Vietnam and India pulling buyers away from China - Just Style
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Vietnam and India pulling buyers away from China

05 May 2021

Vietnam is continuing to pull US buyers away from China, a new report has found, with India also a top favourite as companies increasingly look for alternative sourcing locations.

According to a recent Q2 Barometer report by supply chain compliance solutions provider Qima, as businesses hope to leave the challenges of the pandemic behind them, China sourcing is bouncing back strongly but is yet to return to pre-Covid levels. In the meantime, alternative sourcing locations such as Vietnam, India and Turkey are experiencing sustained levels of growth.

The report, which surveyed 700-plus US businesses with international supply chains, found Vietnam is fast becoming a first choice for buyers diversifying away from China. Qima data shows 16% year-on-year expansion in demand for inspections and audits in Vietnam in the first quarter of 2021, representing a third consecutive quarter of growth that had initially begun as a post-lockdown rebound in mid-2020.

What’s more, first-quarter inspection demand has, on average, doubled compared to the first quarter of 2019.

The findings are in-line with Qima’s global sourcing survey, which saw 43% of respondents cite Vietnam among their top three buying geographies as of early 2021. This is twice the percentage observed in 2019.

Additionally, around one-third of buyers globally, and 38% of US-based buyers, name it among the countries from where they plan to buy more in 2021.

Businesses are also showing increasing interest in India, with 26% of Qima survey respondents naming the country among their top three sourcing geographies.

Notably, despite being traditionally viewed as a textile hub, India as a buying market was regarded just as highly for promotional products, footwear, and eyewear, jewellery and accessories.

Internal Qima data on audit and inspection demand confirms the increased interest in India sourcing in the first quarter, when demand for inspections and audits spiked 72% year-on-year compared to 2020 where India faced a complete manufacturing shutdown. This growth far outpaces the first quarter year-on-year growth rate of the South Asia region as a whole, at 28% growth, driven primarily by an influx of US-based buyers.

This rebound, however, is dependent on how effectively India manages its ongoing battle against Covid-19 as case numbers dramatically rise in April and renewed pandemic-control measures are put in place.

For China, meanwhile, despite the country emerging strong in the post-pandemic period, the long-term diversification trends in global supply chain are continuing to chip away at its dominance. While the surge in first-quarter China sourcing volumes compared to the previous year is undeniable – inspection demand up 55% year-on-year in the first quarter of 2021 – it does not always translate into growth compared to the pre-pandemic period.

While textiles inspection demand in China rose 8.3% in the first quarter, it still represented a 20% drop compared to the first quarter of 2019. By contrast, China’s competitors in textiles and apparel, such as Vietnam, India and Bangladesh, recorded double-digit growth in demand for inspections compared to the first quarter of 2020 as well as the comparable period of 2019, indicating sustained expansion over pre-pandemic levels rather than a simple rebound.

Meanwhile, despite near-shoring suffering a notable setback during 2020, as global supply chains emerge from crisis mode, buying closer to home is returning to brands’ and retailers’ agendas.

EU brands, in particular, are eager to revisit from the familiar buying markets in the Mediterranean, with Turkey, a clear favourite, being named as a priority sourcing choice by almost one-third of EU-based respondents of the Qima survey.

Internal data for the first quarter of 2021 suggests that European buyers are already putting into motion their plans to revitalise Turkey sourcing, as demand for inspections and audits in Turkey has increased 89% year-on-year in the quarter.