It wasn’t too long ago that buyers were focused on reducing the number of countries where they sourced, and also consolidating the number of vendors they worked with in each country.
A year ago, everything changed.
Growing geopolitical uncertainty caused buyers to rethink their strategy. The new plan: diversify.
The US-China trade war (for the record, apparel has not had to suffer "Trump Tariffs"), was a wake up call about how fast even what appears to be a totally stable situation could change. Although China is still likely to remain the largest apparel exporter to the US, there's a lot more concern about being too dependent on any one country.
Now, buyers are looking for a diversification strategy that’s much more comprehensive than the old ‘China + One” approach. Hence the search for new factories and new mills.
Fortunately, finding the right suppliers got just a little easier thanks to the extensive matchmaking efforts of Cotton Council International (CCI).
At the recent COTTON USA sourcing fair (Macau, April 9-10) buyers found a targeted group of high quality suppliers that were pre-selected based on their specific requirements.
"We find this fair to be very well organized. It’s a close knit group of very select buyers and suppliers - the people we meet here are serious, they are very focused, so it makes it easier to understand the buyers and sellers and to have meaningful discussions. Both sides understand each other's requirements," said Deepesh Singhania, Deputy General Manager, Garment Sourcing at Raymond Apparel Ltd. (India).
“I like the direct contact with suppliers. I can source many kinds of cotton products here. Because there are so many suppliers in one place, I can quickly meet with many factories and mills and see if they have the products we need,” Maria Cejudo, China Sourcer from Coppel (Mexico), told Inside Fashion.
“We can catch up with a lot of new suppliers here. It’s easy to reach a lot of the right people, then my regional team will follow up with them,” said Angie Chan from Puma, adding that she was looking for fabric, but also garment capacity as well.
The fair enabled participants to discover vendors who might not have otherwise crossed their radar.
“I found a spinner who normally supplies woven mills, but it turns out they are able to provide us with the kind of yarn we need for knit garments,” said Brad Fu, Sales Director at Goldfame Group (Hong Kong), a company that manufactures knit garments in Cambodia.
While the brands at the event already have a strong vendor base, most said that they were also looking for new suppliers - often times in countries where they were less well established.
Seeking to Expand Vendor Bases
“We have a very stable supplier base,” said Virginia Man, Director of Global Sourcing - Asia from Destination XL (USA), “however we’re always looking for new ones that have good potential.”
“We're looking for fabric suppliers outside of China because we want to be less dependent on China,” said Ryan Ko, Fabric Manager - Wovens at American Eagle Outfitters (USA). “It’s very useful to be at this fair because we're able to connect with a lot of very good quality vendors and find some new suppliers here.”
“Many of the mills in Southeast Asia are less efficient, less innovative, and have less capacity than Chinese mills. It's also harder to control those mills from Hong Kong so you have to figure in the cost of QC and QA. In China we have a long term relationship with our mills. We have an understanding with them. So it's easier. Not that Chinese mills don't ever make mistakes, but because we've been working with them a long time we understand each other better. Now we need to develop this kind of relationship with mills in Southeast Asia,” he told Inside Fashion.
“Vietnam is the superstar right now but it's getting competitive. We’re manufacturing there mainly for export to Europe.,” said Angie Chan from Puma.
“Indonesia is interesting because it has lots of labor, but the fabric supply is limited. Also the skills are not as good. But it has the advantage of being in Asia and so we just need to develop it more.
“We're also looking for high end suppliers in Japan and Korea because we want to be able to get more innovation. The innovation drives the business. The commodity items are where we make up the volume. For commodity items we need capacity,” she said.
“Right now, China sourcing is more ‘local for local’,” she added.
“We’re very positive about Myanmar,” said Toiny Pang, Technical Specialist at Marks & Spencer, talking about how his company is managing risk by diversifying their sourcing into more nations.
“We feel that Myanmar has improved in terms of the political situation, sustainability, and some of the ethical aspects. In some ways it's better than Bangladesh. The infrastructure is safer and treatment of workers is more ethical,” he said.
