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February 21, 2022updated 25 Feb 2022 7:17am

Supply chain pros and cons for top 10 global apparel companies

Just Style reveals the supply chain opportunities and obstacles facing the world's biggest apparel companies, such as Nike, Inc and H&M Group.

By Laura Husband

Just Style’s round-up highlights the main strengths and weaknesses within the supply chain of the top ten global apparel companies based on a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, conducted by the GlobalData Apparel Intelligence Center.

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How can brands navigate the post-COVID-19 Apparel market?

In 2021, the Global Apparel market remained at 3% below pre-pandemic levels, with Europe and LATAM lagging behind. If they want to see full recovery, brands must look ahead. GlobalData is therefore offering this free report, Future of the Apparel Market Post Pandemic, to assist companies in adapting to the future market. This report explores the following topics:
  • Latest forecasts for the online apparel market out to 2025
  • How different regions and categories will perform, including which regions are lagging behind and which are performing at pre-pandemic levels
  • Which categories within the Apparel market are displaying resilience
  • Which brands are driving online spending
  • Impact of inflation on the Global Apparel market
  • What the biggest trends are that apparel businesses must adopt to succeed
Read our report on the Future of the Apparel Market Post Pandemic to gain valuable insights on how to best position your brand in a post-COVID-19 world.
by GlobalData
Enter your details here to receive your free Report.

The top ten apparel companies featured in the analysis, which includes Nike, Inc, Adidas AG and Inditex SA, were chosen based on having the highest clothing and footwear sales in value terms in 2020, according to the Apparel Intelligence Center. The results of the analysis for each company, which was correct as of February 2022, reveals the elements of the business and its supply chain that are proving to be successful, as well as the factors that could potentially create challenges in the coming months.

Supply chain strengths and weaknesses for leading global apparel companies

1. Nike, Inc

Nike headquarters: US

Nike’s business model: US sporting goods giant Nike, Inc designs, markets, and distributes sports footwear, apparel, equipment, and accessories for men, women, and children. The company markets its products under various brands, including Nike, Jordan, and Converse. Most recently, Nike acquired virtual sneakers and crypto-collectibles start-up RTFKT in a bid to speed up its digital transformation and enter the metaverse. Nike sells its products through its company-owned retail stores, e-commerce portals, independent distributors, licensees, and sales representatives located worldwide. It also merchandises its products through its e-commerce portal nike.com.

Nike’s strength: Strong operational network 

The analysis reveals Nike’s strong operational network enhances its supply chain activities and its future growth and expansion plans. This is said to help the company ensure a steady supply of inputs and manage its supply risks, price variations and complexities.

The analysis also highlights that Nike footwear products are supplied by 191 footwear factories located in 14 countries and are manufactured outside the US by independent contract manufacturers. For example, in FY2021 its contract factories in Indonesia, China, and Vietnam produced about 24%, 21% and 51% respectively of Nike brand footwear products.

The company is said to have manufacturing contracts with independent manufacturers in India and Argentina to manufacture and sell its footwear in those countries. During FY2021, the company’s four footwear contract manufacturers accounted for about 61% of the Nike brand’s footwear production, while each contractor accounted for more than 10% of production.

Nike sources its apparel from 344 independent factories in 33 countries outside of the US, while each factory accounted for 8% of the Nike brand’s apparel production in FY2021. During FY2021, the company’s contract factories in Cambodia, China, and Vietnam manufactured 12%, 19% and 30% of its total apparel production, respectively. The company’s top five contract manufacturers accounted for 51% of the Nike brand’s apparel production, while Nike distributes its products through seven distribution centres in the US and 70 centres outside of the US.

Nike’s weaknesses: Competitors with higher operating, technical and distribution resources and a heavy reliance on Asia 

The analysis highlights that Nike operates in a highly competitive retail market with a long list of competitors. It suggests that some of its competitors have higher operating histories, technical, marketing, distribution and support resources, as well as greater brand recognition and higher financial capabilities. All of these factors could potentially restrict Nike’s creation of innovative products and the ultimate expansion of its business.

