M&J Bangladesh

Two rising Asian suppliers, Bangladesh and Vietnam, are putting pressure on the traditional manufacturers of jeans for the American market, while the U.S. has held on as a place for high-end and niche production.

In both cases, the longtime top suppliers — China in women’s jeans and Mexico in men’s — are seeing a slow erosion in their U.S. import market share, according to industry officials and government data.

While still a primary supplier to the U.S. in women’s denim, China has been experiencing rising labor costs for years. As companies look for sourcing alternatives, Bangladesh and Vietnam have been developing more vertical industries to compete for a piece of the pie.

“It’s just gotten a lot more expensive to work in China,” said Nate Herman, senior vice president of supply chain at the American Apparel & Footwear Association. “The fact that Bangladesh has become more of a vertical industry in denim — it’s making the yarn and it’s making the fabric as well as the finished jeans — has made it much more competitive with China. You have viable alternatives to China for fast fashion and higher-end jeans.”

Bangladesh is gaining some of the market share at a time when the country’s garment industry is undergoing rigorous fire and safety inspections and training in the wake of the Rana Plaza building collapse in 2013 that claimed the lives of more than 1,133 people and injured hundreds of others.

Herman noted that the major denim companies — VF Corp., Gap Inc., H&M and Abercrombie & Fitch — are part of two industry initiatives committed to improving Bangladeshi garment factories.

“There was a dip, obviously, in the year after Rana Plaza, but it has been up ever since,” he said.

Vietnam is also coming on strong as a top supplier. The country is part of the pending Trans-Pacific Partnership trade deal with the U.S. and 10 other countries that would encompass nearly 40 percent of the world’s gross domestic product.

“We have definitely seen a lot of shifts to Vietnam from other Asian suppliers,” said Julia Hughes, president at the U.S. Fashion Industry Association. “TPP being on the horizon has certainly been a part of that, but companies have also been looking at Vietnam as a sourcing destination for a few years.”

Herman said the majority of upstream investment in Vietnam has gone into fabrics and yarns in the denim area, making it more vertical.

“When you have that kind of investment for denim, it becomes extremely attractive and erodes a lot of the advantages that China has as a vertical industry,” Herman said.

On the men’s and boys’ jeans side, Mexico has been a long-term top supplier to the U.S., but Herman said some companies have found it to be more difficult to operate in the country due to an intensified effort by the Mexican government to conduct audits of shipments, causing headaches for U.S. companies.

“It is also a reflection of the fact that there is a growing fashion trend in men’s jeans and Mexico is good at one thing — making the same type of jeans over and over” as opposed to fast fashion jeans, Herman said.

Bangladesh, with its emphasis on women’s fashion denim, is attracting more of that business, he added.

U.S. jeans production has been stabilizing in the past couple of years after the European Union imposed a 26 percent retaliatory tariff on women’s jeans as part of a dispute at the World Trade Organization in 2013, eventually dropping it in 2014.

According to U.S. Census Bureau data in 2014 (the last year the government collected data on U.S. production and shipments), shipments of U.S.-produced women’s and girls’ jeans and jean-cut casual slacks was $428.5 million, far below the $600.1 million in shipments reported in 2013. U.S. shipments of men’s and boys’ jeans and jean-cut casual slacks were $43.1 million in 2014, down from $48.1 million in 2013.

“The U.S. production took a huge hit with that [Europe’s retaliatory tariff] because that’s where a lot of high-end U.S. women’s jeans were going,” Herman added. “The additional duty really hit the price point hard. I think the industry has recovered a little since that, but it is not above where it was in 2013. It’s doing OK.”