'Corona Shock' Strips Fashion... Industry Collapse "Layoff Storm and Revival Flood"

Blocked Sales Channels Inside and Outside... Both Large and Small Businesses Stagger
Cost-Cutting Restructuring Leads to 'Unemployment Crisis'... Bankruptcy Concerns

[Asia Economy Reporter Lee Seon-ae] The textile and fashion industry is collapsing. The export routes have been blocked due to the COVID-19 pandemic, and domestic demand is in recession. With both domestic and international sales channels closed, companies of all sizes, from large corporations to small and medium enterprises, are staggering. Business restructuring aimed at cost reduction is ultimately leading to workforce reductions, making the "unemployment crisis" a reality.

◆Accelerated Supply Chain Collapse= As large corporations are rapidly initiating restructuring, the collapse of the textile and fashion industry's supply chain is accelerating.

According to E-Land Group on the 28th, E-Land Retail will discontinue offline (store) operations for nine children's clothing brands. E-Land Retail was the company with the most brands and the largest sales scale in the domestic children's clothing sector. Although there will be no forced layoffs of employees operating the withdrawing brands, this clearly reflects the harsh reality faced by the fashion industry. An E-Land Group official explained, "After experiencing the COVID-19 crisis, we judged that business structure reorganization was necessary, so we will launch an online platform for children's clothing and promote the transition of existing offline brands to online brands."

Uniqlo is also pursuing store efficiency improvements, leading to continued closures of offline stores and inevitable layoffs.

Emergency management measures such as wage cuts and unpaid leave or vacations are also being implemented one after another. Baba Fashion, Aioli, Buraedang, and Dongkwang International are currently implementing unpaid leave. LF voluntarily cut executive salaries by 30% in March and plans to continue emergency management until the situation stabilizes.

◆Flood of Rehabilitation Applications= As large corporations falter, the impact on mid-sized companies supplying textiles or fabrics to them is severe. In the Daegu Dyeing Industrial Complex Management Corporation, where synthetic fabric processing companies are concentrated, suspensions and closures are occurring one after another. A representative there hinted, "Several places have declared suspensions, and one is planning to completely stop operations and close."

The situation is even more serious for small and medium-sized companies with a high export ratio. With unilateral order cancellations from overseas buyers continuing, losses are substantial, and companies are barely surviving through workforce restructuring. Most companies, including SeAH Sangyuk, Hansol Textile, Shinseong Tongsang, Shinwon, Poongin Trading, and Choesin Moolsan, are pursuing restructuring measures such as unpaid leave, salary cuts, and encouraged resignations.

An industry insider said, "Due to order cancellations and delays from overseas clients, it has become difficult to collect payments, and companies are bearing the full cost of fabrics, sewing, and accessories used for production, resulting in losses of hundreds of billions of won per company. Since most sales depend on exports to the Americas and Europe, even if the counterparties unreasonably cancel contracts, it is difficult to respond strongly due to the need to maintain future relationships and legal complexities."

Yejin Sangsa, Brian & David, and Nut Club have entered corporate rehabilitation procedures. Sungchang Interfashion has filed for rehabilitation. Dada C&C received approval for its rehabilitation plan, and BM Global's deadline for submitting a rehabilitation plan has been extended. An industry insider said, "There are a considerable number of companies waiting to apply for rehabilitation, and 3 to 4 companies are undergoing bankruptcy procedures. The number of corporate rehabilitation applications in garment manufacturing has averaged 20 to 30 cases annually over the past five years but has sharply increased as of the first quarter this year."

Although survival seems unlikely, government support has not reached the industry. The government has proposed support measures such as the "Employment Retention Subsidy" for all industries, but the fashion industry, which cannot even foresee a week ahead due to lack of work, has no capacity to endure with the employment retention subsidy. The Korea Textile Federation is appealing for support tailored to the flexible nature of the business, requesting ▲emergency management funds for mid-sized companies ▲relaxation of damage verification standards ▲expansion of trade insurance and unpaid payment damage target countries.

This content was produced with the assistance of AI translation services.