US Apparel Sector Shifts Sourcing Strategy Beyond China
Diversifying away from China as the main provider has been a topic of discussion in the US apparel industry, especially in terms of purchasing. While it’s acknowledged that China will remain a significant player, the strategy is shifting toward a “China plus many” or “Asia plus many” approach. Six months into 2024, US apparel import figures reveal that this shift is indeed happening.
Who Holds the Lion’s Share of the US Apparel Market?
June’s market share data presents a mixed picture for the top 10 suppliers of apparel to the US. According to the latest data from the US Office of Textiles and Apparel (OTEXA), China increased its share of the US apparel market by 0.7%. Similarly, Vietnam saw a 0.9% increase in market share. Cambodia and India both experienced a growth of 0.4% in their market shares.
Honduras and Pakistan maintained relatively flat market share growth, with increases of 0.0% and 0.1%, respectively. On the other hand, Mexico recorded the largest decline in market share growth at -0.7%, followed by Bangladesh with a -0.5% decline and Indonesia with a -0.3% drop. Nicaragua’s share grew by 0.1%, while El Salvador saw a slight decline of 0.1%.
The data suggests that several Asian and Western Hemisphere countries are gaining momentum as emerging sourcing destinations for US fashion companies. More apparel is being sourced from India, Cambodia, Pakistan, Jordan, and Guatemala as US fashion companies become more interested. These countries gained additional market share in the first half of 2024 compared to a year ago, benefiting from their perceived lower social and environmental compliance risks and lesser involvement in geopolitical tensions.
Is China Still the Cheapest Option?
China remains the most cost-effective option, with its average price per unit for apparel falling further to $1.76 in June, making it the cheapest among the top 10 apparel suppliers to the US. This price is 37% lower than the next cheapest supplier, El Salvador, at $2.80 per unit. Pakistan was the third cheapest supplier at $2.94 per unit.
Despite being among the most favored sourcing destinations for US apparel, India and Cambodia were at the higher end of the price spectrum, with average unit prices of $3.54 and $3.20, respectively. The most expensive sourcing location in June was Mexico, with an average unit price of $4.30.
Does Price Influence Sourcing Trends?
Traditionally, sourcing decisions were heavily influenced by price, with companies focusing on buying cheap and selling at a profit. However, with new legislation holding brands accountable for the social and environmental impacts of their supply chains, the emphasis on price points has diminished, though it remains a crucial factor.
Since 2020, the pandemic and subsequent geopolitical issues have highlighted the vulnerabilities of relying on Chinese supply chains. As a result, US apparel brands and retailers are increasingly aware of the importance of diversifying their supply chains and nearshoring their operations. This shift, combined with a decrease in demand for basics and mass-produced goods, has led to changes in sourcing strategies.
June’s US import figures reflect these changes. Six of the top 10 apparel suppliers to the US saw growth in June, with Cambodia experiencing the most significant increase, growing by 11.6% to 48 million SME. India saw a 7.5% increase in shipments to 69 million SME, while Vietnam, the second-largest supplier to the US, recorded a 6.1% increase to 194 million SME. Pakistan also witnessed healthy growth, with a 3.02% increase to 34 million SME.
China, currently the largest supplier of apparel to the US, saw modest growth of 1.31% to 386 million SME. Meanwhile, Honduras reported a slight increase of 0.3% in shipment volumes to 34 million SME.
In contrast, Mexico experienced the largest drop in import volumes, with a staggering 20.5% decrease to 30 million SME. The number of shipments dropped by 7.2% to 47 million SME in Indonesia, while the number of shipments dropped by 5% to 111 million SME in Bangladesh, whose apparel industry is currently being affected by ongoing protests. El Salvador also saw a decline in shipment volumes, falling by 4.7% to 23 million SME.
Overall, the total shipment volumes to the US in June rose by a modest 0.2%.
The market demand remains relatively weak, with no significant growth observed. In June 2024, US apparel imports decreased by 0.2% in quantity and 6.0% in value compared to the previous year. The quantity of imports in June 2024 was nearly identical to that of May, when seasonal factors were considered. Additionally, recent stock market volatility and concerns about an economic recession have added new uncertainties to the market outlook.
According to the newly released 2024 USFIA fashion industry benchmarking study, leading US fashion companies have identified inflation and the US economic outlook as their top business challenges this year.
The top two suppliers to the US market, China and Vietnam, have outperformed Bangladesh so far in 2024, driven by increased demand for more personalized, customized, and value-added items. In the first half of 2024, 33.2% of US apparel imports came from China, up from 32.8% in 2023. Vietnam accounted for 16.7% of imports, up from 15.8% in 2023. In contrast, Bangladesh’s share of US apparel imports fell to 9.6% in the first half of 2024, down from 10.1% a year ago.
According to studies, basic apparel items like cotton shirts and pants are frequently sourced from Bangladesh by US fashion companies. However, as US consumers demand fewer clothing items but expect more trendy, fashionable, and customized products, Bangladesh appears to be lagging behind China and Vietnam. These countries benefit from more vertically integrated local supply chains, offering superior product diversification and production flexibility.
Political instability in a country also reduces its attractiveness as a sourcing destination. So, it’s important to keep an eye on how Bangladesh’s recent changes to its government will affect the country’s clothing exports.
