If you have been visiting social media influencer marketing platforms such as TikTok and Instagram in the past four years—particularly spaces inhabited by Gen Z and younger Millennials, you might have come across the peculiar use of the word “core”, as a suffix.

Vogue Magazine in an article in 2022 coined the internet-popular suffix as shorthand used to denote a very specific style or aesthetic. Cottage-core, Fairy-core, Goblin-core, Dark Academia, Athleisure, Old Money, Utility Wear, Mob Wife or even the most common: Y2K. This sudden proliferation of micro-trends and subcultures in style expression that emerged in the post-pandemic on globalized social media platforms has seen seismic changes in textile and apparel industries, in less than half a decade. 

Apparel manufacturing giants world over have been faced with the need to adapt speedier market-responsive strategies and demonstrate thoroughgoing transitions towards sustainable apparel manufacturing practices throughout production lines—all the while maintaining price attractiveness for the emerging spender. 

While Sri Lanka in its recent history has lost markets in the West, due to cheaper labour and production scalability offered by competitors in Bangladesh, Vietnam, China and Africa, it is still faced with a distinctive opportunity: to double down on its unique selling propositions of fair labour practices and technological and innovative superiority. There is also opportunity in the East.

McKinsey & Company’s State of Fashion 2024 report reveals that while consumers in the United States and Europe showed less intent to shop for fashion in 2024, Indian consumer confidence hit a four-year high last year, with India-based fashion executives having shown far more optimism than their counterparts in the West. Similarly, though China’s economy emerged from its challenges this year, the country’s consumers showed a higher intent to shop for fashion than consumers in both the United States and Europe combined.

To weigh in on the growing and ever-responsive middle class in Asia, and the Western hemisphere seeing a decisive shift towards slow-fashion sentiment and sustainability in garments, we sat down with Isuru Gunaratne, General Manager, Strategic Planning of MAS Holdings—a significant player among the Sri Lankan apparel manufacturing export market players.

He describes the increasing need to balance the diverging and converging needs of Eastern and Western consumers, as uniquely opportune for Sri Lanka to transition from an important player to an indispensable innovator for fashion markets, world over.   

The Shifting West

Sri Lanka’s clothing exports to the West have stagnated over the last few years. When we look at how markets in the Western Hemisphere have changed over the last four years, it’s essential to understand the context of the local apparel industry too, Gunaratne suggests.

The clothing industry has been a cornerstone of the Sri Lankan economy, in terms of being an important source of foreign exchange during the pandemic and crisis years: from 2020 to 2022, when tourism and other sources of revenue were declining, it buttressed the economy. According to industry data from 2023, the industry employed about 350,000 people directly and affected more than a million people indirectly, exporting about $4.5 billion worth of goods in the year, which was roughly 40% of the country’s total merchandize, primarily to Western markets.

When describing the Western markets Gunaratne pares down a dramatic turn of events that shifted markets irrevocably. He begins with the pandemic: disrupted supply chains, labour shortages and lockdown lifestyles, all fundamental changes that altered consumer behaviour.

This also coincided with the U.S. government’s unprecedented monetary policy changes, which included cash injections, and subsequent inflation. All of this played into creating a never-before environment for most consumers in the U.S. “By 2021, the U.S. experienced its highest inflation rate in 40 years, at about 7%, affecting global apparel demand. Consumer priorities shifted all together,” Gunaratne explains. There’s now a stronger focus on technology products and experiences over apparel.

He also raised that geopolitical tensions such as the ever-unravelling U.S.-China trade war, the conflict along the Red Sea shipping routes, and the war waged on the Gaza Strip having posed unavoidable disruptions to trade and international relations, demanding sharp adaptability and seamlessness from apparel manufacturers, owing to the unprecedented nature of the times.

To mitigate risks related to unavoidable external disruptions, Gunaratne proposes honing in on automation and digital tools, one such being speed-to-market tools. “When I mention speed-to-market digital tools, I’m talking about technologies that streamline the journey from product design to delivery. These tools reduce lead times and enhance responsiveness to market demands, which is crucial in fast-paced industries,” Gunaratne says.

For example, digital design tools, like prototyping software, let designers create, modify, and test products in a virtual environment. This significantly shortens the design lead time, sometimes even halving it. The global market for these tools is growing rapidly, with double-digit annual growth expected due to increased adoption over the past five years, Gunaratne says.

He suggests that automation as a speed-to-market tool adds another dimension to leveraging production amid disruptions such as labour shortages, enabling the de-skilling of operations and robust e-commerce solutions that reach customers faster. “Implementing automation in manufacturing and supply chain management boosts efficiency, reduces human error, speeds up production, and allows for quicker adjustments in an agile environment. This is particularly important given the current labour shortages, even in places like Sri Lanka, as it enables us to de-skill critical operations and rely less on skilled labour.”

Gaining an Edge

In today’s fashion industry, companies use AI and big data for market analysis and demand forecasting, allowing them to anticipate trends and consumer preferences before they emerge. This proactive approach enables faster responses to market changes, offering a competitive edge.

