Vietnam has benefited as producers and buyers diversify their supply chains

Vietnam has benefited as producers and buyers diversify their supply chains

The volume of US apparel imports booked another double-digit hike month-on-month in August thanks to retailers stocking up for the back-to-school season – with Vietnam and Indonesia seeing the largest growth and Cambodia a massive 21% year-on-year decline. That said, the data also shows the volume of imports is down on last year. 

The latest figures from the Department of Commerce's Office of Textiles and Apparel (OTEXA) show the volume of US apparel imports from all sources was up 12.2% in August to 2.85bn square metre equivalents (SME) compared with 2.54bn SME booked in July, as retailers stocked up for the all-important back-to-school season.

However, the figures also show a 4.3% fall year-on-year in August imports – widening the year-on-year decline of 3.5% seen in July. Total imports during the month slipped to 2.73bn SME, from 2.85bn SME in August last year. In value terms, imports were down 7.2% year-on-year to $8.30bn in August.

In terms of individual supplier countries, half of the top-ten recorded year-on-year growth, while Cambodia booked a double-digit decline.

Shipments from China – the largest supplier of apparel to the US – were down 8.6% year-on-year to 1.32bn SME, but increased 12.8% compared with a month earlier.

The second-largest supplier, Vietnam, was one of the two countries to record double-digit year-on-year growth, booking an increase of 11.6% to 332m SME, stronger than July's 9.2% gain and the 4.5% seen in June. Indonesia, meanwhile, also saw its apparel shipments to the US jump 10.9% in August to 103m SME compared with the year before. 

Bangladesh, ranked number three in the top-ten league table, saw a decline of 6.9% to 160m SME. Cambodia, meanwhile, recorded the largest decline of 21.1% to 90m SME, widening its decline of 16.8% in July. 

Of the remaining top-ten supplier countries, Pakistan saw a decline of 9.3% to 43m SME, while Honduras booked a year-on-year decline of 6.8% to 93m. India booked an increase of 5.8% to 80m SME, but this was a 1.2% decline in month-on-month imports. Meanwhile, El Salvador booked a year-on-year increase of 4.6% to 68m SME, and Mexico 4.6% growth year-on-year to 75m SME. 

Total US apparel and textile imports in August rose 6.7% from July and were up 4.7% in June, reaching 6.07bn SME from 5.69bn SME in the same period a year ago, with textiles down 1% to 3.34bn SME.

Facts behind the figures

While there continue to be concerns that increasing wages are undermining the competitiveness of China's garment production on the world stage, the latest figures confirm it still remains the largest source for apparel buyers as rising prices are largely being offset by productivity gains. No other 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 country also continues to lead the way when it comes to efficiency and infrastructure.

A Fashion Industry Benchmarking Study published in June found that China's position as the number one sourcing destination seems unlikely to change anytime soon. The country's economic growth also beat expectations in the second quarter. But despite this, China's industrial economy is showing signs of a slowdown due to lack of investment and overcapacity, a report published last month suggests. 

US fashion firms share sourcing trends and strategies

China's industrial economy shows signs of slowdown

Vietnam, meanwhile, has benefited as producers and buyers diversify their supply chains, helped by its low labour costs and its industry focus on specialisation, modernisation, and increasing value added.

Foreign direct investment continues to flow into the country, and the conclusion of negotiations on the Trans-Pacific Partnership (TPP) trade agreement means Vietnam is expected to be one of the biggest beneficiaries. Manufacturers in Vietnam also stand to gain from improved access to the EU import market once the EU-Vietnam free trade agreement comes into force.

Vietnam's apparel exports exceeded $27bn in 2015, exceeding a target of $20bn set for 2020, and are expected to hit $31m this year. The country's garment industry is now calling on the government to create a development strategy to 2025, with a vision towards 2040, in order to help firms take advantage of opportunities likely to be brought by free trade agreements.

While Vietnam's textile and garment exports continued to grow in the first eight months of this year, it was at a slower pace than the year before due to production delays and falling demand in global markets, figures published last month show. The Vietnam Cotton and Spinning Association (VCOSA) puts the drop in export orders down to having to compete "fiercely" with garment producing countries in the region, particularly Cambodia and Myanmar, which enjoy tax incentives when exporting to the EU, as well as competition from China, India, Bangladesh and Sri Lanka. 

