Portugal has become one of the main production hubs in proximity for big european fashion companies.
From Inditex to LVMH. Portugal Works full speed to satisfy all the supplys of the big european fashion companies. This small country has managed to become one of the most important productive hubs in proximity while the bulk of the production was moving massively to Asia. During a new edition of the Modtissimo trade fair, which is being held these days in Porto, Paulo Vaz, president of the Associação Têxtil e Vestuário of Portugal (ATP), talks about the keys of this transformation.
Mds: Is Portugal an example of transformation for the industry? Why hasn’t this happened in other countries?
Paulo Vaz: Our success is due to a merge of factors. First, to a strategy of companies and public policies. Public resources, especially in terms of innovation and internationalization, have been very useful for our development. On the one hand, technological innovation (new processes, new materials ...), to differentiate the product, because since 2008 crisis companies understood that if they continued to compete for price, they had no future, because there is always someone cheaper than you.
Mds: What is the other type of innovation?
PV: The non-technological. Innovate in the business model, developing new design skills, for example. Increasingly, brands want to be focused on their core business, which is the development of the concept, marketing, the point of sale ... The rest, they try to pass it to the supplier, which becomes a service center for brands.
Mds: Is a change of mentality the first thing the industry needs?
PV: Yes, there has been a huge change. But it was also very fast, because there is nothing that changes your mind faster than the need to. Companies have faced a very simple choice: they remain the same, where there is no future, or you change and provide value.
“Companies have to work hand in hand to be able to win scalability”
Mds: what role does the association play?
PV: It has a very important role. On one side, it’s the responsible of creating a collective development strategy. We don’t tell the brands what they have to do, it plans with them the big strategic guidelines. That has been the first part of our role. In a second stage, employers must dedicate themselves to finding the resources to apply all this strategy. We negotiate with politicians to obtain the necessary resources, and today we have the most important program of internationalization of the Portuguese economy, with a contribution of 16 million euros with which 400 companies, especially SMEs, can attend all major fairs.
Mds: And for innovation?
PV: We have a technological center and another one of new technologies and materials that work solely to serve companies. The important thing is that 72% of its capital belongs to the companies and associations themselves, so it has an economic logistics. This means that they must satisfy what companies want.
Mds: A large part of the industrial companies in the sector are SMEs. Is it a handicap?
PV: From an industrial point of view, it is not a problem, it can even be an advantage because it allows them to be more flexible. But from the commercial point of view, of buying and selling, size is very important. That is why companies must work collaboratively to have the necessary scale to operate in international markets more effectively.
“There is nothing that changes your mind faster than a necessity”
Mds: Do you see integration by acquisitions possible?
PV: This is a structural problem. Textile is a sector formed by companies of big dimensions, and generally they are not very interested in distributing property and management. This is an obstacle for people to agree and be able to work with a much larger scale. Although it is also true that this has begun to change out of necessity. When agreeing is decisive for survival, people do.
Mds: Does it cost to attract young and qualified labor force?
PV: Yes, especially in those more labor-intensive industries. In addition, the country’s sociological profile has changed a lot in recent years. Young people have higher education, masters ... They have a lot of context and ambition and do not want to stay in a sewing machine eight hours a day working in a repetitive activity. This is going to be a problem for the future, we are not going to have people to work in five or ten years.
Mds: What is the solution?
PV: There are three paths. First, import the talent of Bangladesh, India, China ... It’s not a lot of people, but it is happening. Second, more mechanization: introduce better management methods to do more with fewer people. And, finally, another way is that companies are beginning to take is to relocate processes of less added value, such as clothing, especially to North Africa. Many companies are already opening offices and plants in Morocco. Value-added operations are still being carried out in Portugal, such as cutting or finishing, and everything that is made goes to Morocco and returns in one day. The important thing is that the customer is satisfied, no matter where.
“In ten years, there will be no labor force in the factories”
Mds: Can protectionism benefit the European industry?
PV: Protectionism never benefits anyone. It doesn’t bring anything good. It is a political fallacy that satisfies only the interests of some local industry. We have seen examples in Argentina or Brazil, which have important industries but very delayed from the point of view of technology or competitiveness. Although I don’t think we get to that. What is happening today with the United States and China is a fight to try to find more balanced solutions for the United States, but I do not see the border being closed. In addition, the agreement that is being negotiated with Mercosur will open the borders of a very important space and in which we have a competitive advantage because we have price, advantage, quality and image that there is not there.
Mds: How is the sector adapting to sustainability?
PV: This is the last of the axes we have for the future, along with innovation, internationalization, human capital and design. Because, today, sustainability is business. Until now, they were just words of activists who wanted to change the world, an almost philosophical debate. Now, instead, we face a consumer society that asks for sustainable products and wants to be certain that they exist. There, I think that in Portugal we have a great competitive advantage. Portugal is, for example, one of the great leaders of renewable energy, 70% of our energy comes from these sources. In addition, being a production hub in proximity, the carbon footprint is also smaller when it is transferred to the main European consumer markets. When the blockchain is implemented, it will give us a competitive advantage because they are aspects that can be measured.