WASHINGTON — After two decades of textile and apparel sourcing concentrated in the coastal regions of China, experts predict that rising production and labor costs will drive companies to the country’s cheaper neighbors and regions with developing apparel and textile manufacturing.
The next 10 years will see Vietnam, Bangladesh, India, Pakistan and Indonesia as the rising stars of apparel production.
Increased manufacturing and raw material prices and rising labor costs have already impacted sourcing within China, driving some companies to move production to the northern and western provinces. Until recently, most apparel was manufactured in the southeastern part of China, where there was easy access to ports.
Cost has always been a driving factor of sourcing decisions for apparel executives, and the pressure to keep production expenses low has only increased as consumers have grown used to less expensive clothing and global macroeconomic forces have pressured company margins.
In 2000, China shipped 2.2 billion square meter equivalents to the U.S., according to the Commerce Department’s Office of Textiles & Apparel Last year, the U.S. imported 20.7 billion SME of textiles and apparel from China, nearly half of all goods imported. The total amount of apparel imported into the U.S. in 2009 was 46.6 billion SME.
The value of the dollar against other currencies, inflation trends and speed-to-market pressures in the retail environment in the U.S. will drive sourcing to new regions over the next decade, experts said. Sourcing executives and industry observers pointed out that not only have China’s labor costs risen, but raw material and energy costs have increased as well. Inflation in supplier countries has also had an impact.
The difficulty with shifting into the interior of China for most companies is that the logistical challenges outweigh the labor cost benefit, said Gary Hufbauer, senior fellow at the Peter G. Peterson Institute for International Economics in Washington.
“Ten years from now I think China will be too expensive,” Hufbauer said. “They’re very competitive now, but it would be amazing if their wages weren’t double what they are now in 10 years, or even more.”
The increases will be particularly felt on commodity products, Hufbauer said. China is more likely to maintain its price competitiveness on more sophisticated items. Wages in other countries, like India, could also increase but are not expected to rise at the same rapid rate, which will help those nations pick up some of the market share shifting out of China, Hufbauer said. Countries like Bangladesh will have no wage pressures.
China has made no secret of its wish to graduate from new kid on the block to global powerhouse. For apparel manufacturing, that could mean any production that is still there will shift to the high end, Hufbauer said.
“They may not do jeans in China [in 10 years], but they might do the high fashion stuff,” he said.
Countries like Italy and France that are commonly associated with high-end manufacturing could face a lot of competition from China in the coming decade, he said.
Not everyone agrees about China’s path. David Spooner, an attorney with Squires, Sanders & Dempsey and a former assistant secretary of commerce for the import administration and former special textile negotiator under President George W. Bush, said China’s rising labor costs are driven in part by the exponential growth in its gross domestic product. China’s double-digit expansion is unsustainable, and if GDP growth flagged it “would stop the flight of production,” he said.
Rising costs and other factors might push some production to other countries like Indonesia, Bangladesh and their southeast Asian neighbors, said Rick Darling, president of Li & Fung USA, but China will likely still be the dominant player.
“At the end of the day, anywhere in the world, there’s no replacement for China,” Darling said.
China, Vietnam and Indonesia offer competitive labor and energy costs, despite not having the benefits of a trade preference program with the U.S., said Mark Jaeger, senior vice president, general counsel and secretary of Jockey International Inc.
Economic factors always influenced decisions about sourcing and production, Jaeger said, but because most apparel is produced outside the U.S., trade policy, quotas, safeguards, duties and trade agreements also impact the supply chain for clothing.
The result of the complicated web of policies that can impact apparel and affect the cost and speed of producing in specific countries has “resulted in widespread and inefficient supply chains where inputs are moved around the globe to satisfy origin requirements in trade deals,” Jaeger said.
“Over the next 10 years, I think sourcing will consolidate into fewer countries and supply chains will be focused,” Jaeger said. “Countries that depend on duty preferences for their competitive advantage will gradually lose share.”
Some feel 10 years from now China could resemble the Japan of several decades ago, a country moving up the manufacturing food chain away from gateway industries like apparel and textiles into more complicated, higher-value channels like electronics and cars.
China’s move into higher-margin categories would create a vacuum that could be filled by a number of countries. India and Vietnam, already powerhouses with well-developed infrastructure and vertical platforms, could both step in to fill the void. Vietnam has already expanded the products it manufactures and developed its industry across the board, said Julia Hughes, president of the U.S. Association of Importers of Textiles & Apparel.
Vietnam, Bangladesh, India, Indonesia and Pakistan are top 10 suppliers to the U.S. and Pakistan and India are both vertically integrated in specific product categories.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews