* Orders found in rubble reveal price of retail profits
* Clothes sold in West for up to 10 times factory cost
* Industry under pressure to tighten safety controls
By Sarah Morris
MADRID, May 14 Order dockets found in the rubble
of a Dhaka garment factory where over 1,100 workers died show
just why it pays foreign stores to buy from Bangladesh - clothes
made for as little as a tenth of what they sell for in the West.
Rana Plaza, which collapsed three weeks ago, supplied big
names in global retail; documents plucked from its ruins by
labour activists and seen by Reuters bring into sharp focus the
price of putting shirts on the backs of cost-conscious shoppers.
In one case, polo shirts of a brand sold in London for $46
were offered for sale from Rana Plaza for just $4.45, a typical
transformation in an industry where manufacturers across Asia
and retailers in Europe and North America are locked in war to
get catwalk trends ever faster, and ever cheaper, to consumers.
Found at the site, where rescuers dug out bodies of hundreds
of seamstresses and factory hands, were orders from Spanish
chain store Mango to Phantom Tac, a supplier based in Rana
Plaza, where owners are accused of sacrificing safety to profit.
It is no secret that retail price labels, whether for a $5
T-shirt or a $5,000 suit, reflect manufacturing costs that are a
fraction of what the wearer eventually pays. But the mark-ups
revealed by the Rana Plaza documents - of 5 to 10 times from
factory gate to store window - offer a precise insight into the
relationship of one end of a global supply chain to the other.
One order form, a copy of which was shown to Reuters by
activists, bore Mango's letterhead logo and was dated Jan. 23
this year. It specifies 12,085 polo shirts for a men's
autumn/winter range in five colours - black, off-white, royal
blue, burgundy and straw - in six sizes, from XS to XXL, and in
100-percent cotton at a weight of 220 grams per square metre.
The price to Mango: $4.45 each. The chain currently offers
similar shirts for sale in Spain for 26 to 30 euros ($34-39) and
for 26 to 30 pounds ($40-46) at its branded stores in Britain.
A Bangladeshi garment worker, typically paid less than half
the wages of counterparts in China, the world's biggest clothing
exporter, would have to spend two or three weeks earnings just
to buy one polo shirt at Mango in Madrid. A Spaniard on the
minimum wage could afford the same shirt for a day's labour.
"GOOD PRODUCT - COMPETITIVE PRICE"
Other costs - shipping, shop wages and rents, advertising
and so on - eat up the mark-ups retailers make in a ferociously
competitive business where consumers demand the lowest prices.
Operating profits of 15-20 percent are common, however; many
firms insist they do also try to ensure suppliers do not abuse
poor garment workers - as seen in moves this week to sign up to
a new code of practice in Bangladesh to try to improve safety.
Mango, which has over 2,600 outlets in 107 countries, said
it had not finalised the order found in the rubble. The company,
based in Barcelona, said that it would have gone ahead only had
a trial sample been found to be up to standard and had Phantom
Tac passed Mango's checks on its labour practices and safety.
"The documents found refer to an order that wasn't confirmed
and that we would not have confirmed until we had finished the
social audit with a positive result," a spokeswoman said.
Another set of documents retrieved from the dusty wreckage
shows an order, complete with pattern sketches, for long-sleeve,
checked shirts under the Danish brand Jack's, owned by retailer
PWT Group. The unit cost was $5.08, and tags to be attached to
each shirt listed a retail price of 24.90 euros ($32.66).
"A good product - at a competitive price," runs the slogan
for Jack's menswear, sold in Scandinavia, Russia, Britain and
Ireland. Its owners said they were shocked by the loss of life:
"We are very moved by this and feel deeply with the wounded
and families of the victims," said PWT marketing manager Brian
Borsting, adding that the firm planned to offer financial help.
Bangladesh ranked bottom in minimum pay for factory workers
in 2010, according to World Bank data. Business owners told
Reuters average wages were around $64 a month. The minimum wage
for the lowest skilled in the clothing industry is 3,000 taka -
about $38. It was nearly doubled in 2010 after violent protests,
but most workers earn above the minimum, limiting its impact.
The government has again responded to pressure after the
Rana Plaza disaster by calling this week for new regulations on
wages and calling on private employers to raise pay levels. But
as clothing accounts for 80 percent of exports, employers have
persuasive political arguments against eroding competitiveness.
U.S. aid agency USAID found in 2009 that a pair of chinos
using $4.60 of materials left a Bangladeshi plant for $5.37, 92
cents less than a Chinese competitor. Nearly all the Bangladeshi
advantage, for a garment made in 40 minutes, came from a labour
cost of just 32 cents an hour, compared to $1.44 in China.
Mango, with sales last year of 1.69 billion euros, does not
disclose its margins. Among listed competitors, Spanish rival
Inditex SA, the world's largest clothing retailer and
owner of Zara and Massimo Dutti, most recently recorded a
58-percent gross margin - the excess of revenues over the cost
of the goods it sold - according to Thomson Reuters data;
Sweden's H&M Hennes and Mauritz AB had a margin of 55
After accounting for other costs, taxes and so on, these two
had net margins of 16 percent and 9 percent respectively.
Activists argue that global chains should do more to share
their profits with the people who make their products:
"More than low prices for clients and the safety of its
workers, retailers have been focused on achieving high margins,"
said Ruben Sanchez, spokesman for Spanish consumer group FACUA.
"They have the room to spend more on workers' conditions."
Fashion retailers have been criticised on social media, too.
Benetton's Facebook page shows a stream of comment about
working conditions in Bangladesh that drew a response from the
Italian company: "We intend to play our part and this is why we
are providing a fund for the victims," it said in a posting.
British discount fashion retailer Primark, owned by
Associated British Foods Plc, and Canada's Loblaw Cos
Ltd also offered compensation to families of victims who
were working for their supplier at Rana Plaza.
The factory collapse was one of four deadly incidents in six
months in Bangladesh and retailers and authorities in the
European Union and United States are looking at stricter codes.