The new geography of textile sourcing destinations

The textile industry has changed over the past 40 years. Gone are the days when fashion brands & retailers could privilege geographically close suppliers or have their own factories. In order to reduce production costs, brands do not get many options: increasing the productivity of their factories or subcontracting their production in low labour cost countries. In the 90’s fashion bands largely agreed to this second option. The abundance and low cost of the Chinese workforce have attracted many buyers and China has rapidly become the major sourcing destination, commonly known as “the workshop of the world”. 


However, China’s quasi-monopoly in the textile manufacturing is now called into question because of rising labour costs.  A transition has already started in the sourcing textile world. The question here is whether or not the Chinese economy is enough flexible to adapt and find a competitive factor other than the one of the labour cost for the next 35 years. Jiang Hui, President of the China Chamber of Commerce For Import and Export of Textile and Apparel, showed a great degree of objectivity during the China Textile Forum 2015 where AQM was present among more than 200 Chinese textile factories : China’s textile exports have significantly fallen since 2014 especially those of low added values items. This decrease is directly due to the transfers made by brands from China to South-East Asian countries.   


Indeed 20 years after China; Bangladesh, Vietnam, India and even Myanmar have modernized their production facilities and adapted their process to international buyers needs. In addition, those countries still enjoy significant labor costs advantages. As Eike Michaelis - Director Strategic Sourcing at Adidas Group - has pointed out at the China Textile Forum, many brands and retailers have already announced or made transfers towards South-East Asia.

It is not a radical transfer because common buyers are not only considering the cost factor but also the quality, capacities, respect of deadlines and potential risks. However, even if China keeps a competitive edge regarding capacities, the transfer has already begun, especially towards Bangladesh and Vietnam. Buyers are also closely monitoring the development of Myanmar.  


Some Chinese factories are already feeling the pinch and are blaming  the new Free Trade Agreements which benefit Vietnam significantly (the Trans-Pacific Partnership (TPP) and the Free Trade Agreement between EU and Vietnam), but Eike Michaelis assures that the leading textile brands had already planned or decided to move their activities towards Vietnam, long before the agreements became public. Those agreements are only strengthening the already existing advantages of the South-East Asian countries.


Africa plays an increasingly important role in the textile industry, especially countries such as Ethiopia and Kenya but they cannot yet be considered as true competitors of China and South-East Asian countries. African countries benefit from a low labour cost (on average an Ethiopian working in the textile industry earns $90, 00 each month) and from cheap raw materials but without the support of international firms, those countries will remain providers of products with low-added value. Indeed, they lag behind in terms of capacities and respect of standards. Therefore, Africa is still a niche at the moment and only time will tell whether it will benefit from adequate foreign investment to become an attractive sourcing destination for brands.


However, there is one thing that is for sure: the textile industry will evolve still further.