Local Brands Ride the Rising Tide of Growing Domestic Markets
In addition to the international brands, this year’s fair included a growing number of successful Asian brands. With growing domestic retail markets, the local brands are also finding increasing need to expand their supplier base.
Cotton Republic is a fast growing Chinese retail brand that’s already doing massive volume.
“We are a retailer. Our Cotton Republic brand focuses on men's underwear and is priced for the mid-tier market at around US$20 per pair. Our Cotton Smith brand is mainly denim and is priced for the mass market. We have one style we call Dancing Jeans. They’re a stretch skinny jean priced at RMB 129 ($20 per pair). We’ve sold about 100,000 per year of this style,” said Hei Yong, Director.
“We’re doing a new project with US cotton for socks. We’re selling black socks at 10 pairs for $3. Our initial order is 1 million pairs, and we’re targeting selling 100 million pairs this year,” he said.
“Cotton is very popular in China. Chinese people really love cotton because it's a natural fiber. This makes it very appealing,” said Mr. Yong.
“Today you must be very flexible and be able to move between physical retail and e-commerce. You have to be able to do both. Through physical stores you can build the brand. But you need online channels to drive sales volumes,” he explained.
T.M.G. is one of a growing group of Asian manufacturers that have leveraged the knowledge of garment making to develop brands for their home market. The Vietnamese garment manufacturer not only does exports. It also licenses the John Henry (USA) brand and has collection of men's and women's shirt which it sells to the domestic market through its chain of 120 stores.
“One of our biggest challenges is that we need to change from doing basic products to something with more added value. We’re looking for new fabrics with performance properties that can make cotton garments more special,” said Grace Hien Nguyen, General Director at T.M.G. (Vietnam). “This fair is very useful for us because we can meet so many new suppliers across many categories,” she added.
Different Countries, Different Challenges
Suppliers from different nations are facing different challenges.
For India manufacturers, a strong rupee is making exports less competitive.
“Business is good, however because our currency has appreciated, selling to the domestic market is better for us right now,” said Naveen Sharma at Pee Vee Textiles Limited (India).
“The key for India is to support economic growth without letting the currency strengthen too much. We need domestic business, but we also need exports,” he said.
Rising costs are also an issue for Thai manufacturers.
“Business is tough in Thailand. Labor costs are higher so our products are more expensive. We only get orders when the other countries are full,” said Natapol Jarukittikun from Thai Textile Industry Ltd., noting that orders where shifting to Vietnam and even Bangladesh.
Indonesian manufacturers are also facing price pressures.
“Business is good, however profits will be lower this year,” said Arun Nayak, General Manager Marketing at Sritex (Indonesia). “There’s a feeling of uncertainty in the market. It’s being driven by politics and economics - people have less confidence to spend money right now,” he explained.
“Today people want natural and sustainable fabrics, however they also want something that's more cost effective. The challenge is to be able to meet the criteria for natural and sustainable while also meeting price points,” said Atul Apte from Raymond Apparel Ltd. (India).
The growing demand for smarter looking athleisure wear is driving sales for Sapphire Fibers (Pakistan).
“People want quality knits with good structures and stable fabrics. They want something that looks premium, is comfortable and is durable,” said Muhammad Irfan Akbar, Marketing & Merchandising at Sapphire Fibers Ltd.
“The focus remains on basic, good quality fabrics. The differentiation comes from adding prints or embroidery,” he said.
Denim with comfort stretch remains a bestseller for men’s jeans. Right now, colours are darker, pure indigo, with larger twill and more character - it’s a heritage look, according to PT Grand Textile Industry, an Indonesia denim mill that produces two million yards of fabric per month and spins its own yarn using US cotton.
“More people are coming to Indonesia to make garments as an alternative to China. We’re partnering with local garment manufacturers to create sort of a hybrid vertical operation, said Albert Tjandra, Marketing Director at PT Grand Textile Industry.
For most Asian suppliers, the biggest long term opportunity is the growth of their domestic markets, which enables them to be less dependent upon exports. “The domestic market is stable and accounts for 40 percent of our sales. However we are looking to continue to grow our exports,” said Shanty Rachmasari, Marketing Manager at Sritex, adding that the long awaited EU-Indonesia free trade agreement would definitely help exports.