Forget the Hype – China is Winning the Apparel War

China, Vietnam, India, Bangladesh, Mexico, Pakistan, Honduras, and Cambodia make up 75 to 80 percent of imports to the United States. Despite the negative press about recent trends, U.S. imports of apparel and textiles have grown from around $93 billion in 2008, before the economic downturn took hold, to around $101 billion in 2012. China’s share of that was up six percentage points over the period, indicating that demand for China goods remains strong.

Over the same period, Vietnam, India, Indonesia, and Bangladesh have all seen increases of 5 to 9 percent.

“The big message is that Asia and Southeast Asia…are going to continue to have the lion’s share of imports into the U.S,” says Chris Callieri, principal in the consumer and retail practice at A.T. Kearney, the global management consulting firm.

Imports from Mexico and other Americas sourcing destinations were either stable or declining between 2008 and 2012, despite increased buzz about the potential for fast sourcing from the Americas.

“I still think there’s good potential in those countries,” says Callieri of the flat growth. “Is it because retailers haven’t ramped up, or are there other factors?”

Production in the Americas could allow firms to respond more strategically to demand signals, but the leap has not been made yet. In Mexico, this may be due to political uncertainty and security concerns.  Other countries may simply not be on the radar of manufacturers, in an era of relatively low demand expansion in the U.S.

Even with significant investment, countries in the Americas will never actually supplant China and Southeast Asia. Right now, China accounts for around 40% of U.S. imports, Bangladesh is around 5%, and Honduras and El Salvador are both around 2%.

“I don’t think either of them [Honduras or El Salvador] have the ability to ramp up to 10 or 15% of imports, but they could certainly ramp up,” says Callieri.

Indeed, the long-term trends favor more expansion in Vietnam and Cambodia, not in the Americas, according to Callieri. Partly, this is due to the recent disasters in Bangladesh, which have given that country a bad reputation and threatened its trade facilities.

“These countries [Vietnam and Cambodia] are fairly cost competitive, and they seem to have a better track record from a supplier conditions standpoint in Banglades,” says Callieri. Still, Bangladesh should continue to prosper. “I expect that because of the underlying cost attractiveness in Bangladesh, they will continue to play a strong part in supplying apparel to the U.S., but I think it’s going to become a little bit more expensive for retailers to work there.”

New changes to safety regulations, including an agreement that would require retailers and sourcing firms to invest directly in factory safety equipment, may make it difficult for some firms. Assuming the industry comes together to address the issues, however, the best suppliers in Bangladesh should continue to thrive.

Eventually, says Callieri, there may also be more sourcing from within the U.S. Commitments by big brands will make a dent in imports. Ralph Lauren and Wal-Mart are two firms that have made big bets on the promotional sourcing strategy.

“Particularly as Wal-Mart continues to place their focus on ‘Made in U.S.A.,’ I think you’ll start seeing more of a shift,” he says. “I don’t think that means our imports are going to be cut in half, by any stretch of the imagination.”

 


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