BD slips one notch to sixth position: Study

Sourcing hotspot for US fashion cos

Monira Munni | Published: July 24, 2019 10:33:12 | Updated: July 25, 2019 14:28:57

FE file photo

Bangladesh has slipped one point to the sixth position as a sourcing destination for US-based apparel and fashion companies in 2019 despite the fact that the majority of buyers surveyed have expressed interest to increase their sourcing from the country, according to a latest survey.

Ongoing trade uncertainty coupled with a 20 per cent hike in sourcing cost from Bangladesh, Vietnam and India, the main alternative destinations to China, are being pointed out as the biggest concerns by the US fashion industry executives.

Bangladesh is the sixth top sourcing destination with 60 per cent usage among respondents, said the '2019 Fashion Industry Benchmarking Study.'

In 2018 and 2016, Bangladesh remained the fifth sourcing destination while seventh in 2017, the report revealed.

China remained the top destination (100 per cent of respondents), Vietnam (86 per cent) and India (86 per cent) are top three most-utilized sourcing destinations, followed by Indonesia (71 per cent), Cambodia (63 per cent), Bangladesh (63 per cent) and the Philippines (57 per cent).

In terms of sourcing cost, China scored 3.5 points, Vietnam 4.0 points and Bangladesh 4.5 points.

The findings of the study, conducted jointly by the United States Fashion Industry Association (USFIA) and the University of Delaware, were released on Monday.

A record-high percentage of respondents (80 per cent) expressed interest in expanding sourcing from the country in next two years. In 2017, the percentage was only 37.

"Despite the price advantages, respondents still see Bangladesh not as attractive as many of its competitors regarding speed to market, flexibility and agility, and risk of compliance," it said.

It also pointed out narrow categories of products as barrier to Bangladesh's growth potential.

Citing the US official data, it revealed that cotton trousers and cotton shirts have stably accounted for nearly 60 per cent of total US apparel imports from the country in the past ten years.

The sixth edition of the study surveyed the executives from 39 US-based leading fashion brands, retailers, importers and wholesalers between April and May 2019.

However, the respondents still regard the "risk of compliance" as a notable weakness despite rating score raised to 2.0 in 2019 from only 1.5 in 2018.

Regarding the capability of quickly adjusting the delivery, volume, and product of sourcing order upon requests of customers, China scored the highest (4.0 points) based on its unparalleled production capacity and integrated production networks.

On the other hand, Bangladesh received the lowest rating score of 2.5 in this flexibility and agility segment.

"Shipping and logistic cost and labour cost remain the top factors driving up sourcing cost in 2019, with 94 per cent of respondents expecting an increase," it said.

About 74 per cent of the respondents said raw materials cost would increase this year.

Regarding China, the report said despite the lingering tariff war, China will remain a dominant textile and apparel supplier for the US market in the foreseeable future as China does not have a near competitor in terms of the variety of products it can make.

"China is one of the few 'balanced' sourcing bases that US fashion companies can choose from with speed to market, compliance risk and flexibility becoming ever more essential sourcing factors, tariff alone is not sufficient to make US fashion companies give up sourcing from China completely," it reads.

The study also ranked the US's protectionist trade policy, managing supply chain risks, investing in an updating technology and finding a new sourcing base other than China as top sourcing concerns for American firms.

Amid escalating trade tensions and growing uncertainties of the US and world economy, respondents are more 'conservative' about the five-year outlook for the US fashion industry than they were one year ago.

The percentage of those who are "optimistic" or "somewhat optimistic" dropped to 64 per cent this year from 84 per cent in 2018. Meanwhile, 25 per cent of the respondents feel "neutral" about next five years, a big jump from only 4 per cent in 2018.

When asked, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Dr Rubana Huq said the report summarized strengths and weaknesses of the sourcing countries under four categories and ranked the countries accordingly.

Bangladesh scored lowest in three categories (speed to market, flexibility & agility, and risk of compliance), and topped in the 'sourcing cost' category.

Citing the report, she said unit price from Bangladesh has grown at the highest rate among all other producing countries during the period from 2018 to May 2019 which is positive for Bangladesh and apparently negative for them (US buyers).

"Bangladesh will face tough competition in the coming days given its increasing unit value in recent past and price reduction by China," she noted.

Sustainability like economic, social and environmental compliance will get more priority as the US retailers are more willing to look into this matter for their sourcing; even they are planning to spend a higher budget to improve these qualities. This is a good indication for Bangladesh, she said.

Bangladesh's overall apparel exports to the US rose by 15.48 per cent to $2.55 billion during January to May 2019, up from $2.21 billion in the corresponding period of 2018, according to the data from the Office of Textiles and Apparel (OTEXA) affiliated with the US Department of Commerce.

Vietnam's apparel exports grew by 12.01 per cent to $5.30 billion in the first five months of the current calendar year, it showed.

On the other hand, China's garment exports grew by 0.37 per cent to $9.06 billion during the period, according to the data.



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