SMART’s recently released White Paper on the used clothing market answers several questions about why there is instability in the market and reasons for the weakening demand for used clothing. Bank & Vogue has summarized the key points of this article for its customers and suppliers.
According to SMART, to understand the decline, we must first look at the factors that caused an increase in used clothing prices:
- Relaxed fiscal and monetary policies in developing countries.
In 2008 many developing countries relaxed their fiscal and monetary policies in order to fight the banking industry collapse in the U.S. and Europe.
- China’s buying raw materials from developing countries.
During this time, the Chinese economy continued its rapid development. China was making significant purchases in raw materials from developing countries in Africa and South America. This stimulated their economies and led to an increase in individual purchasing power.
- Weak USD.
A byproduct of the U.S. economic policy together with the relaxed fiscal policies in developing countries and China’s expanding economy, was a weak U.S. dollar that increased demand for second hand clothing and many other U.S. exports until 2014.
- High Recycling Rates.
Recycling rates at this time were at an all-time high; raw material prices were increasingly steadily.
These factors all contributed to an increase in the demand for used clothing. Once these factors became weakened, so did the demand for used clothing. Developing countries have tighter fiscal and monetary policies, China’s economic expansion has slowed down, and the strong USD has made U.S. clothing more expensive. Customers in developing countries are now complaining of the difficulty of finding U.S. dollars on the open market.
However there is still optimism about the future of the used clothing industry. Bank & Vogue agrees with SMART that the existing used clothing inventory must be used up and prices must fall to affordable levels for developing countries as some of the next steps to recover demand of used clothing.
You can access the full text of the White Paper on the SMART website.