Janet Fox, vice president and director of strategic sourcing at J.C. Penney Co. and chairwoman of the U.S. Association of Importers of Textiles & Apparel, doesn’t expect any significant shifts among the top six apparel and textile suppliers to the U.S. — China, India, Pakistan, Vietnam, Mexico and Bangladesh.
China will be used for quicker turns because it has textile mills and apparel factories, she noted, and Egypt has potential to grow because it has duty-free access to the U.S. Fox feels the biggest sourcing issues in 2010 will center on price increases in commodities, products and freight, plus a potential slowing of international cargo because so many container ships have been taken off line.
“China might become higher priced this year,” she said. “Wages are being increased considerably — 10 to 15 percent — throughout most of China.”
Any movement in the Chinese currency could also cause price increases.
“One of the biggest concerns is raw materials pricing,” she added. “Commodities are going up, which happens when the dollar is weak. With cotton, a huge commodity we all use, pricing is up considerably from 60 to 77 cents a pound in ’09 to 73 cents a pound this year, with a forecast up to 86 [cents]. That would be bad enough if there wasn’t also a shortage because of bad crops in the U.S., India and Pakistan, so right now there is more demand than supply.”
Freight companies are taking ships offline and slowing them down, due to lack of demand precisely when retailers are working harder than ever to reduce cycle time, she pointed out.
“When you are trying to read your sales so much closer to when you purchase, any day added to the chain causes a concern because most retailers are running very close to inventory,” Fox explained.
Trade legislation on Capitol Hill will take a back seat as the lawmakers focus on the mid-term elections in November, she predicted.
“We don’t see any positive movement on any initiatives this year,” Fox said. “From a retailer’s point of view, we may have to be a little bit on the defensive with the economy being slow. Probably some [people] expect that there may be a further decline in jobs and if that is the case protectionism comes into play when unemployment gets higher.”
The Obama administration’s decision in September to tax tires from China under Section 421 of the 1974 Trade Act could signal a protectionist agenda, she pointed out.
“This set a precedent,” she noted. “The Bush administration declined all 421 cases.”