Dividing the European market into low-, mid- and high-end market segments allows for a more targeted approach than looking at the European market in terms of countries. Focusing on market segments is the most accurate manner of targeting the market, also since most Western-European importers re-export their products across Europe.
This does not mean there are no differences in taste in the different countries in Europe; for example, Scandinavia and Southern-European countries have distinctly different preferences when it comes to product characteristics such as colour and pattern. However, Europe has more and more developed towards a single market that is divided in segments.
Generally, Bangladesh has the ability to compete in both the low- and mid-end markets.
Exporters for the low-end market must be able to reliably (!) supply large volumes. This is especially relevant for products where the focus is on useability, the practical aspects of the product, rather than the aesthetic (design) aspects of the products. As product groups, basketry and shopping bags are often found in that segment.
By definition, price is a dominant factor in the low-end market and the margins are thin. If all goes well this is compensated by the volumes of the orders. However, if there are mistakes in production, or when the prices of the raw materials increase, this has a big effect on these thin margins. Companies that want to be successful in the low-end market need to continuously focus on increasing efficiency in production and sourcing, and on maintaining the desired quality level to avoid claims.
For the mid-end market, suppliers need to work on product development and design, and add value through their specific use of materials and/or craftsmanship. This helps in creating products that compete on more than just price, even though price is still a very important (but not dominant) factor in the mid-end market. Adding value in other aspects leads to products that are more attractive for niche markets and allow exporters to create their own, unique position in the market.
What has become increasingly important in the mid-end segment, is the story behind both the company and its products. A good and well documented story helps in further distinguishing a producer from its competition.
- Bangladesh can focus both on the lower segment and the (higher) middle segment.
- In the lower segment, efficient production and low-cost raw materials are key.
- In the (higher) middle segment, producers need to add value through design, the use of sustainable materials, heritage techniques and storytelling.
- Bangladesh has the ability to supply both the lower segment and the (higher) middle segment.
- In the lower segment, efficient production and low-cost raw materials are key. Sotronjis are a good example.
- In the (higher) middle segment, producers need to add value through design, the use of sustainable materials (like jute), handmade production and storytelling.
- For Bangladesh this will remain a niche segment due to the simple fact that it hardly produces any cotton.
- That means that the (higher) middle segment is the evident choice. Producers need to add value through design, the use of sustainable techniques (like natural dyes), handmade production, heritage techniques (such as kantha embroidery) and storytelling.
- Since cotton is mostly imported from India, import of GOTS certified organic cotton needs to be considered.
- Bangladesh needs to focus on the higher low and lower middle segment.
- To compete with cotton products, producers have to unite sustainable values and reasonable pricing.
- As an eco-friendly replacement for plastic bags and cotton bags, it is required to focus on sustainable raw materials.
- Bangladesh can focus both on the lower segment and the (higher) middle segment.
- In both segments Bangladesh can focus on sustainable raw materials.
- In the lower segment, efficient production and low-cost raw materials are key.
- In the (higher) middle segment, producers need to add value through design, the use of heritage techniques and storytelling.
For all product groups: research into alternative raw materials, sustainably produced, needs to be a key activity in the sector, to maintain and expand Bangladesh’s market share.
COVID-19 and the HDHT sector
It is hard to predict what direction consumption will take in HDHT in the longer-term. As pandemic-induced lockdowns increased people’s focus on their homes, (particularly online) sales of home products were boosted. Money that was originally reserved for travel and other leisure activities, could instead be spent on home improvement and decoration.
Spending a lot of time at home moved consumers towards:
- making their home more pleasant, practical and comfortable overall
- bringing the outdoors inside and vice versa
- cleaning out clutter
- realising that we need to produce more sustainably
Interest particularly increased in products that facilitate:
- wellness / fitness at home
- working from home
These medium-term trends are partly a continuation of consumer trends that were already ongoing; some may be accelerated.
While the reappreciation of the home is expected to stay and stimulate demand in the mid-to-long term, the initial surge in HDHT purchases is unlikely to continue when the immediate need to re-decorate subsides and the available budgets have been spent.
