Vietnam is set to gain the most from a cutback on sourcing from China

Vietnam is set to gain the most from a cutback on sourcing from China

Rising costs in China have forced an increasing number of Western apparel brands and retailers to look at cutting back on sourcing in China, and have more of their apparel manufactured elsewhere, a new report suggests. 

However, in looking for alternative production locations, Western buyers have found their options are limited as no other single country can provide the capacity, quality, skills, variety, and complete supply chain which the Chinese textile and clothing industry possesses. Also, many of the more attractive alternative locations suffer from various disadvantages.

Concerns over factory safety, and adverse publicity associated with these concerns, have deterred some buyers from sourcing in Bangladesh - one of the world's lowest cost textile and clothing producing countries, according to a new report from Textile Outlook International.

Many buyers are also wary about sourcing in Cambodia, a potential low cost alternative to Bangladesh and China, because of recent labour unrest and reliability issues.

Vietnam would appear to offer better prospects for Western buyers as it has a well- developed textile supply chain and appears to have escaped adverse publicity of the kind which has plagued the industries in Bangladesh and Cambodia.

In fact, Vietnam is expected to be one of the fastest growing suppliers of textiles and clothing to Western markets over the next few years.

In 2013, US textile and clothing imports from Vietnam grew in value by 14.6%, which represented the fastest growth rate among imports from the US's ten largest suppliers. And imports continued to grow strongly in the first four months of 2014, having increased by 15.5% compared with the corresponding period of the previous year.

Furthermore, Vietnamese exporters stand to gain from a successful conclusion to negotiations aimed at establishing a Trans-Pacific Partnership (TPP) free trade agreement. This would provide imports of Vietnamese products into the US market with significant tariff benefits and flexible rules of origin.

US imports from Bangladesh grew by 10.5% in 2013, making Bangladesh the US's second fastest growing supplier after Vietnam during the year. However, many of the orders placed with Bangladeshi suppliers for delivery in 2013 will have been negotiated before the collapse of Rana Plaza - an eight-storey commercial building in Savar near Dhaka, Bangladesh, which housed five garment factories as well as a mall - and the adverse publicity which followed.

In fact, recent data suggest that a move away from Bangladesh may well be under way. During the first quarter of 2014, US clothing imports from Bangladesh declined by 0.2%.

US imports from Cambodia, meanwhile, rose by only 0.7% in 2013 and during January-April 2014 they were up by a relatively modest 2.1%. As a result, the country lost market share.

Admittedly, Cambodia and Bangladesh fared much better in the EU import market. In 2013 EU imports from Cambodia shot up by 37.3% and imports from Bangladesh by 15.0%, which made Cambodia and Bangladesh the two fastest growing textile and clothing suppliers to the EU among the leading ten.

EU imports from Vietnam, on the other hand, grew by only 3.2%. However, growth picked up to 14.5% during January-March 2014 as buyers switched to sourcing locations other than Bangladesh, Cambodia and China.

Vietnam seems set for a solid future as an alternative sourcing location to China. However, imports from Vietnam into the EU and the US continue to be dwarfed by those from China.

The fact remains that no country can match China in terms of the size of its supply base, its range of skills, its quality levels, its product variety and the completeness of its supply chain.

The following reports all appear in Issue No 169 of Textile Outlook International: "Editorial: Will textile and clothing suppliers in Bangladesh, Cambodia and Vietnam gain market share from China?"; "World textile and apparel trade and production trends: South-East Asia"; and "Trends in EU textile and clothing imports".

Expert analysis

World Textile and Apparel Trade and Production Trends: South-East Asia, June 2014

World Textile and Apparel Trade and Production Trends: South-East Asia, June 2014

This latest report in our flagship series contains 32 pages of statistical data, information and insight into the textile and apparel industries...read more