EU's changing apparel market and Bangladesh's export challenges

Bangladesh’s garment industry has faced some serious challenges of late. In the first eight months of FY2025-26, the country’s ready-made garment exports fell 3.73 percent year on year to $25.79 billion, against $26.79 billion in the same period of the previous fiscal year. In the EU—Bangladesh’s biggest apparel market—garment exports slipped 1.03 percent to $7.83 billion in the July-November period, down from $7.92 billion in the same period of FY25, with the bloc accounting for over 48 percent of total RMG shipments in that period.

There are several obvious explanations for the slowdown. These include weak consumer demand in Europe, higher living costs, a cautious buying environment and, of course, geopolitical disruptions. Bangladesh’s own exporters and trade bodies have been making these points for months. But I believe there is another possibility worth examining—especially for suppliers serving mainstream fashion retail—and it is that part of the market has been shifting away from traditional wholesale import channels and towards direct-to-consumer cross-border e-commerce flows led by companies such as Shein and Temu. In other words, the global apparel trade may be increasingly influenced by a growing “parcel economy.” EU policymakers themselves now describe the surge in low-value e-commerce consignments as large enough to distort competition. The European Parliament said 5.8 billion low-value items valued under 150 euro entered the EU in 2025. It said that growth is linked to the rise of Chinese online retailers such as Shein and Temu, as 91 percent of those shipments came from China in 2024.

For Bangladesh, the EU is not just another market, it is the main market. The European Commission says total EU-Bangladesh goods trade reached 22.2 billion euro in 2024 and that almost 94 percent of EU imports from Bangladesh were textiles. It also notes that Bangladesh remains the largest beneficiary of the bloc’s Everything but Arms arrangement—providing duty-free, quota-free access to the EU single market for all products except arms and ammunition from Least Developed Countries (LDCs). So, any structural change in the way Europeans buy low-cost clothing matters directly for Bangladesh’s export machine.

The problem for traditional trade analysis is that the direct-to-consumer parcel boom does not show up neatly alongside the conventional bulk import model on which many sourcing economies depend. Even where goods are recorded for customs and VAT, the flow is highly fragmented, often entering as millions of small consignments rather than containerised wholesale orders to established retailers. Eurostat’s own quality reporting says that extra-EU trade statistics can exclude transactions below national statistical thresholds, which can be as high as 1,000 euro or 1,000kg in some member states. That does not mean all low-value e-commerce trade disappears from the data. But it does mean analysts should be cautious about assuming that traditional apparel import datasets capture the full competitive pressure now coming from the parcel economy in a comparable way.

For Bangladesh’s garment sector, the commercial effect could be significant even if the statistical picture is far from perfect. If EU consumers are spending more for ultra-fast, cross-border direct shipments, then traditional retailers may order less from their established sourcing bases or buy later and in smaller quantities. That would show up as pressure on Bangladesh’s export receipts without necessarily appearing in import datasets most commonly used by industry observers. It would also help explain why suppliers can feel the market weakening even when some official trade readings appear mixed or lagged. This is especially relevant in value fashion—where speed, price, and variety influence consumer decisions.

The good news for our exporters and European customers is that Brussels has now moved decisively to curb at least part of that distortion. In February 2026, the Council of the European Uniongave final approval to new customs duty rules for small parcels entering the EU. The measure abolishes the threshold-based customs duty relief for consignments valued under 150 euro. Until the wider EU customs data hub is operational in 2028, member states will apply an interim flat-rate customs duty of three euro on each item category in a small parcel sent directly to consumers, from 1 July 2026 to 1 July 2028. Once the new system is fully in place, normal customs tariffs will apply instead. Under the new proposal, online platforms are also set to become responsible for customs duties, product compliance, and paperwork on goods sold into the EU. Distance sellers and platforms shipping directly to EU consumers will be treated as the Importer of Record (IOR)—responsible for ensuring imported goods comply with all local laws, customs regulations, and documentation requirements in the destination country—shifting legal responsibility away from consumers and onto the seller or platform. They will be required to ensure that duties are paid and that goods comply with EU regulations. Operators that repeatedly fail to comply could face fines of one to six percent of the value of goods imported into the EU over the previous 12 months. The EU will also create a new EU Customs Authority in French city Lille and a central data hub, though the deal still needs final formal approval. While this will not end the small-parcel model and nor is it aimed specifically at fashion, EU institutions are being unusually explicit about the rationale. The council said the current duty-free treatment of such parcels leads to unfair competition for EU sellers. The European Commission has made the same point, saying the removal of the threshold is intended to level the playing field between direct imports of individual parcels and traditional retail imports of goods in bulk. For Bangladesh, that should be read as a positive.

Bangladesh’s garment industry has built its position around scale, compliance, established buyer relationships, and the ability to supply large programmes into mainstream retail. If Europe becomes less permissive towards lightly taxed or duty-sheltered parcel flows, some competitive pressure should shift back towards more conventional sourcing and import models. That would not solve our other challenges, from productivity and lead times to margin pressure and post-LDC trade planning. But it could remove part of the policy asymmetry that has favoured direct cross-border sellers. There is also a wider point for brands and retailers buying from Bangladesh. A more level customs framework in Europe is not just about protecting EU sellers. It is also about restoring fairer competition across supply chains.  Suppliers investing in compliance, traceability, worker protections, and long-term manufacturing capacity have struggled to compete with business models built around millions of low-value parcels moving through a lighter-touch border regime. Brussels now appears to accept that this imbalance has gone too far.

Mostafiz Uddin is managing director of Denim Expert Limited. He is also the founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE).

Views expressed in this article are the author's own. 

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