China is not only the top supplier of many textile and apparel products to the US, but also holds a lions share of the market

China is not only the top supplier of many textile and apparel products to the US, but also holds a lion's share of the market

The outlook for China as a supplier of textiles and apparel (T&A) to the US market remains a topic of heated debate among industry professionals and academics. But an analysis of 2016 trade data by Dr Sheng Lu, assistant professor at the Department of Fashion and Apparel Studies at the University of Delaware, shows that while the country looks set to maintain its lead into the future, increasing competition is coming from suppliers in the Western Hemisphere who offer faster speed to market.

There's a widespread view that China's rapidly rising labour cost means cheaper textiles and apparel suppliers in Asia, such as Vietnam and Bangladesh, are becoming more attractive sourcing destinations for US fashion brands and retailers.

However, studies like the Sourcing Trends & Outlook for 2017 report released by the US Fashion Industry Association (USFIA) last week suggest that even with concerns about higher prices, China remains the dominant supplier of these products to the US market.

A review of 2016 trade statistics across 167 categories of T&A products categorised by the Office of Textiles and Apparel (OTEXA) under the US Department of Commerce sheds some new light onto the performance of 'Made in China' in the US T&A import market.

There are no near competitors for China-made textiles and apparel

Consistent with the findings in the USFIA report, trade data at the disaggregated product level also indicates that T&A 'Made in China' has no near competitors in the US import market. Specifically, in 2016:

  • Of the total 11 categories of yarn, China was the top supplier for 2 categories (or 18%);
  • Of the total 34 categories of fabric, China was the top supplier for 25 categories (or 74%);
  • Of the total 106 categories of apparel, China was the top supplier for 88 categories (or 83%);
  • Of the total 16 categories of made-up textiles, China was the top supplier for 12 categories (or 68%).

In comparison, for those Asian T&A suppliers regarded as China's top competitors:

  • Vietnam was the top supplier for only 5 categories of apparel (less than 5% of the total);
  • Bangladesh was the top supplier for only 2 categories of apparel (less than 2% of the total);
  • India was the top supplier for 2 categories of fabric (9% of the total), one category of apparel (1% of the total) and 5 categories of made-up textiles (41.7% of the total).

Moreover, China was not only the top supplier for many T&A products, but also held a lion's share of the market. For example, in 2016:

  • For the 34 categories of fabric where China was the top supplier, China's average market shares reached 41%, 23 percentage points higher than the 2nd top suppliers for these categories;
  • For the 88 categories of apparel where China was the top supplier, China's average market shares reached 53%, 38 percentage points higher than the 2nd top suppliers for these categories;
  • For the 16 categories of made-up textiles where China was the top supplier, China's average market shares reached 57%, 40 percentage points higher than the 2nd top suppliers for these categories.

Without a doubt, no other T&A supplier will catch up with China in the US market anytime soon.

China-made textiles and apparel are becoming more competitive on price

It is interesting to see that despite the reported rising labour cost, T&A 'Made in China' are NOT becoming more expensive. On the contrary: the unit price of US T&A imports from China in 2016 was 6.8% lower than a year earlier, whereas over the same period the unit price for imports from rest of the world only declined by 2.9%.

Specifically, in 2016:

  • Of the total 11 categories of yarn, China's unit price dropped in 10 categories (or 91%), with an average change of -10%;
  • Of the total 16 categories of fabric, China's unit price dropped in 11 categories (or 69%), with an average change of -13%;
  • Of the total 106 categories of apparel, China's unit price dropped in 67 categories (or 63%), with an average change of -9.1%;
  • Of the total 34 categories of made-up textiles, China's unit price dropped in 20 categories (or 59%), with an average change of -12%.

Furthermore, China's T&A are even more price competitive compared with other suppliers to the US market.

For example, in 2016, the unit price of 'Made China' was only 78% of the price of 'Made in Vietnam' (in 2012 this was 89%); 88% of 'Made in Bangladesh' (in 2012 this was 100%); 86% of 'Made in Mexico' (in 2012 this was 103%); and 72% of 'Made in India' (in 2012 was 81%).

In recent years, T&A factories in China have made substantial investments in automation technologies to control production cost through improved labour productivity and better supply chain management. The results suggest these efforts are paying off.

China's top competitor: Vietnam, Bangladesh or speed to market?

Nevertheless, in 2016 China lost its top supplier position in ten T&A categories compared with the year before, including:

  • One category of yarn (OTEXA code 400);
  • One category of fabric (OTEXA code 622);
  • Seven categories of apparel (OTEXA codes 340, 440, 447, 640, 647, 744 and 746);
  • One category of made-up textiles (OTEXA code 469).

However, while Vietnam and Bangladesh are widely regarded as China's top competitors, their challenge to China in the US market seems to be limited. For example, in 2016 Vietnam replaced China's number one position only for OTEXA code 647 (men's & boy's trousers) and Bangladesh only for OTEXA code 340 (men's & boy's woven shirts).

Nor was price the primary reason why US fashion brands and retailers chose to source less from China for these ten categories of T&A products. For as many as seven categories, the unit price of 'Made in China' actually declined from 2015 to 2016, ranging from -3% to -27%.

Notably, however, half of the new 'No 1' suppliers replacing China are countries located in the Western Hemisphere. For example:

  • Peru became the new No 1 supplier for wool yarn and sewing thread (OTEXA code 400);
  • Mexico became the new No 1 supplier for glass fibre fabric (OTEXA code 622), as well as shirts & blouses and sewing thread (OTEXA codes 340 and 440);
  • Honduras became the new No 1 supplier for boy's shirts and sewing thread (OTEXA code 640).

These results suggest that US fashion brands and retailers are increasingly treating countries in the Western Hemisphere as a viable alternative to 'Made in China'. Sourcing from the Western Hemisphere can not only help US companies save import duties through trade agreements such as NAFTA and DR-CAFTA but also can shorten lead times.

Because speed to market is growing in importance for US fashion brands and retailers' sourcing decisions, the Western Hemisphere supply chain is likely to post an even bigger challenge to 'Made in China' in the years ahead. 

To sum up, China's position as the top textiles and apparel supplier to the US market is unlikely to change for quite some time. US fashion brands and retailers will continue to source from China for factors such as price competitiveness, reliability, and a great variety of product choices. 

Meanwhile, the sourcing landscape is also gradually shifting. The Western Hemisphere in particular offers tremendous opportunities and will account for a bigger share in companies' sourcing portfolios in the future.