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Special report – Spain 🇪🇸
Live from the Market
The textile and clothing industries in Spain were severely disrupted, as in many other countries, by the Covid-19 pandemic, the effects of which were felt in a major way in 2020. These industries quickly recovered to previous levels of activity, but stagnated in the last year.
A resilient sector that faces stagnation.
Due to the decline in the domestic market and disruptions in international freight traffic, some companies closed permanently during the 20-21 biennium, and the trend towards a decrease in the number of players (which had already begun before the pandemic) has continued subsequently. However, the reduction in the number of companies has been less than might have been feared, being -8% in the last four years (2023 compared to 2019, the year before the pandemic), and -3% in the last year (2023 compared to 2022), with currently 7.600 companies working in the textile (3.500) and clothing (4.100) industries.
The capacity for resilience, understood as the ability to recover positions prior to a disturbance, has been remarkable. The turnover had already recovered in 2021 practically the same level as before the pandemic, and in 2022 it grew again, although 2023 has been a year of stagnation, even with a slight decline. Indeed, the turnover of Textile/Clothing in 2023 was 11.613 million euros, with a decrease of -2%, but maintaining an increase of +11% over the figure for 2019, prior to Covid.
This is not surprising, since something similar has happened in many of the surrounding markets. Changes in consumption patterns, the effects of the war in Europe due to the invasion of Ukraine by Russia, and other factors, are affecting activity levels in many countries.
Within this, the performance of the clothing sector (+17% in the period 2019-2023) has been better than that of the textile industries (+6%). However, there is some inconsistency between the evolution of production and sales in the clothing industry, suggesting an increase in supplies from foreign manufacturers, by Spanish brands, to maintain or increase a level of sales in value, with less physical production of their own.
Although there were movements during the pandemic, particularly in the home textiles sector, aimed at increasing the weight of technical textiles in sales, no significant or permanent change has been perceived at the sector level. Certainly, in some textile companies that work in both fashion and technical textiles, the latter has increased its weight in total sales over the last two years, but the sector as a whole has learned the hard way that technical textiles, although less seasonal and volatile, have markets dependent on government contracts that require large volumes and are very sensitive to prices, and on the behavior of outside sectors, such as construction, which are also not linear.
A textile/clothing exporter, albeit in deficit.
Foreign trade has evolved in a manner consistent with the trajectory of the sector as a whole. After a -20% drop in textile + clothing exports during the year of the pandemic, in 2021 these had already recovered, exceeding the figure for 2019. Growth continued in 2022, but the following year it returned to levels slightly higher than those of 2021.
If we take the total for the 2019-2023 period, textile exports (4.733 million euros) are 10% higher than those of 2019, but 5% lower than those of 2022.
Within this, with a slightly increasing figure, which moves in a range of 1.000 to 1.200 million euros, articles of technical use represent just under a quarter of textile exports.
In clothing, exports amounted to 18.823 billion euros: +8% over 2019, -5% over 2022.
The foreign trade balance is in deficit, as imports are 30% higher than exports in value.
Over the last four years, the value of textile imports (4.930 million euros) grew +11%, that of clothing (18.823 million) +8%, and the sum of imports (23.753 million) increased +9%.
Within this, the data for 2023 have been negative, with double-digit declines in imports.
The sector has its own statistical office, the «Centro de Información Textil y Confección» (Textile and Clothing Information Centre) – CITYC, which collects data from different sources and prepares its own estimates.
Current situation, shopping tourism and transition.
The textile and clothing sector in Spain is in a moment of transition characterised by uncertainty, as several alternatives are being explored. Highly dependent on the domestic market in elder times, it has been trying hard to push abroad for four decades, with an increased effort since the beginning of the current millennium and, in particular, after the financial and real estate crisis of 2008, which almost collapsed the domestic market and forced companies to look abroad to compensate for lost sales within Spain.
Traditionally, companies operated mainly in the fashion market, although there has always been an important sector of home textiles, which suffered greatly in the years of the fall in the real estate market, but which is currently performing solidly.