GlobalData apparel analyst Emily Salter notes Nike’s supply chain is also heavily reliant on Asia. She says: “This impacted its stock availability and revenue at the start of its FY2021/22 with factory closures in Vietnam, and port closures in China contributing to significantly increased shipping times from Asia to North America, its main market.”

2. Adidas AG

Adidas headquarters: Germany

Adidas’ business model: Adidas AG designs, manufactures and markets athletic and sports lifestyle products and markets its products under the Adidas brand. The company’s product portfolio includes footwear, apparel and sports accessories and equipment. The company distributes and sells products through its own-branded stores, retail stores, wholesale stores, sporting goods chains, buying groups, department stores, lifestyle retail chains, e-tailers, and franchise stores. It also markets products through e-commerce platforms and mobile shopping apps. In January 2022, Adidas marked its entry into the metaverse with a collection of digital and physical items to be sold as non-fungible tokens and announced plans to hire thousands of new employees, including over 500 positions in the areas of digital, IT and data and analytics. 

Adidas’ strength: Strong operational network 

Similar to Nike, the analysis shows that Adidas’ global operations and strong operational network enables it to manage its development, production, planning, sourcing and distribution related activities efficiently. In December 2020, the company operated over 2,500 own-retail stores; wholesale stores across the globe. It also markets products under Adidas brands through e-commerce stores in 40 countries and mobile shopping apps in 25 countries.

The analysis shows Adidas has two production facilities in Germany and the US, but it outsources most of its production to independent manufacturing partners. As of December 2020, Adidas had 132 independent manufacturing partners, operating 277 manufacturing facilities. The company has operations across the Americas, Europe, Asia-Pacific, Africa, and the Middle-East, however, more than 68% of its independent manufacturing partners are located in Asia.

GlobalData associate apparel analyst, Darcey Jupp concurs and explains Adidas successfully uses its large-scale operations to its advantage by sourcing from multiple regions. 

Adidas’ weaknesses: Competitors with higher operating, technical and distribution resources and higher costs and lead times during the supply chain crisis 

It’s not surprising the analysis highlighted that Adidas is similar to Nike in that it also operates within a highly competitive sportswear market. The factors listed as determining the level of competition within the sportswear apparel and footwear industry include price, comfort, quality, product functionality, brand loyalty and awareness, and marketing and advertising capabilities. Some of Adidas’ competitors also have higher operating histories, technical, marketing, distribution and support resources; greater brand recognition and a higher financial capability which could restrict the creation of innovative products and business expansion.

According to the analysis, in FY2020, the company’s third-party manufacturing partners were mainly located in Asia with Adidas sourcing over 97% of footwear, 93% of apparel, and 77% of accessories and gear volumes from the region.

Apparel analyst Jupp explains this could be seen as a negative for the company. “Its skew towards Asia means the brand has suffered in the supply chain crisis. Significantly higher costs and increased lead times from ports around Asia encouraged the brand to cast doubt over its full year revenue outlook of 20% in Q3 FY2021,” she says,

3. Inditex SA

Inditex’s headquarters: Spain

Inditex’s business model: Inditex SA designs, distributes and retails apparel, footwear, accessories and household textile products. The company classifies its business operations into three segments: Zara/Zara Home, Bershka and other business. Inditex’s operational strategy is to manage its multi-concept store network worldwide. It aims to integrate its physical and online retail formats using efficient technologies within its business operations and enhance its logistic capabilities to give its end users a smooth experience. The company also plans to offer multi-channel customer service to its users through call centres and it wants the company to be seen as a one-stop shop for major trends in the fashion market. In January 2022 Inditex announced it is investing EUR238m on a complex that will house Zara’s apparel sales and design teams in Arteixo, Spain.

Inditex’s strengths: Multi-channel selling and vertical supply chain 

The analysis reveals that Inditex’s sale of merchandise through multiple channels increases its direct-to-consumer business. Inditex retails its products through a combination of in-stores and online business formats and these diverse retail and marketing channels help to increase brand awareness, store traffic and sales. As of January 2021, Inditex operated 6,829 stores in 96 markets and managed online retail activities in about 202 markets. 

