Global apparel markets: winners and losers
How will the global apparel industry change over the next five or so years? A new report from just-style believes there will be slowdowns in the activity of apparel outsourcing powerhouses such as India and China, and a continuing rise by shooting stars such as Vietnam and Bangladesh. Shorter runs for each style and faster time to market will also continue to put pressure on the supply chain.
The world's top 15 exporting countries accounted for 82% of the US$600bn global apparel market in 2007 according to a new report from just-style.
However, the 'Global market review of tomorrow's apparel industry - forecasts to 2014,' also points to significant slowdowns in the activity of apparel outsourcing powerhouses such as India and China where strikes and rising costs of manufacturing and transportation are working against manufacturers.
The report looks at today's apparel market, as well as the existing trends and how they will impact the apparel market of tomorrow.
It discusses future outsourcing markets by country, showing how and why countries will become - or cease to be - global players.
And it analyses relationships between suppliers and buyers, as well as the impact of the "flat world" on nations and specific product lines.
Speed and value
Increasingly, both buyers and suppliers are looking at value and speed to market instead of the lowest costs, the report says.
Countries with the US as their primary export market suffered mild setbacks in their apparel exports during the general economic slowdown in 2008.
Even so, firms in Central American nations are expected to show the strongest growth of apparel outsourcing activity from 2008 to 2014, helped by special trade concessions if they use US-made fabric and other inputs.
In the same way, several African nations are using advantages offered by the African Growth and Opportunity Act (AGOA) to significantly increase their exports to the US and abroad.
But this growth has come from the decreasing competitiveness of the average Chinese firm, impacted by increasing labour costs, the strengthening RMB, higher raw material prices, and a reduction in export tax rebates (which are to be raised to 14% from 1 November).
A brief rise in exports is expected when the US removes import restrictions to certain Chinese apparel categories in late 2008, but industry observers expect the place of India and China to be permanently taken by shooting stars such as Vietnam and Bangladesh from 2010 forward.
Added to the internal woes of supply companies, the general slowdown of economies in North America and Europe is another important factor in the mediocre growth rates observed in 2007 to 2008.
US apparel production has decreased every year since 1997, and in the first half of 2008 was at its lowest level since 1963. However, the average price per unit increased 25%, as the product mix shifted to higher priced articles.
China, meanwhile, saw its apparel exports rise by 15% in volume and almost 20% in value in 2007, despite quota restrictions levied on several apparel types. China was responsible for 34.3% of total EU apparel imports, and 83.9% of clothing sold in Japan sported Made in China labels.
Hong Kong apparel exports fell over 8% in the first half of 2008 as compared to 2007, as manufacturing operations migrated to mainland China.
Turkey is still reeling with the Asian dragon onslaught, having had its apparel exports decrease more than 8% in 2007.
Vietnam increased its 2007 apparel imports to the US by 31% in volume and 34% in value.
Mexico sales fell over 7% in 2007 as US and EU importers shifted orders to low cost and high quality outsourcing countries in Asia such as Vietnam and China.
EU apparel production increased a nominal 0.4% in 2007, though exports fell 3.4% and imports increased 5.4%.
Japan displayed a 5.3% increase in 2007 export revenue through higher sales to the EU, South Korea, US and Vietnam.
Global sourcing has become the key strategy for survival and growth for companies in the apparel market, the just-style report says.
Technological advances are helping to tighten production schedules and manage supply chains that cover multiple sourcing locations and multiple suppliers, as well as comply with local regulations, cultural and social issues, currency differences etc.
Keeping costs low and managing the cash-flow remains another critical factor for the success of the transaction.
Buyers are also opening local procurement offices near supplier sites to keep tight control over the supply chain.
The report says the challenges in sourcing include global supply chains, higher logistics costs, rising costs that are out of manufacturers' control, fluctuating currency rates, and retailers sourcing directly from manufacturers.
Corporate social responsibility (CSR) is another critical consideration for tomorrow's apparel industry, with buyers increasingly sensitive to labour irregularities and exploitation of women or child workers.
A recent addition to labour standards is environmental aspects, with pressure from consumer groups forcing apparel companies to rethink their operations from a more environmental viewpoint.
Another challenge facing apparel companies is finding a cost-effective method to provide quality fit in apparel. Lack of good fit is the reason given by more than 70% of all consumers for deciding not to purchase clothing.
Tomorrow's apparel players will also face new challenges such as design innovations, rapidly evolving fashion styles, shorter runs for each model and improving the time to market.
The report also believes there will be continuing trend towards consolidation in the industry; smaller batch size to meet consumers' demand for variety; increasing competition from lower cost countries; and pressure on manufacturers for customised products.
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