The fashion sector suffers in the domestic market from the change in consumer attitudes. Consumers currently prioritize leisure activities in their spending, and spend less money on clothing. In return, it benefits from shopping tourism.
For the current year 2024, the number of international tourists is expected to exceed 90 million visits, a forecast that seems to be confirmed after the figures for the first half of the year. This is a significant amount for a country with almost 48 million inhabitants, and Spain is the second country in the world with the highest number of visitors, behind France.
Of course, many of these tourists, among whom there are many low-cost travellers, spend little or nothing in clothing and footwear shops in Spain, but many others visit the shops on the shopping streets and in coastal tourist towns and make purchases.
The number of international professional events held in Spanish cities is also increasing, with a professional public with greater purchasing power. And there is also a luxury tourist who spends a significant amount individually.
Retail market, at the retail level, depressed in historical terms.
Despite all this, the domestic textile and fashion retail market is at levels clearly lower than those it had before the pandemic.
In Spain there was an association that represented the entire fashion trade, Acotex. This still exists, but another one called ARTE (Retail Association Spain) has recently appeared, which brings together only large companies, whose vision of the business is different from that of small and medium-sized retailers. Its assessment of the market is also different.
Acotex provides a long statistical series that shows the collapse of the market to half its value in the year of the pandemic, with retail sales falling from 18.000 to less than 9.000 million euros. According to its figures, the market has slowly recovered, and 2023 has closed with sales of more than 11.300 million euros, still 37% below the pre-pandemic value.
For its own, the ARTE association is more optimistic, reflecting sales of more than 12.500 million euros in 2023, but this figure is still much lower than the value assumed to be the reference one for 2019.
The big shadow of the big (Spanish) world retailing.
The entire fashion sector is under the umbrella of the fast fashion retail giant Inditex, which in 2023 had a turnover of nearly 36.000 million euros. This group is an international leader that for years has been a driving force for suppliers in Spain and Portugal, as well as many other countries around the world.
It is characterized by exerting strong pressure on prices and by placing its suppliers at the limit of profitability. Additionally, its global procurement policy continually modifies the weight of purchases in the different areas, which can cause difficulties for those suppliers that are no longer competitive on a comparative basis.
Spain also has other retail groups that, while following different policies and being considerably smaller than Inditex, are also characterised by their global sourcing scheme.
During the year of the pandemic, and subsequently with the disruptions in the supply chain caused by various reasons (China’s delay in reversing restrictive anti-Covid19 policies, incidents on the Suez Canal route), it was thought that the return to local sourcing would benefit suppliers regionally close to large Spanish retailers on a global scale, but these benefits have been temporary, at least for the most immediate geographical circle.
A textile industry geared towards investing in Transformation.
On a different area, one consequence of Covid-19 was the European awareness that it would be necessary to financially support policies aimed at increasing the resilience of productive sectors, and help them adapt to the changes that are imposed, whether due to the normal evolution of markets and technology, or due to eco-social demands.
The Spanish Government has launched various PERTEs (Recovery, Transformation and Resilience Plans), financed with Next Generation Funds from the European Union, some of them sector-focused and others of a transversal nature.
The Spanish textile and clothing organisations lobbied to obtain a sector-only plan, which they did not obtain. However, textile/fashion is contemplated within the Circular Economy PERTE. This helps to face the challenges of the 2030 agenda and the sustainability demands contemplated by the EU, in particular those that concern the recovery and recycling of textiles.
There are other transversal PERTEs to which textile/clothing can also benefit.
The sector has created an Observatory that cooperates with national and regional governments within Spain to take advantage of this and other instruments that help a green and digital transformation of the sector. It also hopes to participate in the European programme on Textiles for the Future planned for 2025-26 within the framework of Horizon Europe, the details of which have not yet been revealed.
All this aims to mobilise public and private investments to transform the sector and ensure the future competitiveness of Spanish textiles/clothing in a global market.
Article written by Humberto Martínez,TEXTIL EXPRES.
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