GlobalData retail analyst Pippa Stephens explains Inditex has a vertically integrated supply chain and a large proportion of its suppliers are in its home market of Spain. This means it takes full control of all stages of its product development process, including manufacturing and distribution. It also allows Inditex to have superior supply chain flexibility so it can react quickly to new trends, quickly restock bestselling styles, and meet current demand. 

Inditex’s weaknesses: Competitors with greater financial and operational resources and costly localised production 

Inditex operates in a highly competitive environment with strong competition in its global casual and sportswear apparel segments. The analysis suggests this could be a threat to its existing market presence. The global apparel market is generally a competitive one, with the continuous entry of new brands and competitors. Local companies may also introduce cheaper imitations of the company’s products and designs and there is a risk that some of Inditex’s major competitors could have greater financial and operational resources that could hamper its market position and brand image.

Retail analyst Stephens also points out the company’s reliance on local production in Spain could be viewed as a weakness because it is likely to be more costly than  outsourcing overseas.

4. Hennes & Mauritz AB (H&M Group) 

H&M Group headquarters: Sweden 

H&M Group’s business model: Hennes & Mauritz AB (H&M Group) design and retails fashion apparel, accessories, homeware and cosmetics. The group offers these products under brand names such as H&M, Cos, Monki, Weekday, Sellpy, Arket and & Other Stories. Apart from selling in-store, it also offers products through various e-commerce channels. This month, the retailer announced that it would be launching an online offering of second-hand items in Sweden, followed by Germany and the potential to be rolled out across other markets. 

H&M Group’s strengths: Multi-channel selling and wide global presence 

H&M Group’s sale of merchandise through multiple channels is said to increase the company’s direct-to-consumer business and increase brand awareness, store traffic and both in-store and online sales. The analysis explains multi-channel retail is expected to be the leading mode of sale in Sweden’s retail sector in 2022 with a predicted share of 53.6% and online pureplay accounting for the remaining 46.4%. H&M Group also benefits from its presence in diverse territories as this insulates it from the risk of operating in a single economy. Plus, the company has entered into a number of franchising agreements to distribute its products in several regions.

GlobalData apparel analyst Emily Salter says H&M Group’s hundreds of suppliers and manufacturers being spread across numerous countries is a huge plus. She explains: “This diversification is smart to reduce the impacts of supply chain shocks.” 

In H&M Group’s full year report for 1 December 2020 to 30 December 2021, CEO Helena Helmersson notes: “We will strengthen, develop and broaden the offering to include more products and services in order to develop our relationships with customers and attract even more customers around the world. The stores and the customer experience will continue to play a key role. The optimisation of the store portfolio remains successful. Now we are stepping up the pace of investment in both our physical and digital stores to elevate and strengthen the integrated experience further.” 

H&M Group’s weaknesses: Dependence on third party vendors and delays within the supply chain 

The analysis reveals that H&M Group is completely dependent on third party vendors for the supply of its merchandise. This means the group does not own any factories and outsources to commercial product suppliers in manufacturing factories. The group maintains huge vendor relationships, however, it has no assurance of continued supply, pricing, or access to new products. For this reason, disruption in vendor relations could lead to insufficient in-stock positions. In addition, this lack of direct control over the manufacturing process could make the company vulnerable to quality issues in its sourced merchandise.

Apparel analyst Salter says this is supported by the group reporting in its Q3 FY2020/21 results that demand was not able to be fully met because of disruption and delays in product flow.

5. Fast Retailing Co Ltd (Fast Retailing) 

Fast Retailing’s headquarters: Japan

Fast Retailing’s business model: Fast Retailing Co Ltd (Fast Retailing) is a manufacturer and retailer of private-label apparel. It operates retail stores and sells products online under multiple banners such as Uniqlo, Comptoir Des Cotonniers, Princesse Tam.Tam, GU, Theory and J Brand. In December 2021, the group revealed it aims to have 20% fewer greenhouse gas emissions in its supply chain, 90% fewer emissions in its stores and offices, and it plans to increase the proportion of recycled materials to about 50% by FY2030.

