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OM in the News: “Slave Wages” Haunt England’s Online Retailer Boohoo

July 17, 2020

“I’d rather manufacture in Bangladesh than in Leicester, because they’re far further advanced in terms of labor protection,” says the CEO of the retailer Esprit in Financial Times (July 10, 2020). Adds the former CEO of New Look, “In Leicester . . . it’s slave-like conditions. Everybody knows about it and some firms are clearly ignoring it.” They are referring to the $5 billion fast-fashion business Boohoo, located in Leicester, England. Boohoo is the biggest buyer from garment workshops (over 75%) in a city battling claims over poor working conditions.

The garment industry area of Leicester

“We’re kind of put into a cage and we have to run around like rats,” said the GM at Top Fashion, a local clothing manufacturer. Leicester’s problem of illegal factories has been an open secret for almost a decade, with police this week walking the dilapidated factory corridors looking for evidence of modern slavery.

Over the past 15 years, the revival of Leicester’s textile trade has been the story of Boohoo’s rise. Abandoned by big retailers 3 decades ago, Leicester’s industry splintered into 1,500 mini-factories, typically employing fewer than 10 people. This flotilla of small workshops competed with rivals in Bangladesh and Turkey by offering an ultra-flexible service, handling small orders in quick time. It helps Boohoo test almost 3,000 lines of clothes every week and ramp up production of trends that catch on.

One study found below minimum wage employment to be “endemic”. More than 3/4 of garment workers earned $4.40 an hour–half the minimum wage. So cheap were rates that agents directed work to Leicester that was supposed to be completed in Romania.  Some employers preyed on the vulnerability of local workers who are often South Asian immigrants with poor English and few options. And to make matters worse, the pandemic has Leicester under lockdown because of the virus’ spread in the garment industry.

Boohoo’s practice of throwing new clothes out (at low prices) to see what sticks is a great OM story of speed and flexibility, tying to our discussion of achieving competitive advantage in Chapter 2.

Classroom discussion questions:

  1. How is Boohoo able to adjust its offerings so quickly?
  2. What is the ethical dilemma that Boohoo competitors in Leicester face?

 

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