US fashion firms concerned about protectionist policies

31 July 2017

The US apparel industry is more concerned about protectionist US policy than rising costs of production or other supply chain risks, a survey has found.

The latest United States Fashion Industry Association’s (USFIA) Fashion Industry Benchmarking Study found concerns about a protectionist trade policy agenda was the number one concern, rising from tenth last year.

All the survey respondents – sourcing executives working for US-based brands, retailers, importers, and wholesalers – said they opposed a proposed border adjustment tax that would see taxes rise on goods imports to the US and fall exports.

Despite this, most respondents were confident about the five-year outlook for the US fashion industry, though fewer rated themselves “optimistic” or “moderately optimistic” about prospects than last year.

Competition within the US from e-commerce was listed as the second most important concern, replacing increasing production or costs, which slipped down to number seven.

China retained its position as the top sourcing destination for apparel companies in the US. All of the respondents said they have sourced from China over the last three years, and 91% said they do so currently. The percentage of respondents who said they expected to reduce their sourcing from China also fell to 46%, down from 60% last year. 

China accounts for between 30-50% of goods in the typical sourcing portfolio today, compared to between 11-30% from Vietnam and the rest from other countries.

However, the survey found the so-called ‘China plus many’ sourcing model is being replaced by the ‘China, plus Vietnam, plus many’, even though only 36% of executives expect to increase sourcing from Vietnam this year, compared with 56% last year.

This drop was likely a result of the US’s withdrawal from the Trans-Pacific Partnership, it said.

Bangladesh was named the most competitive sourcing destination in terms of price, but also the riskiest in terms of trade compliance.

More than half (54%) expected their sourcing base to become more diversified in the next two years and respondents said they had sourced from 51 countries or regions in 2017, one more than last year. 

Western countries are also growing in popularity for US fashion firms, despite Asia's continued dominance. This year saw a rise in sourcing from the US, with 70% of respondents now sourcing domestically, up from 52% in 2016. This is largely because of the shorter lead time and relatively low compliance risks.

Ethical sourcing and sustainability concerns are also being given more weight in sourcing decisions. The majority of respondents (87.5%) said these issues have become more important over the last five years, and all of those surveyed said they audited their suppliers.

Top 10 business challenges for the US fashion industry:

  1. Protectionist trade policy agenda in the United States
  2. Market competition in the United States from E-commerce
  3. Market competition in the United States from brick and mortar stores
  4. Investing in and updating technology
  5. Managing supply chain risks
  6. Meeting consumer demand
  7. Increasing production or sourcing cost
  8. Economic outlook in developed economies
  9. Joint: Compliance with trade regulations
    HR issues, including talent recruitment and retention

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