Fast Retailing’s strengths: Diversified store network and global e-retail market 

The analysis highlights the company has a diversified network of stores across the world that enhance its customer reach and sales. It also stands to benefit from growing online retailing which is significant as the global online retail market is expected to reach a value of $1.74 trillion this year with apparel retail expected to contribute to 23.7%, according GlobalData. Fast Retailing sells its products through various e-commerce websites and intends to build a new retail industry by linking online and physical store operations with various attractive services, such as more clothing sizes online and in-store pickup of online purchases.

Fast Retailing’s weaknesses: Intense competition and Japan’s labour shortage 

Fast Retailing has to continuously launch new products and open new stores to compete in this highly competitive market, suggests the analysis. The factors that determine the level of competition include price, quality, promotional activities, distribution, brand image, reputation, store accessibility and service. Some of its competitors could have higher operating histories, technical, marketing, distribution, and support resources, which could restrict the creation of innovative products and business expansion. Plus, the company’s home market has a population that is ageing rapidly so a low availability of skilled workers could pose challenges in terms of its business stability moving forward.

6. Moet Hennessy Louis Vuitton SE (LVMH)

LVMH’s headquarters: France 

LVMH’s business model: Moet Hennessy Louis Vuitton SE (LVMH) is a manufacturer and marketer of luxury goods. The company’s product portfolio includes apparel, leather goods, wines and spirits, perfumes and cosmetics, jewellery and watches. It also offers cruise services and carries out selective retailing and various other activities under DFS, La Grande Epicerie de Paris, Sephora, and Le Bon Marche Rive Gauche banners. LVMH markets products under the Christian Dior, Guerlain, Givenchy, Kenzo, Louis Vuitton, Celine, Edun, Emilo Pucci, Loewe, Nicolas Kirkwood, Make Up For Ever, and Zenith brand names. 

LVMH’s strengths: Europe-centric production, global store network, operational capabilities and high profit margins 

LVMH has a diversified store network with a wide geographic presence and its strong operational network is said to improve its efficiency in maintaining synergies between demand and supply of its products in the market. 

The company also continues to use strategic acquisitions as a major part of its growth strategy, such as LVMH backing a deal for German footwear brand Birkenstock in February 2021 and Stella McCartney selling a minority stake to LVMH in 2019. 

GlobalData associate apparel analyst Louise-Deglise-Favre highlights another plus for LVMH is that its fashion and leather goods production is primarily Europe-centric in terms of both raw materials and manufacturing. This means it avoids most supply chain issues linked to production in Asia and long-distance shipping.

“Due to the nature of its products, LVMH is also able to absorb inflationary raw material cost increases into its high profit margins (although the group sometimes chooses to increase prices for other reasons),” she adds. 

LVMH’s weaknesses: Intense competition, counterfeiting and piracy 

LVMH operates in a highly competitive industry and according to the analysis, some of its competitors are said to have higher operating histories, technical, marketing, distribution, and support resources. LVMH’s performance could also be affected by the rising influx of counterfeited products in the market. According to the International Chamber of Commerce (ICC), counterfeiting and piracy are estimated to cost G20 countries over $125bn every year. It is also estimated that about 2.5m jobs could be destroyed by counterfeiting and piracy. Being priced low, imitated goods could affect the company’s financial performance and brand image in the long-term.

7. The Gap Inc (Gap)

Gap’s headquarters: US

Gap’s business model: The Gap Inc (Gap) is an omni-channel retailer that offers curb-side pick-up, buy online/pick-up in store, order-in-store, find-in-store, and ship-from-store. The company merchandises apparel, accessories and personal care for men, women and children through its retail stores, franchised stores, and e-commerce portals. Its products are marketed under various brand names including Gap, Old Navy, Banana Republic, GapFit, GapBody, GapKids, babyGap, and Athleta. It struck a deal to offload Intermix to private equity firm Altamont Capital Partners in May last year.

Gap Inc also provides a license to various third parties to sell and market its products. In October of last year, the company acquired AI start-up Context-Based 4 Casting Ltd (CB4) that uses machine learning tools to transform retail operations, increase sales and improve customer experience through predictive analytics and demand sensing

Gap’s strengths: Global presence, store network and US online retail market 

Gap’s wide geographic presence is said to help the company mitigate the risks associated with being dependent on a single region. It also operates franchised stores and has franchise agreements with unaffiliated franchisees. Its global presence enables the company to build a brand image and maintain a strong position in the apparel market, while its diversified store network helps the company to gain operational synergies and serve customers with efficiency. 

