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GLOBAL APPAREL MARKETS - TRENDSs -

How will the global apparel industry change over the next five or so years? A new report from just-style believes there will be slowdowns in the activity of apparel outsourcing powerhouses such as India and China, and a continuing rise by shooting stars such as Vietnam and Bangladesh. Shorter runs for each style and faster time to market will also continue to put pressure on the supply chain.

The world's top 15 exporting countries accounted for 82% of the US$600bn global apparel market in 2007.However, the 'Global market review of tomorrow's apparel industry - forecasts to 2014,' also points to significant slowdowns in the activity of apparel outsourcing powerhouses such as India and China where strikes and rising costs of manufacturing and transportation are working against manufacturers.

Speed and value
Increasingly, both buyers and suppliers are looking at value and speed to market instead of the lowest costs, the report says.

Countries with the US as their primary export market suffered mild setbacks in their apparel exports during the general economic slowdown in 2008.

Even so, firms in Central American nations are expected to show the strongest growth of apparel outsourcing activity from 2008 to 2014, helped by special trade concessions if they use US-made fabric and other inputs.

In the same way, several African nations are using advantages offered by the African Growth and Opportunity Act (AGOA) to significantly increase their exports to the US and abroad.

But this growth has come from the decreasing competitiveness of the average Chinese firm, impacted by increasing labour costs, the strengthening RMB, higher raw material prices, and a reduction in export tax rebates (which are to be raised to 14% from 1 November).

A brief rise in exports is expected when the US removes import restrictions to certain Chinese apparel categories in late 2008, but industry observers expect the place of India and China to be permanently taken by shooting stars such as Vietnam and Bangladesh from 2010 forward.

Added to the internal woes of supply companies, the general slowdown of economies in North America and Europe is another important factor in the mediocre growth rates observed in 2007 to 2008.

Production trends
US apparel production has decreased every year since 1997, and in the first half of 2008 was at its lowest level since 1963. However, the average price per unit increased 25%, as the product mix shifted to higher priced articles.

China, meanwhile, saw its apparel exports rise by 15% in volume and almost 20% in value in 2007, despite quota restrictions levied on several apparel types. China was responsible for 34.3% of total EU apparel imports, and 83.9% of clothing sold in Japan sported Made in China labels.

Hong Kong apparel exports fell over 8% in the first half of 2008 as compared to 2007, as manufacturing operations migrated to mainland China.

Turkey is still reeling with the Asian dragon onslaught, having had its apparel exports decrease more than 8% in 2007.

Vietnam increased its 2007 apparel imports to the US by 31% in volume and 34% in value.

Mexico sales fell over 7% in 2007 as US and EU importers shifted orders to low cost and high quality outsourcing countries in Asia such as Vietnam and China.

EU apparel production increased a nominal 0.4% in 2007, though exports fell 3.4% and imports increased 5.4%.

Japan displayed a 5.3% increase in 2007 export revenue through higher sales to the EU, South Korea, US and Vietnam.

Sourcing issues
Global sourcing has become the key strategy for survival and growth for companies in the apparel market, the just-style report says.

Technological advances are helping to tighten production schedules and manage supply chains that cover multiple sourcing locations and multiple suppliers, as well as comply with local regulations, cultural and social issues, currency differences etc.

Keeping costs low and managing the cash-flow remains another critical factor for the success of the transaction.

Buyers are also opening local procurement offices near supplier sites to keep tight control over the supply chain.

The challenges in sourcing include global supply chains, higher logistics costs, rising costs that are out of manufacturers' control, fluctuating currency rates, and retailers sourcing directly from manufacturers.

Corporate social responsibility (CSR) is another critical consideration for tomorrow's apparel industry, with buyers increasingly sensitive to labour irregularities and exploitation of women or child workers.

A recent addition to labour standards is environmental aspects, with pressure from consumer groups forcing apparel companies to rethink their operations from a more environmental viewpoint.

Another challenge facing apparel companies is finding a cost-effective method to provide quality fit in apparel. Lack of good fit is the reason given by more than 70% of all consumers for deciding not to purchase clothing.