Upcoming Vietnam FTA set to boost EU retailers

Vietnam garment industry calls for "strategy update"

Vietnam garment export growth slows as orders stall

Despite factory safety concerns, Bangladesh's clothing industry has largely continued to build momentum as a low-cost sourcing destination. Since the collapse of the Rana Plaza building in April 2013, two major industry-backed remedial plans, together with one supported by the government, have worked to resolve issues over safety and worker rights, including the closure of some garment factories.

However, two recent fatal terrorist attacks in Dhaka have again raised concerns over a potential economic fallout for a sector reliant on foreign investment, although local garment exporters insist that business continues as usual in the country. A recent conference in Dhaka also accused global buyers of still failing to pay fair prices and following non-transparent purchasing practices, with experts stressing the industry needs to move from paying minimum wages to living wages. 

Terrorist attack "a tipping point" for Bangladesh?

Bangladesh insists "business as usual" despite safety fears

Sustainable sourcing the way forward in Bangladesh

Cambodia's apparel industry is the country's largest manufacturing sector, despite being blighted by strikes, wage disputes, and factory faintings. Garment manufacturers have called for a focus on productivity to offset rising wages, and are also urging buyers to increase their prices for Cambodian goods. A new monthly minimum wage of $153 has just been agreed and will take effect from January 2017.

But while Cambodia's garment sector appears to be doing fine, boosting the country's GDP to a predicted 7.2% for 2016, recent data shows the country is not competitive enough. Garment exports are only growing in markets with beneficial access, like Canada, Japan and the EU, with shipments to the US having fallen for the past five years.

Cambodia raises garment worker minimum wage to US$153

Cambodia garment sector faces ongoing challenges

Indonesia, which led the field with Vietnam for US import growth in August, has seen its textile and garment industry grow rapidly over recent years, thanks to significant investment in new textile and garment factories. South Korean company PT Nesia Pan Pacific Clothing, to name just one, will invest a total of $60m over three years in new Indonesian factories, according to the government.

A new textile training academy in the city of Solo on the Indonesian island of Java is also being seen an important step towards addressing the critical shortage of middle managers in the country's garment industry. Courses cover mechanical yarn making, woven cloth making and garment manufacturing engineering.

Indonesia moves to solve middle management shortages

Year-to-date and five-year overview

While monthly trade data is often volatile, with big swings from one month to the next, a broader view of the year so far shows total US apparel and textile imports declined 1.9% between January and August to reach 41.76bn SME, from 42.60bn SME in the prior year. Within this, textiles dropped 2.6% to 23.90bn SME, while apparel shipments fell 1.1% to 17.86bn SME. 

In value terms, total US apparel and textile imports this year were down 5.5% to $70.61bn, from $74.74bn in the same period a year ago. Apparel imports fell 4.5% to $54.07bn, while textiles dropped 8.9% to $16.54bn.

However, half of the top ten apparel supplier countries booked growth during the first eight months, with imports from Vietnam increasing 6.4% to 2.34bn SME, Bangladesh up 1.7% to 1.30bn SME, and El Salvador rising 4.9% to 559m SME. Imports from largest supplier China are down 2.26% to 7.2bn SME in the year so far, while Cambodia has seen the largest year-on-year decline of 16.4% to 591m SME.

Taking a broader look at the data, over a five year period from 2010 to 2015, Vietnam is the only country in the top ten to have seen a steady increase in import volumes to the US, growing from 1.91bn SME in 2010 to 3.14bn SME in 2015, increasing its share from 7.72% to 10.73%. China's imports have fluctuated over this period, from 10.4bn SME in 2010, falling to 9.74bn SME a year later, before reaching a peak of 11.4bn SME in 2015. The country has increased its share slightly, from 41.98% in 2010 to 42.03% last year. 

Pakistan, meanwhile, is the only country in the top ten to be exporting less to the US than it was five years ago, from 698m SME to 591m SME in 2015, lowering its share from 2.82% in 2010 to 2.29% last year.