Strategic initiatives such as the Intermix deal are a major part of the company’s growth strategy. It also closed the sale of its Janie and Jack children’s fashion brand to Go Global Retail last March. With this divestment, the company is said to be more focused on growing its Old Navy and Athleta brands and transforming its Gap and Banana Republic brands.

Gap’s weaknesses: Dependence on merchandise vendors, intense competition and manpower costs in the US

The analysis shows Gap is highly dependent on vendors outside of the US with about 32% of the company’s FY2020 purchases, by dollar value, coming from factories in Vietnam, and 16% coming from factories in China. Its two largest vendors accounted for 7% of its total sales in FY2020. This means any increase in product costs and taxes, import, financial and regulatory issues, or disruption of imports from Vietnam, China, or other foreign countries could affect the company’s business operations. Gap also operates in a highly competitive clothing retail market and the analysis warns that players from emerging countries are competing for market share. Many of Gap’s competitors are said to have longer operating histories, greater brand recognition, established customer and supplier relationships, and greater financial resources, which could lead to the creation of innovative products and business expansion through acquisitions. Increasing manpower costs in the US could also affect Gap’s stability and operational efficiency with a number of US states raising minimum wage rates on 1 January 2022. 

8. Kering SA

Kering’s headquarters: France

Kering’s business model: Kering SA (Kering) designs, manufactures and markets ready to wear luxury apparel and lifestyle products. The company’s major brands include Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen, Brioni, Boucheron, Pomellato, DoDo, Qeelin, Ulysse Nardin and Girard-Perregaux. Kering distributes products and services through direct operated stores, franchise boutiques, wholesale partners, and several retail and wholesale channels. 

Kering’s strengths: Multi-channel selling, geographic presence and expansions 

The company sells its products through a combination of in-store and online business formats, which increase its direct-to-consumer business. Kering’s wide geographic presence protects it from the risk of operating in a single economy and enables it to generate multiple revenue streams, which equates to competitive advantage and financial stability in the long term.

The company continues to use strategic expansions as a major part of its growth strategy. In April 2021, the company expanded its logistics capabilities by launching a new hub in northern Italy to expand its presence in the country. While in December 2020, Kering announced plans to open a new operations centre in the the US to expand its presence in the state of New Jersey. 

Kering’s weakness: Intense competition 

Kering competes with numerous apparel companies in terms of design, quality, price, and durability. Intense competition could change the price dynamics in the market which the analysis suggests could results in the company being forced to reduce its prices to remain competitive and would affect the overall financial stability of the company.

9. Hanesbrands Inc (Hanesbrands)

Hanesbrands’ headquarters: US

Hanesbrands’ business model: Hanesbrands Inc (Hanesbrands) is an apparel manufacturing company that produces, distributes and markets activewear, lingerie, casualwear, and underwear. The company markets its products under Hanes, Champion, Bonds, Maidenform, DIM, Bali, Playtex, Bras N Things, Nur Die/Nur Der, JMS/Just My Size, Wonderbra, Lovable, Alternative, Berlei, L’eggs and Gear for Sport brand names. It sells its products through mass merchants, mid-tier and department stores, specialty stores, retail stores and e-commerce sites.

Hanesbrands announced in February 2022 that it plans to sell its US Sheer Hosiery business as part of its plan to focus on areas with the greatest potential for growth and returns.

Hanesbrands’ strengths: Research and development (R&D), operational network and customers and distribution channels 

Hanesbrands focuses on R&D, which enables it to stay abreast of the changes in the industry and gives it the “first mover” advantage by enabling it to launch products ahead of the competition, the analysis explains. The company implemented its Innovate-to-Elevate strategy that focuses on innovation capabilities, including the development of new and improved products featuring innovative properties. This strategy helped the company to meet consumers’ needs and develop its advertising and promotion services. 

