WASHINGTON — The increasing prices of goods, changing labor patterns and costs and the devaluation of the dollar on the world economic stage are driving apparel and footwear production out of traditional bases in southern China.
It’s a situation sourcing executives referred to as “a perfect storm” of global economic and political factors. Oil and gas prices have increased the costs of some raw materials, and the expense of transporting those materials and finished goods. Add to those elements increased labor costs, a dollar falling against the yuan and moves by the Chinese government to shift apparel production to new provinces, executives said.
Current economic pressures on U.S. consumers have added additional stresses to the situation.
“Now, more than ever, companies who are navigating this period are doing so with extreme caution in how they position their offices, vendor migration plans and overall sourcing strategies,” said Peter Warner, senior vice president of global sourcing for Liz Claiborne Inc. “We anticipate the situation to remain unsettled in the immediate postelection period, so it is extremely important not to invest too much time and infrastructure in plans that you can’t change quickly.”
Gary Ross, vice president of global nonbeauty supply chain for Avon Products, said, “We’re watching and monitoring the issues very closely and we’ll adjust our sourcing as we see conditions change.”
Pat Devaney, chief of sustainability for Deckers Outdoor Group, which makes Uggs, Teva, Tsubo and Simple shoes, said, “There are dramatic issues for all of us that are making products in southern China. As southern China develops, the cost of goods rises, and that can only be absorbed so much by us and others before being passed on to consumers and retailers.”
As costs continue to pinch in southern China, some executives said they see a shift away from the coast to northern provinces where labor costs are cheaper and the central government is supportive of industry.
There has been some “natural migration” in production from the south to the north and west parts of China, Avon’s Ross said, but some of the developments have been deliberate moves by the Chinese government.
“From minimum wage increases in certain parts of southern China, to tax incentives and value-added rebates [in other areas], it’s all done by design to force a migration,” Ross said.
Some executives said they would or already have considered moving production to Latin America, but for many China still presents the best value proposition. Most sourcing executives admit that cost pressures and sourcing decisions are getting more scrutiny than they have in a long time. The relative stability of the last few years seems to be a thing of the past, but most say what that means in the long term for their sourcing decisions is unclear.
“Maybe the model has to change in this environment,” said Richard Yamarone, director of economic research at Argus Research Corp. “China is no longer the place of nickel labor.” Places like Mexico could come into play, as well as Eastern Europe, Egypt, Vietnam, India and Pakistan, he said.
“With the change in administration coming with the elections, in terms of sourcing strategy and trends we’re going to be working with the table as it has been set over the last several years,” said Mark Jaeger, senior vice president and general counsel for Jockey International.
Jockey has a diversified sourcing base with facilities in Asia and closer to home in Latin America. But there are some added costs to operating in the Western Hemisphere, as well, Jaeger said, in order to meet the requirements of existing trade pacts like the Central American Free Trade Agreement.
“What the correct answer is, we’ll only figure out eventually,” Yamarone said. “It has to be some combination of moving facilities to less costly countries and maybe a trend toward cheaper materials.”
Increasingly, sources said, no single factor influences sourcing more than others.
“In today’s environment, world class sourcing strategies cannot just focus on competitive costs, but also need to address each brand’s requirements on speed, quality and flexibility,” said Warner.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews