A Letter from James: When Bad Things Happen to "Good" Brands

For Fashion Revolution Week 2023

We want to talk about this during Fashion Revolution Week, and talk to you about how we came to that decision, and what it has meant for the people who worked in the factory, some of whom laid the foundations for our brand. 

To us, there is nothing more important than truth. Earning the trust of our customers, our shareholders and our advocates comes at a price - you might not like or agree with everything we have to say. But what we don’t want to do is sugarcoat an event that has caused us and our staff a lot of distress. 

Photo: During James and Erica's time in Cambodia.

My own little family has only ever known a world in which “daddy is going away to visit the team at the factory”. They too have sacrificed so that we can do what we do.

As Covid-19 swept the world, we had just launched our brand into North America through a distribution agreement and the amazing support of retailers like Nordstrom. Almost overnight, our wholesale business collapsed.  

We were left with two factories, staff who couldn’t go to work because of lockdown restrictions, a nascent online business, and a lot of inventory that we couldn’t sell. 

We committed to supporting our factory staff, continuing to pay them for unworked hours spent at home. It would be a case of waiting until we could reopen our facilities and things returned to normal. Of course, they didn’t and wouldn't return to normal for some time to come.

Photo: Production line in Kampong Cham facility.

Still, we were deeply distressed by the number of businesses who laid off workers as soon as Covid hit to stop the proverbial bleeding of money going out: we did not think that was the right thing to do. But this dig-in-our-heels stance came at an immense cost to the business. 

As we doggedly maintained our workforce, two factories and our operations in Australia, our revenues declined, so we used debt finance and loans from friends and family to ensure we could continue to support workers. We received a small boost from the Australian Government to pay local wages (we only received one JobKeeper payment as our revenue was growing year-on-year and we didn’t qualify for the second round!), and also a small boost to staff wages from the Cambodian Government. We also benefited from investment from two crowd-funding campaigns: onboarding individuals who would back the brand and our mission despite the wider economic conditions. 

We sought further investment through the VC community, but found even impact investors to be gun-shy despite seemingly strong evidence that consumers were continuing to preference sustainability during and after the pandemic, and are willing to pay a premium to do so (the jury is still out with regard to whether consumer good intentions translates into actual action, but prior to Covid and even now we are experiencing great traction). 

But, as we all know, the world did not return to “normal” in 2022, and 2023 wasn’t shaping up to be different! Things would get worse before they would get better. And after two years of supporting our workers through Covid, and our best efforts to compensate for lost revenue by ramping up our manufacturing services for other brands and diversify our revenue streams, we simply couldn’t do it anymore.  

When you cannot finance an operation, it usually ceases to exist. So we were left with one of two decisions: close the whole business, or pare back our operations to get to a place that we could reasonably facilitate. As part of our “rescue mission”, we decided to do the latter, which included letting go of some of our much loved head office staff, relocating our HQ, cutting back on staff hours and wages as a stop-gap solution, and eventually folding our factory operations into one facility in Phnom Penh. This occurred in December 2022. 

How did we support the staff at our Kampong Cham facility? 

We offered a financial management course to help staff appraise their financial situations and manage them better (we learnt a lot in this process, too!). We offered all of the staff the opportunity to transition to the Phnom Penh facility: eight of the staff chose to do this, while 40 staff did not, and we can appreciate why. We offered and paid full severance to those staff choosing not to continue with Outland. We will continue to monitor their wellbeing and offer assistance to them when and where we can. But this will also require investment of human resources and finance. 

Photo: Phnom Penh Production House.

In beginning Outland Denim, we were very conscious of the idea of paternalism, and that no business could be 100% economically sustainable - all businesses are vulnerable to challenges; all businesses are fallible. Changes in industry, the economic environment, market fluctuations, changing regulation, trade negotiations, political conflict, natural or climate change induced disasters, consumer preferences, the rise and fall of demand and leadership decisions all have their role to play. 

Added to that encroachment by technology such as A.I. displacing jobs and the allurements of changing geographical sourcing preferences (aka nearshoring, onshoring, rightshoring et al.), and creating a stable, ongoing, sustainable business is actually quite a feat.  

So it has always been our desire to equip, skill and empower our staff to transition and prosper outside our walls rather than to be the answer to all of their prayers. We do our best to safeguard their employment, and protect their rights, but also to operate with the view that we cannot be a panacea for everyone - we might just be a stepping stone or a place of economic respite. We hope to not be a hindrance. There are always those “unintended consequences” of our actions to think about. This stuff keeps us awake at night. We won’t always get things right.

But our mandate as a social impact brand also comes with added responsibilities: while most brands can turn a blind eye to the factory staff impacted by cancelled orders or an economic downturn, we know our factory staff by name, and we know their stories. We also know that unemployment is a key risk factor in vulnerability to modern slavery. That individual debt drives people to desperation, migration and exploitation. And we know that developing countries have very limited social security systems (if any) to support the unemployed. 

It is all very uncomfortable truth. 

Outland Denim was founded as a practical response to a humanitarian need: the protection of young women from vulnerabilities to exploitation and human slavery through employment, training/skills acquisition, education, living wages and social support mechanisms. Covid has only exacerbated modern slavery and exploitation. And driven unemployment. So creating more work is even more crucial. We strongly desire to enter a period of “regrowth” to do this, and believe it is within grasp (call us optimists!).  

Photo: English class.

Our commitment to the economic, educational, physical and emotional wellbeing of our staff is key to meeting their long-term need for security. It is also about building a fair business model where everybody benefits; a culture of “shared value” through cultivating a mutually rewarding culture based on understanding, trust, and the intrinsic value in one’s work.

This Fashion Revolution Week, we want to talk about some of the uncomfortable truths about the fashion industry, and the limitations of social impact business under duress, taking ourselves as a case study. We still believe that the fashion industry can be an answer and not just a problem, and that no one should be impoverished in the making of our clothing.  

Cheers, James 

For those interested in what is happening in the broader industry, here is a list of further reading:

More than 50,000 Cambodian workers laid off amid downturn in garment sector, Radio Free Asia, 17 March 2023

‘Worn out’: debt discipline, hunger, and the gendered contingencies of the COVID-19 pandemic amongst Cambodian garment workers, April 2022, Katherine Brickell, Sabina Lawreniuk, Theavy Chhom, Reach Mony, Hengvotey So & Lauren McCarthy, Social & Cultural Geography, DOI: 10.1080/14649365.2022.2055778 

Cambodia: Ministry of Labour confirm that over 110 garment factories have closed, leaving 55,174 workers unemployed due to impacts of COVID-19, 22 November 2020, Business and Human Rights Resource Centre

Leveraging Desperation: Apparel Brands’ Purchasing Practices during Covid-19, 16 October 2020, Mark Anner, Ph.D., Director, Center for Global Workers’ Rights in Association with the Worker Rights Consortium

Cambodia: COVID-19 causes about 400 factories' suspensions leaving over 150,000 workers jobless, 4 July 2020, Business and Human Rights Resource Centre

Cambodia: PM says 256 factories in apparel sector and 169 companies in tourism sector suspend operations affecting over 146,000 workers due to COVID-19, 2 June 2020, Business and Human Rights Resource Centre

Abandoned? The Impact of Covid-19 on Workers and Businesses at the Bottom of Global Garment Supply Chains, March 27, 2020, Mark Anner, Ph.D., Director, Center for Global Workers’ Rights in Association with the Worker Rights Consortium