Hanesbrands has a broad distribution network, which helps it gain operational synergy and serve its customers efficiently. Its products are sold mainly through two main channels: indirectly through brick-and-mortar wholesale customers from third parties and directly through consumer-directed purchases. The in-store wholesale revenue from third parties is generated by selling its products to distributors to support their brick-and-mortar activities, and by royalty revenue from licencing agreements. Consumer-directed revenue is mainly generated by own stores or e-commerce websites, which include both its owned sites and its retail customers’ sites, through sales to individual customers.

A wide operational network also helps the company to reach a diversified customer base. It distributes products through multiple channels, including mass merchants, national chains and department stores, and other specialty retailers. The company also distributes products through websites, catalogues, and other third party distribution operators in overseas markets.

Hanesbrands’ weaknesses: Intense competition and weather conditions 

The analysis shows Hanesbrands faces significant competition in each of its operating segments with its competitors having greater resources and brand recognition. The analysis points out that intense price and product competition could also have an effect on the company’s business operations and erode its market share. As the company focuses on activewear, lingerie, casualwear, and underwear, the analysis suggests that unseasonable or severe weather conditions could adversely affect sales. Both casual wear and activewear became increasingly popular during the pandemic, however, and Hanesbrands announced in February it would be increasing its 2024 financial targets from $7.4bn to $8bn of revenue.  

10. PVH Corp 

PVH’s headquarters: US

PVH’s business model: Apparel retailer PVH Corp (PVH) markets products under Calvin Klein, Tommy Hilfiger, Warner’s, True & Co, and Olga. The company sells products through company-owned stores and digital channels, department stores and digital commerce sites, off-price and independent retailers, pure-play digital commerce retailers, warehouse clubs, and territorial licensees.

PVH’s strengths: Operational network, distribution channels and strategic initiatives

The analysis reveals PVH has a strong and diversified operational network that enhances its customer reach and minimises its dependence on a single region, distribution channel, demographic group, or product category. As of January 2021, the company produced its products at over 1,200 factories in more than 40 countries that were managed by independent third-party manufacturers. The products are shipped from manufacturing facilities to company-owned and third-party-operated retail and wholesale distribution centres.

PVH’s broad distribution channel is said to meet its stores’ needs efficiently, with the group licensing its brands to third parties around the world. The analysis explains the company’s business model reduces its dependence on an outside party to provide logistics support and minimises operating costs, which in turn increases profit margins.

PVH’s strategic initiatives aim to strengthen its operations and increase its returns. For example, the company partnered with The Ellen MacArthur Foundation in March last year to launch its First Circular Design Denim Collection, while its subsidiary PVH Brands Australia launched The Shaping Bra collection under the Nancy Ganz brand name during the same month.

PVH’s weaknesses: Dependence on limited customers and intense competition

The analysis points out the apparel industry is growing through business gains, mergers and acquisitions, and strategic alliances, which enable large customers to diversify their operations. This could affect PVH as if the purchasing power of customers increases, it could affect the company’s business and financial conditions if there are price fluctuations and other quality issues.

PVH also operates in a highly competitive apparel retail market with players from emerging countries competing for market share. Plus, many of its competitors have a longer operating history, greater brand recognition, established customer and supplier relationships, and greater financial resources.

Click here for more information about the methodology used to create the analysis for the global apparel companies in GlobalData’s Apparel Intelligence Center.

Related Companies

Free Report
img

How can brands navigate the post-COVID-19 Apparel market?

In 2021, the Global Apparel market remained at 3% below pre-pandemic levels, with Europe and LATAM lagging behind. If they want to see full recovery, brands must look ahead. GlobalData is therefore offering this free report, Future of the Apparel Market Post Pandemic, to assist companies in adapting to the future market. This report explores the following topics:
  • Latest forecasts for the online apparel market out to 2025
  • How different regions and categories will perform, including which regions are lagging behind and which are performing at pre-pandemic levels
  • Which categories within the Apparel market are displaying resilience
  • Which brands are driving online spending
  • Impact of inflation on the Global Apparel market
  • What the biggest trends are that apparel businesses must adopt to succeed
Read our report on the Future of the Apparel Market Post Pandemic to gain valuable insights on how to best position your brand in a post-COVID-19 world.
by GlobalData
Enter your details here to receive your free Report.

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