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US fashion brands plan to increase sourcing from Bangladesh

Moinul Haque | Published: 23:26, Aug 05,2020

 
 

Fifty-five per cent of fashion brands in the United States have expressed their interest to expand sourcing from Bangladesh in the next two years while around half of the companies plan to modestly increase procurement from Indonesia, Vietnam, and India, said a recent survey.

The ‘2020 Fashion Industry Benchmarking Study’ said that despite the changing business environment due to Covid-19, Asia’s position as the dominant sourcing base for US fashion companies remained unshakeable.

The study found that the top ten most-utilised sourcing destinations for US companies in 2020 remained the same as last year and eight Asian countries, including Bangladesh, saw a higher utilisation rate this year than 2019.

The report said that Covid-19 resulted in widespread sales decline and order cancellations among US fashion companies that affected suppliers in China, Bangladesh, and India the most.

The study showed that 100 per cent of US fashion companies more or less postponed or cancelled sourcing orders as sales dropped and business operations were significantly disrupted.

‘Benefiting from US fashion companies’ reduced sourcing from China, Vietnam and Bangladesh are expected to play a more significant role as primary apparel suppliers for the US market,’ it said.

This benchmarking study was based on a survey of nearly 25 executives working at leading US fashion companies from April to June in 2020.

All respondents said that the US fashion companies were sourcing relatively less from China and had moved some orders mostly to China’s competitors in Asia, according to the study.

It said that Covid-19 and the trade war were pushing US fashion companies to reduce their ‘China exposure’ further while ‘China plus Vietnam plus many’ remained the most popular sourcing models among the respondents.

According to the report, around 29 per cent of the respondents indicated to source more from Vietnam than from China in 2020, up further from 25 per cent in 2019.

The fashion industry benchmark study of the US Fashion Industry Association identified that this year, Bangladesh gained its position as a third top sourcing destination for the US fashion companies with an 85.7-per cent usage rate among respondents, up from 60 per cent in 2019.

Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, conducted the survey between April and June of 2020.

Apparel ‘Made in Bangladesh’ enjoyed a prominent price advantage over many other Asian suppliers mainly due to the low cost of labour, the study observed.

It also said that ‘Made in Bangladesh’ demonstrated a notable price advantage for cotton apparel items, which accounted for nearly 77 per cent of the country’s total apparel exports to the US in 2019.

Other than the factor of labour cost, the strong capacity in cotton yarn and fabric production locally (mainly for knit apparel) rather than relying on imports, has contributed to the cost advantage of ‘Made in Bangladesh’, the study found.

It said that man-made fibre apparel could be a potential new growth engine for Bangladesh’s exports, as US fashion companies were eager to diversify sourcing from China, and the sourcing capacity in Vietnam was not available.

The study identified the economic and business impacts of the coronavirus pandemic as the top business challenges for the US fashion companies in 2020, saying that the companies would have to prepare for medium to long-term impacts of the pandemic as the difficulties caused by Covid-19 would not go away anytime soon.

The US brands and buyers, however, had expressed their concerns over labour and social and environmental compliance in Bangladesh.

‘Respondents still regard sourcing from Bangladesh involves relatively higher compliance risks in general, with the rating score for the country standing at 2.0, the same as last year,’ the study said.

It said that some respondents had explicitly expressed their concerns about the dissolution of the Alliance for Bangladesh Worker Safety and the Accord on Fire and Building Safety in Bangladesh.

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