Tomorrow's apparel players will also face new challenges such as design innovations, rapidly evolving fashion styles, shorter runs for each model and improving the time to market.

The report also believes there will be continuing trend towards consolidation in the industry; smaller batch size to meet consumers' demand for variety; increasing competition from lower cost countries; and pressure on manufacturers for customised products. Thanks to juststyle for content.

CHINA RAISES EXPORT REBATE FOR TEXTILE INDUSTRY
Finally the Chinese government has reacted to help its textile and toy industry by once again raising the export taxes. The clothing and textile rebate would rise from 13-14% as of the 1 November 2008.

China's announcement on Monday that GDP growth had fallen to 9% - highly enviable to most countries, but the slowest rate in five years - sent a shiver through observers who hoped the country's rapid expansion would compensate for falling demand elsewhere.

The head of China's economic planning agency pledged that it could maintain its growth rate yesterday.

"Of course, due to the upturn of economic turbulence outside China there is some slowdown to our growth rate, but I think the growth of China's economy will still be at a 9% rate," Zhang Ping, chairman of the National Development and Reform Commission, told reporters in Australia.

He cited strong domestic demand, adding that only 1.2% of China's growth last year came from exports. But other economists predict that GDP growth could fall to 7% or 8% next year.

The tax changes will be welcome relief for exporters who have felt increasingly hard pressed by soaring production costs and the rapidly appreciating yuan as well as the bleak global economic outlook. However this rebate may not be enough for wholesalers in Australia and New Zealand who are buying product in US$ and have been badly affected with the significant drop in the A$ against the US$ in recent weeks.

Speaking before the changes were announced, Wang Zhiguang, vice-chairman of the Dongguan Toy Industry Association, told Guangzhou Daily: "Of the 3,800-odd toy firms in Dongguan, no more than 2,000 are likely to survive the next couple of years."

Industry in Dongguan, a manufacturing city in south China's Pearl River Delta, includes 7,000 garment plants and 3,000 footwear factories. Mass manufacturers have been particularly badly hit because local authorities have been attempting to shift the region's economy towards higher-value goods and services.

Prospects for Textile and Garment Industry in Bangladesh
The textile and garment sector in Bangladesh fulfils a crucial role in the country’s economy. In the 2006/07 fiscal year (July 2006-June 2007), it accounted for as much as 76% of the country’s total exports. And in 2006 it provided jobs for 4.5 mn people, accounted for 10.5% of the country’s GDP, and contributed 40% of its manufacturing output.

Exports have been growing at an impressive rate in recent years. In 2006/07 alone, they increased by 18.2% to reach US$9.6 bn, a record level for the fifth consecutive year.

Looking ahead, Bangladesh has an excellent opportunity to boost exports of garments to the USA and EU countries where demand for low cost apparel is increasing. The introduction of quotas restricting EU and US imports from China in 2005 and 2006 respectively has already provided it with a breathing space in which to gain market share. So has the EU’s Generalised System of Preferences (GSP) scheme, which provides garment manufacturers in Bangladesh with duty-free access to the EU market—subject to certain conditions relating to the origin of the materials used in the manufacture of the garment.

However, there are significant obstacles to overcome if the industry’s full potential is to be reached. In the short term, the fermenting issue of employment conditions needs to be addressed. Also, economic difficulties in the USA and Western Europe, and the prospect of a recession, have already led to a slowdown in consumer spending. Unless there is a speedy recovery, exports of textiles and clothing from major suppliers such as Bangladesh could suffer as Western buyers cut back on their purchases. Over the longer term, considerable investment is required to improve, update and extend the infrastructure in Bangladesh. Meanwhile, the textile sector needs to implement its own modernisation programme in order to satisfy a greater proportion of the garment industry’s raw material requirements. - Just Style

Vietnam - US second largest apparel supplier
Vietnam became the number two supplier of apparel to the US in the first four months of 2008, according to a new report. Just a year earlier, Vietnam had ranked as low as fifth. This growth comes despite a US import monitoring programme which has failed to scare buyers away.
Full article just-style.com