Sustainability: People and planet
European consumers are increasingly adopting more sustainable lifestyles. Consumers and designers are making more sustainable choices, especially in higher-end segments. There is an increasing concern and awareness of the negative impacts of production and consumption, further emphasised by the pandemic. For most consumers (particularly the younger generations), the COVID-19 crisis has made it more important that both consumers and companies improve their sustainability. In addition, most people want significant change to make the world fairer and more sustainable after COVID-19.
For the products we focus on in this plan, sustainability issues are mainly related to:
- the choice of materials
- renewable resources
- water treatment
- labour conditions
- energy consumption and use
The sector’s use of natural materials such as jute and grasses fits in well with this trend, as well as the use of recycled fibres or leftovers from the production of other textile products. Natural dyes add an extra sustainable feature to the products. Using natural materials also allows Bangladeshi shopping bag/tote producers to benefit from the bans on lightweight plastic carrier bags that are being rolled out in Europe in accordance with the Plastic Bags Directive.
Social responsibility is another key aspect of sustainability, particularly in the production of handmade items. Refraining from using child labour is especially relevant in the carpet and rug sector.
According to the World Economic Forum, 86% of people want significant change to make the world fairer and more sustainable after COVID-19. While this is reflected in an increased demand for fairly produced products, these products do not necessarily have to be fair-trade certified. Often, simply adhering to WFTO’s fair trade principles is sufficient.
Storytelling through traditional designs, craftsmanship and materials
Ethnic motifs and traditional craftsmanship are popular on the European market. A renewed appreciation of handmade techniques in natural materials may be strengthened by the loss of craft skills in Europe, as well as a growing tiredness of standardised, mass, industrial products. This is a long-term trend where consumers are increasingly interested in the story behind the product, which adds to its uniqueness.
Handmade products often showcase a sense of origin via ethnic patterns, weaving techniques or unique materials. Such items are often made by women in rural areas. This lends itself well to telling the story about the importance of meaningful work and income in developing countries.
Producers can also play into this trend by experimenting with traditional designs and reworking them in a modern way, including playing with the colours. This combination of traditional and modern can have a broader appeal on the European market.
Basketry particularly embodies ‘origin’ in its materials, techniques and meanings. It has cultural stories to tell, through which you can create added value. Rugs and mats are also known for their history. Ethnic designs, often produced by the same tribes for centuries, are seen as ‘floor art’ in Europe.
Home sweet… garden
‘Home sweet home’ is a trend in which the (slightly older) consumer retreats into the safety and security of their own home, and makes that a perfect, luxurious oasis. The home is also where genuine connection takes place with friends and family by eating, cooking and enjoying entertainment together. These two aspects have been strengthened by the COVID-19 pandemic, which has increased consumers’ focus on their home and garden.
Sparked by this trend, the garden has become an extension of the home. The lines between the indoor and outdoor areas of the home are blurring, so it looks as if the garden is also part of the living room, often decorated in the same (or a similar) style. This trend of blending indoor and outdoor styles, represents a much broader segment, ranging from mid-mid upwards. It also applies to smaller urban outdoor spaces like balconies and patios.
Sustainability plays a role in this trend too. For example, according to a recent survey among German gardeners more than half of consumers avoid plastic or tropical wood when buying plant pots and garden furniture. Nearly half of consumers in this survey are willing to spend more money on sustainable or sustainably produced garden products.
Basketry: De-cluttering the home and the mind
Wellness drives the megatrend of consumers improving their physical and mental health in how they live and how they consume. European consumers increasingly struggle with the combination of small urban living spaces and high levels of consumption. Baskets help them achieve and maintain a tidy home.
With excess items neatly stored in baskets, consumers create physical space as well as ‘headspace’, helping them to de-stress. The recent lockdowns in European countries have made this especially relevant, as people were forced to stay at home together in relatively small spaces.
