The report titled ‘Apparel: Export Competitiveness of Certain Foreign Suppliers to the United States’ looked at the export apparel industries of Bangladesh, Cambodia, India, Indonesia, and Pakistan over a 10-year period (2013-2023).
The countries were selected because they are notable suppliers to the US and ranked among the top 10 US import suppliers in 2023 as well as ranking highly within the global export market.
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Main findings from the report
During 2013–23, the US was the largest single-country apparel importer in the world, sourcing most of its apparel from Asia. The US imported $79.3bn worth of apparel in 2023, accounting for about one-fifth of global imports.
The two largest sources of US apparel imports by value were China and Vietnam, which together accounted for 39% of all US apparel imports in 2023.
China saw its market share fall during the period, whereas the five focus countries in the report saw their market shares increase.
Combined, the five countries assessed accounted for 27% of US apparel imports last year, however the report points out the market shares of major US suppliers changed significantly during the reported time period.
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By GlobalDataOf the five countries profiled Bangladesh was the largest US supplier by value, supplying 9.0% of US apparel imports ($7.1bn), followed by India ($4.6bn, or 5.8%), Indonesia ($4.2bn, or 5.3%), Cambodia ($3.4bn, or 4.3%), and Pakistan ($2.1bn, or 2.6%). Other top suppliers of US apparel imports in 2023 were Mexico, Honduras, and Italy.
The 2024 report was based on a literature review, trade statistics, public hearings, desk studies and fieldwork.
What makes apparel exports competitive today?
The University of Delaware’s professor of fashion and apparel studies, Dr Sheng Lu tells Investment Monitor the study explored the main factors that affect a country’s apparel export competitiveness as well as how to become a preferred apparel sourcing country for US fashion companies.
He explains the study outlines the four factors that are most important. However, he continues: “Consistent with existing literature, the USITC report could not determine which factor is decisive in fashion companies’ apparel sourcing decisions.”
Factor 1: Cost
He says the report found that cost or the price buyers pay their suppliers plays a key role in sourcing decisions, however opinions vary regarding the importance of cost relative to other factors.
The USITC report highlighted what Dr Lu describes a “complex and nuanced relationship” between costs and a country’s apparel export competitiveness.
He deems several patterns to be noteworthy. Firstly, apparel is a buyer-driven industry, meaning “the global apparel supply chain gives buyers the power to negotiate based on price, which can push down prices and transfer greater costs to the supplier.”
He also points out a country’s ability to produce textile raw materials locally can provide cost advantages in garment production.
The report reads: “Material inputs are widely recognised as the largest component in the cost of a final apparel product, and these prices are largely determined by the presence of a domestic textile industry or costs of importing textiles.”
Finally, with regards to costs he says it is difficult to compare wages across countries to measure labour competitiveness. The report explains “low labour
costs can improve a country’s competitiveness via lower costs overall, but labour costs that are so low that they do not reflect the true cost of doing business (e.g., via wage suppression) can harm a country’s reputation for social compliance and negatively affect labour productivity.”
Factor 2: Product differentiation
Product differentiation, which includes quality, specialisation, product mix and full package offerings where buyers can take advantage of design services, finishing, packaging and logistics, was also described as a key factor. However, Dr Lu notes that it is placed into varying degrees of importance based on the product, target consumer and the identify of the fashion brand or apparel buyer.
Factor 3: Reliability
The reliability factor has grown in importance in recent years due to the various disruptions that have impacted global apparel supply chains such as the global pandemic, geopolitical conflicts in Ukraine and Gaza and trade policy.
Factor 4: Compliance
It would be easy to assume that compliance programmes concerning wages, social inclusion and climate change mitigation would increase competitiveness, but Dr Lu tells Investment Monitor, fashion buyers and brands remain divided. The report reads: “The relative importance or weight of such compliance in sourcing decisions remains a topic of active study and discussion within the industry.”
The report acknowledges the growing importance of social and environmental compliance to a country’s apparel export competitiveness. However, this relationship remains complex.
The extent to which voluntary social and environmental responsibility programmes and their associated auditing practices have influenced outcomes, especially regarding worker rights, remains unclear.
Suppliers point out the increased frequency of flooding and high temperatures due to climate change has negatively affected their ability to meet labour and environmental standards.
Plus, increased compliance with social and environmental standards raises supplier costs, which negatively impacts their cost competitiveness. Many stakeholders note that while fashion brands and consumers demand greater responsibility, this often does not come with a “price premium” for suppliers, who ultimately absorb these increased costs.
Apparel sourcing’s evolving buyer-supplier relationship
The report revealed some positive developments in the fashion buyer-supplier relationships during the period of time that was measured.
Dr Lu tells Investment Monitor the research shows fashion companies are increasingly recognising the value of building long-term relationships with vendors.
He says: “Buyers emphasise that maintaining these relationships is a key factor in sourcing decisions, largely due to the cost and time involved in finding and establishing relationships with new suppliers.”
The report notes that for brands and retailers to increase transparency and traceability throughout the supply chain, they “need suppliers who will act in line with their brand’s values”.
Suppliers also benefit from a long-term relationship with the USITC report stating that some fashion companies guarantee suppliers a particular profit margin to ensure their continued operation.
Additionally, some buyers gain a deep understanding of their suppliers’ cost structures, enabling them to calculate the costs of compliance with various standards and assist suppliers in reducing costs where possible.
The report does reveal that subcontracting is still regarded as necessary for the garment industry. As apparel orders fluctuate seasonally it can be impractical for suppliers to hire additional permanent workers or invest in machinery for peak demand.
To meet buyer expectations during busy periods, manufacturers often subcontract parts of orders and increase overtime or rely on temporary contract workers. This practice is seen as essential for ensuring a reliable supply of apparel.
Earlier this month (October) Just Style examined the most recent OTEXA data and found India saw the largest increase in apparel shipment volume growth to the US at 13.4% to 115m SME.
Overall, US apparel shipments inched up in August helped by increased imports from China, India and Vietnam. However, on a broader note, only half of the top 10 suppliers to the US saw shipment volumes grow in August.