Gunaratne highlights that for Sri Lankan manufacturers, these tools can differentiate them from competitors like India and Bangladesh, particularly given Sri Lanka’s advanced digital maturity. By focusing on sustainability and ethical practices, Sri Lanka’s apparel industry can capitalize on its reputation for high standards, which includes good working conditions, eliminating child labour, and empowering women.

Gunaratne notes that Sri Lanka’s garment industry leads in adopting renewable energy and water conservation, with MAS Holdings diverting 99.99% of all waste from its landfills, restoring 9,650 acres of biodiversity across geographies that it operates in, and working towards 25,000 acres by 2025. In this regard, MAS is working on a sustainable textile-to-textile solution in partnership with a US company. 

However, to succeed in Asian markets, Sri Lanka must offer competitively priced, high-quality products, catering to a growing middle-income segment. The country can leverage its established relationships with Western brands like Victoria’s Secret and Nike to emphasize ethical and sustainable practices.

Consumer priorities have shifted significantly, with a strong focus on sustainability, influenced by pandemic-related disruptions, economic policies, and geopolitical tensions. Gunaratne points out that 60% of fashion executives now prioritize sustainability, driven by consumer demand for transparency and traceability. Gunaratne highlights that it is high time local manufacturers respond by doubling down on investments in technologies like blockchain, IoT devices, RFID, and QR codes to track and verify the origins of their products, ensuring transparency and accountability.

The Asian Shift

“It goes without saying that over the last four years, markets in the Western hemispheres have experienced significant changes,” Gunaratne notes. He says that the volatility in these markets has been marked by geopolitical tensions and economic fluctuations, creating an uncertain environment for businesses and investors.

Asia however, according to Gunaratne, remains an attractive and lucrative market, despite these global challenges. “One of the key reasons is the rapidly growing middle class in countries like China and India. By 2030, China’s middle class is expected to reach 1.2 billion, and India’s will be around 580 million,” Gunaratne points out. He explains that the projected growth will subsequently translate into a significant rise in disposable income and consumption potential, particularly in sectors like apparel.

Rapid urbanization is another factor driving Asia’s market appeal. For instance, China’s urban population is projected to hit 1 billion by 2030, comprising about 70% of its total population. As urbanization leads to lifestyle changes and increased consumption in fashion, technology, and healthcare, Gunaratne enthuses that with Asia’s digital adoption, apparel is set to grow exponentially in the coming years, within the region. “In 2022, the region accounted for about 62% of global e-commerce sales, with China alone contributing 52% of that total.”

It is important to note that the widespread use of digital tools has shortened lead times and enhanced market responsiveness, making fast fashion in the region even faster. Gunaratne assures that the economic resilience of Asian economies further underscores their attractiveness.  During the global recession triggered by COVID-19, China managed to grow its economy by 2.3% in 2020, and Vietnam saw a GDP growth of about 3% in 2021-2022, while many Western economies faced negative growth.

“Brands have capitalized on these opportunities, growing at double-digit rates, particularly in India. Other brands such as Westside, Zoudio, and Reliance Retail’s Amante, Zivame, and Clovia have also seen substantial growth in the region,” Gunaratne says.

He believes that for Sri Lankan apparel manufacturers, shifting focus to these emerging Asian markets is crucial—albeit, challenging due to Sri Lanka’s traditionally higher-margin clients like Victoria’s Secret, GAP, and Nike. He also maintains that large volumes from markets like India, Japan, and China present a significant opportunity that cannot be missed. “Adapting to this shift by reducing cost bases will be essential to staying competitive and capitalizing on these new opportunities.”

Catching Up

Gunaratne insists that Sri Lanka doubles down on its other uniqueness: its ability to innovate and readily adopt and scale the use of new technologies. “To differentiate ourselves, we should focus on automation and digital tools to bring down costs. This includes rethinking our structures, especially in middle management, to remain relevant in the Asian market.”

The twin crises of brain drain, skilled labour shortage and subsequent loss of markets in the West need to be taken as wake-up calls to change within the industry. “Over the past five to six years, our apparel exports have stagnated between four to $5 billion, while Bangladesh has grown to $30 billion, and is projected to reach $50 billion in the same period.”

According to him, despite having the best talent, opportunities, and customer relationships, Sri Lanka is losing out to countries within the South Asian and South East Asian region, whose growth can be attributed to lower costs and faster reaction times. Sri Lanka should have adopted digital and speed-to-market solutions earlier. “Consumers, especially in the West, now demand good quality products at reasonable prices and fast delivery. Competitors in the region have successfully addressed this demand, while we still need to catch up,” Gunaratne says.

Sri Lanka’s apparel industry stands at a pivotal juncture. By leveraging its strengths in ethical practices and embracing innovative technologies, the country can capitalize on emerging opportunities in both Eastern and Western markets. Focusing on sustainability, automation, and digital tools will be key to navigating challenges and ensuring competitiveness. As the global fashion landscape evolves, Sri Lanka has the potential to transition from a significant player to a leading force in the industry, driving positive change and setting new standards for the future.