is this, because the jeans are produced in Italy, where FWF need not commit so strongly? But then Nudie produces its work plan and so on. Maybe something is wrong with the test criteria?!
  • Maybe this: Why did they interview workers in the factories – to then be surprised “they were all happy with their working conditions although they did not earn enough for their living”. Pardon me, but it is well known that workers are afraid to tell the truth inside a factory – so why do you use such methods?!
  • It is truly sad that brands like Kuyichi, Lee, Wrangler, Hugo Boss and Diesel did not participate in the test at all; knowing about the relevance of Stiftung Warentest, I don’t understand their company policies (To me, it only makes sense not to answer, if you fear your result is not much better, if you answer). It particularly seems strange that the “eco-company” Kuyichi did not react, but apparently Kuyichi wants to explain itself at the Berlin Fashion Summit.
  • We all knew that companies that sell overpriced jeans need not be better in CSR than companies that sell cheap jeans. But Kuyichi’s non-reaction made me personally angry, as I once paid 220$ for a Kuyichi jeans, thinking they were committed – and now they don’t answer … My personal experience with Kuyichi is that the tracking code in my jeans did not work, and once I bought a shirt to later read in the tag that this “sample” was “not for sale”… Warentest recently called Made-By’s tracking system a way of deceiving consumers.
  • Finally, I do not think that the signal that SW is giving (keep on buying cheap fast fashion and keep your fingers from organic cotton jeans) is one that should be the guiding consumers’ purchasing decisions. In terms of global sustainability, Stiftung Warentest should recognize the bigger picture and report about this. Maybe reading Lucy Siegle’s “To die for” and being a little more critical about “cheap” products would have helped.

Also read Kirsten Brodde’s comment.

And also check the Austrian consumer magazine KONSUMENT 7/2011, which did a similar test, where the same brands did not participate.

Why an H&M T-Shirt costs only 4,95 Euro?

Posted: December 19, 2010 | Author: | Filed under: News | Tags: , , , , | 3 Comments »

Wolfgang Uchatius asks in this week’s DIE ZEIT, how an H&M T-Shirt can cost only 4,95 Euro (the exact same price as 10 years ago). In his long and well-researched article he follows the path of an H&M T-Shirt – a little bit like Rivoli’s “Travels of a T-Shirt”, but only on 3 pages. Uchatius discovers at least 7 secrets of the cheap H&M T-Shirt:

1. Cheap cotton: In the past years, the 400 g of cotton that you need for one T-Shirt cost around 0,40 Euro. US cotton is cheap, because the cotton stripping machines yield as much cotton a day as 300 workers, and because US-American taxpayers subsidize it by 40 Cents a shirt. Hence, machines and US taxpayers make our H&M T-Shirt cheap. However, Uchatius explains that the cotton price has been rising to 1 Euro for 400 g, because there is too little cotton in the world market at the moment.

2. Indecent working conditions: The ability of the workers in Bangladesh to hold back their need to go to the toilet during working hours (he explains the living and working conditions of workers in Bangladesh in some detail). Garment workes in Bangladesh drink little during working hours (in factories that are around 30-40 degrees hot!), because otherwise they need to go to toilet and then they do not manage the strict targets set by the factory management to achieve the low prices H&M pays.

3. Very low wages: Uchatius portrays a worker in Bangladesh, who cuts the loose ends of the H&M T-Shirts. She earns 1,18 Euro a day and finishes more than 2000 T-Shirts. She basically adds less than 0,001 Euro per T-Shirt (but she is also not the only one working on a shirt).

4. Low production costs in Bangladesh: The manager of the company in Bangladesh argues that they sell the T-Shirt for 1,35 Euro, a consultant says that it costs no more than 1,40 Euro (H&M did not confirm these prices, but they seem rather expensive to me – three years ago large companies in Dhaka told me they buy one shirt for 0,80$). This price, however, might rise, because the minium wages were increased.

5. Keeping the workers silent: A factory manager in Bangladesh says that he separates working processes into different factories in order to reduce the risk that worker protests spread easily.

6. Low shipping costs: The shipping of the T-Shirt is very cheap, due to containers and huge ships. H&M pays about 0,06 Euro to ship one T-Shirt.

7. Mass consumption: Of the 4,95 about 2,76 Euro stay with H&M (without T-Shirt costs, shipping, taxes). A consultant suggests in the article that H&M has around 2 Euro overheads (transport in Germany, rent of their shops etc.). About 0,60 Euro are H&M’s net benefits per T-Shirt. And if enough people buy such a cheap T-Shirt, a company like H&M can live quite well from it.

Uchatius raises the following dilemma of H&M: One the one hand, the cotton prices and the labour costs in Bangladesh have been rising. On the other hand, 5 Euro is a “magical” price barrier. If prices increase and if we need to pay more to give workers a decent life: Who pays these costs? He suggests that consumers should consider, whether they really need a T-Shirt that costs only little more than a coffee. He encourages the consumers to ask, whether they would also pay three coffees for a T-Shirt. If I look at the commentaries to the article, many consumers seem to pose very few questions…

H&M and Levi Strauss ban sandblasting

Posted: September 10, 2010 | Author: | Filed under: Clip, Company reports | Tags: , , , , | Leave a comment »

Sandblasting makes your jeans look old and fancy. But it has been criticized a lot for causing the death of workers, as the “Auslandsjournal” of the German TV station ZDF recently reported.

H&M and Levi Strauss now banned sandblasting. In a press release they say: “As a commitment to the health and safety of workers across the apparel industry, Hennes & Mauritz AB (H&M) and Levi Strauss & Co. today announced plans to implement a global ban on sandblasting in all of their future product lines. The two companies are encouraging others to join this ban in a move toward eliminating sandblasting as an industry practice.”

Other companies should follow their example.

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