Home textiles: Slow cooking and dining
A key trend in the HDHT sector is the increased interest in “slow” cooking and (social) dining. It involves preparing healthy meals and taking the time to sit and enjoy dinner with family and friends, boosting physical and mental wellness. It also relates to the ‘Home Sweet Home’ trend, where consumers try to make the home a place where genuine connection takes place with family and friends.
Due to the pandemic people are spending more time cooking and socialising as a family/household, and many plan to keep doing so in the future. This development is particularly prominent in younger generations, as older consumers probably already spent more time on these activities before lockdown. Such a long-term increase could further stimulate interest in various types of table and kitchen linen, to help consumers prepare meals and set a well-laid table that adds to the social character of the dinner.
Downward price spirals are a challenge
Commoditisation poses a challenge for some HDHT products, especially in the functional segment. Particularly in the lower ends of the market, this is due to the dominance of a few large-scale suppliers from the Far East. In exchange for volume, they are able to accept small margins by fine-tuning their processes and/or squeezing production costs. In basketry for example, this has driven overall price levels down and led the consumer to see these products as low-priced items, expecting to get ‘a lot for little’ (sets). This makes the room for differentiation in the lower-end market very small.
Prices are also under pressure in the mid-end market, where the basket has become an image item for some typical mid-market styles like cottage, colonial or romantic/nostalgic. Players in this segment often struggle to differentiate from their competitors. As a consequence, products in this segment tend to look alike, with their typical whitewash, lettering and inside fabric lining. This has resulted in price pressure, a marked decrease in product quality and a lower value perception.
European buyers are increasingly trying to distinguish themselves from their competitors. To do so, they focus on their own image and design. They look for producers they can cooperate with to develop their own products, so-called ‘co-creation’. This makes it extra important to showcase your special skills, production techniques and the variety of raw materials you work with.
Buyers: Smaller quantities and shorter lead times
European buyers change their collection at an increasing pace. They also try to minimise the risk of having a lot of stock. As a result, they are looking for shorter lead times and lower minimum orders. This is a distinct advantage for small to medium-sized producers, who are more flexible and can generally supply smaller quantities than bigger producers.
Buyers: Range and concept development
More and more buyers (especially in the higher middle segment) are selling concepts to their clients, rather than single products. They do this for marketing and positioning purposes and to push their sales. To benefit from this trend, producers can create ranges that combine cushion covers and throws, or kitchen linen and table linen. These items could be produced in either the same or in complimentary designs and materials.
General product safety
Europe’s General Product Safety Directive states that all products marketed in Europe must be safe to use. It provides a framework for all legislation regarding specific products and issues. Unsafe products are rejected at the European border or withdrawn from the market. The European Union has introduced a rapid alert system (RAPEX) to list such products.
Restricted chemicals: REACH
The REACH regulation lists restricted chemicals in products that are marketed in Europe. For example, if you dye (the materials for) your products, you have to make sure you do not use azo dyes that release any of the 22 aromatic amines that are prohibited. Be aware that the legislation lists the aromatic amines, not the azo dyes that release them. REACH also prohibits the use of certain flame retardants in textile products intended to come into contact with the skin.
Since November 2020, new limits apply for 33 CMR substances (substances that are carcinogenic, mutagenic or toxic for reproduction). These limits affect textiles such as table and kitchen linen. They are listed in entry 72 of Annex XVII and include substances such as formaldehyde, heavy metals and benzenes.
The European Textile Regulation states that textile products need to be labelled or marked to make sure that consumers know what they are buying. The regulation applies to all products that contain at least 80% (by weight) of textile fibres. It requires textile products to have a label that states the full fibre composition of the product and, if applicable, the presence of non-textile parts of animal origin. The label should be durable, easily legible, visible and accessible. It should also be printed in all the official national languages of the European countries the product is sold in.
There is no Europe-wide legislation on the use of symbols for washing instructions and other care aspects of textile articles. Because consumers do consider care information to be important information on a product label, you are advised to follow the ISO 3758: 2012 standards on the care labelling code using symbols for textiles.
