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Production gradually being moved out of China by European Apparel Brands

Production gradually being moved out of China by European Apparel Brands

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European buyers have started collaborating with US clothing companies in search of cheaper sources which are closer than China. This rapidly increasing shift contemplates to global supply chains the US-China trade war is speeding up. A Qima survey states that 67% of EU-based companies have already shifted sourcing out of China or plan to do so very soon.

Ever since the beginning of the trade war between the US and China, the average retail price of apparel produced in China and supplied to the US has nearly tripled, from $25.7/unit in 2018 to $69.5/unit in 2019. The fundamental reason behind this rise in retail price is rising labor costs in China over the past several years. The advancement to move out of China is mainly led by US companies, but European buyers like all businesses want to cut down on costs and are too looking for cheaper manufacturing sources that are closer to them.

As production cost rises in China and US & EU based apparel companies look to manufacture outside of China, new opportunities arise for other countries, especially in Southern Asia. In fact, renowned company Puma which makes a third of its products in China has announced that it will most probably shift production to Bangladesh, Vietnam and Cambodia as a result of the US-China tariff war.

Manufacturing operations based in countries closer to Europe is a factor that is now being given more importance to by European apparel and textile companies. Hence, countries like Romania, Turkey, Portugal and also Morocco residing in North Africa have been getting more orders and see immense growth in productions. Some designer clothing brands have also started moving some of their productions closer to home in order to have more control over supply chains. For instance, Germany’s Hugo Boss & Britain’s Burberry are trying to make profit out of the Made in Germany and Made in England labels to drive revenue from luxury sales.

Concern in Sourcing higher-value clothing

There’s a peculiar concern when sourcing high-value clothing. For example, basic apparel manufacturing operations can be easily moved to lower-cost locations while higher-value apparel requires more expensive specialization and QA. Having many years of manufacturing experience, China is highly specialized in producing high-value products like outerwear and accessories. On the other hand, other countries are not as qualified in the value chain and clearly cannot compete with China in quantity and quality. Thus, creating risks for buyers in terms of product quality and factory safety. In the high-value industrial sector, China still managed to offer a good balance of reliability, cost, speed to market and low risk of not meeting standards. As the China-US trade war continues to move manufacturing operations outside of China, expect brands to adopt new strategies to meet their sourcing needs.  

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