Uncertain macroeconomic outlook, the deteriorating US-China bilateral relationship, and labour risks have been highlighted as significant business challenges to US fashion companies in 2023, says the just-released Benchmarking Survey by the United States Fashion Industry Association.
- Brought out by Prof Sheng Lu, Associate Professor, Department of Fashion & Apparel Studies, University of Delaware in collaboration with USFIA, The Changing Landscape of Sourcing: Challenges and Opportunities in 2023, this year’s benchmarking study was based on a survey of executives from 30 leading US fashion companies from April to June 2023.
- The study also dwells at length on the focus of the US industry on sourcing of clothing made from recycled or other sustainable textile fibres, labour issues, free trade agreements, and the like.
BUSINESS OUTLOOK: While 69% respondents expressed optimism or cautious optimism about the US fashion industry over the next five years, “inflation and economic outlook” was their top concern this year, moving up from third place in 2022.
- Affected by the weak import demand, only half of the respondents expect their apparel sourcing value or quantity to increase in 2023, a substantial drop from 90% a year ago.
- Reflecting US fashion companies’ overall confidence in their business outlook, most respondents (85%) plan to increase hiring over the next five years.
CHINA FACTOR: The respondents spoke of plans to accelerate “reducing China exposure” to mitigate risks.
- Respondents identified “Finding a new sourcing base other than China” as a more prominent challenge in 2023 than the previous year (i.e., 4th in 2023 vs. 11th in 2022).
- This year, over 40% reported sourcing less than 10% of their apparel products from China, up from 30% a year ago and a notable surge from only 20% in 2019.
- US fashion companies’ apparel sourcing model is gradually shifting from “China plus Vietnam plus Many” to “Asia plus Rest of the world.”
- Almost all respondents (97%) said at least 40% of their total sourcing value or volume now comes from Asian countries other than China.
- Nearly 80% of respondents plan to reduce apparel sourcing from China over the next two years, with a record high of 15% planning to “strongly decrease” sourcing from the country. This strong sentiment was not present in past studies.
- Notably, large-size US fashion companies (with 1,000+ employees) that currently source more than 10% of their apparel products from China are among the most eager to de-risk.
- However, reducing “China exposure” will be more challenging regarding textile raw materials in the short to medium term, as more than 70% of respondents are currently sourcing various yarns, fabrics, and textile accessories from China with no practical alternatives.
LABOUR RISKS: Tackling forced labour risks in the supply chain remains a significant challenge confronting the fashion companies in 2023, especially with the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) in June 2022.
- The fashion companies are actively seeking to diversify their sourcing beyond Asia to mitigate the forced labour risks, particularly regarding cotton products.
- “Managing the forced labour risks in the supply chain” ranked as the second top business challenge in 2023, with 64% of respondents rating the issue as one of their top five concerns.
- Most surveyed US fashion companies have taken a comprehensive approach to mitigating forced labour risks in the supply chain.
- Three practices, including “asking vendors to provide more detailed social compliance information,” “attending workshops and other educational events to understand related regulations better,” and “intentionally reducing v sourcing from high-risk countries,” were the most commonly adopted by respondents (over 80%) in response to forced labour risks and the UFLPA’s implementation.
- Since 1 January 2023, U.S. Customs and Border Protection (CBP)’s UFLPA enforcement has affected respondents’ importation of “Cotton apparel products from China,” “Cotton apparel products from Asian countries other than China,” and “Home textiles from China.”
- Respondents called for CBP to improve UFLPA enforcement transparency and clarity, and share more essential enforcement data with industry stakeholders.
- There is robust excitement about increasing apparel sourcing from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).
- With US fashion companies actively seeking immediate alternatives to sourcing from China and Asia, respondents emphasised the increased urgency of improving textile raw material access to promote further US apparel sourcing from CAFTA-DR members.
FOCUS RECYCLED: Respondents demonstrated a solid dedication to expanding their sourcing of clothing made from recycled or other sustainable textile fibres.
- Nearly 60% said at least 10% of their sourced apparel products already use recycled or other sustainable textile fibres.
- Another 60% of surveyed companies plan to “substantially increase sourcing apparel made from sustainable or recycled textile materials over the next five years.”
- Addressing the higher sourcing costs and the low profit margins are regarded as the top challenge for sourcing clothing using recycled or other sustainable fibre.
- About 60% of respondents also called for policy support for sourcing clothing using recycled or other sustainable textile materials, such as preferential tariff rates and guidance on sustainability and recycling standards.
- Respondents strongly supported and emphasised the importance of the early renewal of the African Growth and Opportunity Act (AGOA) and extending the programme for at least another ten years.
STUDY DETAILS: The study incorporated a balanced mix of respondents representing various businesses in the US fashion industry.
- Approximately 73% of respondents were self-identified retailers, 60% self-identified brands, and 65% self identified importers/wholesalers.
- The respondents to the survey included both large US fashion corporations and medium to small companies.
- Around 77% of respondents reported having more than 1,000 employees. And the rest (23%) represented medium to small-sized companies with 100-999 employees.
WHAT THEY SAID:
There are many positive findings in this year’s Survey. We celebrate the industry’s commitment to increase sourcing of apparel made from recycled and other sustainable textile fibers. This year the top recommendation for a trade policy initiative is to reduce or eliminate tariffs on imports of sustainable and recycled textile and apparel products. And we see a very clear trend to expand sourcing in the Western Hemisphere – especially from our FTA partners in CAFTA and USMCA. Our mission at USFIA remains to support the fashion industry with analysis, education and training, and also to advocate for trade policy that supports Fashion Made Possible by Global Trade. We continue to work to show the benefits of trade, and fashion industry sustainability initiatives, to lawmakers and to the public.
— Julia K Hughes
President
United States Fashion Industry Association