Europe has specific packaging and packaging waste legislation to prevent or reduce the impact on the environment. Buyers may therefore ask you to minimise the use of packaging materials (paper, carton, plastic) or to use a different kind of (recycled) material.
Europe also has requirements for wood packaging materials (WPM) used for transport, such as packing cases, boxes and pallets. The objective is to prevent organisms that are harmful to plants or plant products from being introduced into and spreading within the European Union.
An increasing number of European buyers demand adherence to the following sustainability schemes:
- Business Social Compliance Initiative (BSCI): European retailers developed this initiative to improve social conditions in sourcing countries. They expect their suppliers to comply with the BSCI Code of Conduct. To prove compliance, the importer can request an audit of your production process. Once a company is audited, it is included in a database for all BSCI participants.
- Ethical Trading Initiative (ETI): This initiative is an alliance of companies, trade unions and voluntary organisations. It aims to improve the working lives of people across the globe that make or grow consumer goods, via their ETI base code.
- Sedex: This membership organisation strives to improve working conditions in global sourcing chains. It offers a collaborative platform where suppliers can share information on their ethical and labour standards with (potential) buyers, based on the Self-Assessment Questionnaire (SAQ).
In addition, there are several eco-labels used for textiles:
- The Global Organic Textile Standard (GOTS) is a textile-processing standard for organic fibres. It ensures environmental and social responsibility throughout the production chain.
- OEKO-TEX Standard 100 certification guarantees that no hazardous chemicals are used in the production of textiles. It provides textile and clothing companies with more transparent supplier relationships and facilitates the flow of information regarding potential problematic substances.
- The European Union’s Ecolabel seeks to minimise products’ environmental impact by looking at the use of environmentally friendly chemical options. The label is awarded only to products with the lowest environmental impact in a product range.
- The voluntary Nordic Swan eco-label is used in Sweden, Norway, Finland, Denmark and Iceland.
GoodWeave (formerly known as Rugmark) works specifically to end child labour in the carpet industry in South Asia.
The concept of fair trade supports fair pricing and improved social conditions for producers and their communities. Especially when production is labour intensive, fair-trade certification from e.g., the World Fair Trade Organisation (WFTO) and Fair for Life, can give you a competitive advantage. In general, however, adhering to WFTO’s fair trade principles is sufficient. Fair trade principles has long history. WFTO is not alone promotes ten fair trade principles. Other organizations are in the field playing their role in promotion ten fair trade principles. The stakeholders should explore the fair trade sector more before go for action.
Bangladesh LDC graduation
In light of the COVID-19 pandemic, Bangladesh’ LDC graduation has been postponed from 2024 to 2026. The European Union and the UK have agreed to allow Bangladesh to benefit from the preferential trade agreements (duty-free, quota-free access) for 3 years after graduation, until 2029. After that, an average of 8.7% duty would apply to Bangladeshi exports to Europe.
To continue benefiting from preferential EU-tariffs, Bangladesh needs to qualify for the EU’s Generalised Scheme of Preferences Plus (GSP+). In this special incentive arrangement, the EU cuts its import duties to 0% on more than 2/3 of tariff lines for vulnerable low and lower-middle income countries that implement 27 international conventions on human rights, labour rights, protection of the environment, and good governance. As the current GSP+ expires in 2023, preparations for its replacement are underway.
To interpret the market developments in this chapter correctly, you should be aware that in the European market, countries have different roles. You can make a rough distinction between countries that are mainly importers and countries that are mainly manufacturers. Most Western-European importers do not just sell their products in their own country, but re-export them across Europe. This explains why in HDHT, small countries like the Netherlands often import much more than the demand in their domestic market.
Also, some of the bigger players receive shipments in seaports other than those in the country where the head office is based. Looking at for instance large retail chains that have outlets in different European countries, they have their orders shipped to different seaports to achieve maximum logistic efficiency in supplying these outlets.
In terms of marketing, you need to realise that European countries are not individual HDHT markets. Every country has segments ranging from low to high, in varying sizes. Exporters should connect to the importers and distributors in their segment, instead of focusing on a specific country.