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Research / US Fashion Industry

US Fashion Industry Optimistic About Future

The challenging times not withstanding for US fashion companies coming from the macro-economy in 2022, particularly inflation and rising cost pressures, optimism rules, says the just released Benchmarking Survey by the United States Fashion Industry Association (USFIA).

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20 July 2022

 4 minutes
Long Story, Cut Short
  • Reducing “China exposure” is one crucial driver of US fashion companies’ sourcing diversification strategy.
  • Eight of the top ten most-utilised sourcing destinations are Asia-based, led by China, Vietnam, Bangladesh, and India.
  • Over the next two years, more than 60 percent of respondents plan to increase apparel sourcing from CAFTA-DR members as part of their sourcing diversification strategy.
In spite of the short-term financial challenges, US fashion companies feel optimistic or somewhat optimistic about the next five years, with the overall market sentiment still far better than at the beginning of the pandemic in 2020.
Looking Up In spite of the short-term financial challenges, US fashion companies feel optimistic or somewhat optimistic about the next five years, with the overall market sentiment still far better than at the beginning of the pandemic in 2020. Johny vino / Unsplash

Increasing production or sourcing costs, shipping delays, supply chain disruptions, inflation and outlook of the US economy, human resources (HR) issues, including talent recruitment and retention, have been outlined as the top five challenges facing businesses in the US. 

But in spite of it all, brands and retailers are still optimistic about the future with many companies managing some of these challenges by diversifying their supply chain. The shift from a concentration of fashion sourcing in China to multiple alternative sourcing destinations continues, and as Asia remains strong, 2022 could well be the year that sourcing from the Western Hemisphere really takes off, according to the ‘2022 Fashion Industry Benchmarking Study’ just released by the United States Fashion Industry Association (USFIA) in collaboration with Dr. Sheng Lu, Associate Professor, Department of Fashion & Apparel Studies, University of Delaware.

Although US fashion companies report significant challenges coming from the macro-economy in 2022, particularly inflation and rising cost pressures, most respondents still feel optimistic about the next five years. 

  • Respondents rank “increasing production or sourcing costs” and “inflation and outlook of the US economy” as their 1st and 3rd top business challenges in 2022. 
  • As a new record, 100% of respondents expect their sourcing costs to increase in 2022, including nearly 40% expecting a substantial cost increase from a year ago. Further, almost everything has become more expensive this year, from textile raw materials, shipping, and labour to the costs associated with compliance with trade regulations. 
  • Over 90% of respondents expect their sourcing value or volume to grow in 2022, but more modestly than last year. 
  • Despite the short-term challenges, most respondents (77%) feel optimistic or somewhat optimistic about the next five years. Reflecting companies’ confidence in their businesses, nearly all respondents (97%) plan to increase hiring over the next five years. 
  • US fashion companies are adopting a more diverse sourcing base in response to supply chain disruptions and the need to mitigate growing sourcing risks.
  • Asia remains the dominant sourcing base for US fashion companies—eight of the top ten most-utilized sourcing destinations are Asia-based, led by China, Vietnam, Bangladesh, and India. 
  • More than half of respondents (53%) report sourcing apparel from over ten countries in 2022, compared with only 37% in 2021. 
  • Reducing “China exposure” is one crucial driver of US fashion companies’ sourcing diversification strategy. One-third of respondents report sourcing less than 10 percent of their apparel products from China this year. In addition, a new record of 50% of respondents source more from Vietnam than China in 2022.
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US fashion companies are adopting a more diverse sourcing base in response to supply chain disruptions and the need to mitigate growing sourcing risks.
Diversifying Sourcing US fashion companies are adopting a more diverse sourcing base in response to supply chain disruptions and the need to mitigate growing sourcing risks. Alyssa Strohmann / Unsplash
  • Nearly 40% of respondents plan to “source from more countries and work with more suppliers” over the next two years, up from only 17 percent last year. Managing the risk of forced labour in the supply chain is a top priority for US fashion companies in 2022, especially with the new implementation of the Uyghur Forced Labor Prevention Act (UFLPA). 
  • Over 95% of respondents expect UFLPA’s implementation to affect their company’s sourcing. Notably, more than 85% of respondents plan to cut their cotton apparel imports from China, and another 45% to further reduce non-cotton apparel imports from the country. 
  • Most respondents (over 92%) do NOT plan to reduce apparel sourcing from Asian countries other than China. However, nearly 60% of respondents would also “explore new sourcing destinations outside Asia” in response to UFLPA. 
  • Mapping and understanding the supply chain is a critical strategy to address the forced labour risks in the supply chain. Almost all respondents currently track Tier 1 and 2 suppliers. With the help of new traceability technologies, 53 percent of respondents have begun tracking Tier 3 suppliers this year (i.e., those manufacturing yarn, threads, and trimmings), a substantial increase from 25-36% in the past. There is considerable excitement about increasing apparel sourcing from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Respondents also call for more textile raw sourcing flexibility to encourage apparel sourcing from the CAFTA-DR region. 
  • CAFTA-DR plays a more significant role as a sourcing base. About 20% of respondents place more than 10% of their regional sourcing orders from the region. Only 7% of respondents did so in 2021. 
  • Over the next two years, more than 60% of respondents plan to increase apparel sourcing from CAFTA-DR members as part of their sourcing diversification strategy. 
  • CAFTA-DR is critical in promoting US apparel sourcing from the region. Around 80 percent of respondents take advantage of the agreement’s duty-free benefits when sourcing apparel from the region this year, up from 50-60% in the past. 
  • Respondents say the exceptions to the “yarn-forward” rules of origin, such as the “short supply” and “cumulation” mechanisms, provide essential flexibility that encourages more apparel sourcing from CAFTA-DR members. 

This year’s benchmarking study was based on a survey of 34 executives at leading US fashion companies from April to June 2022. The study incorporates a balanced mix of respondents representing various types of businesses with approximately 70 percent of respondents being self-identified retailers, followed by self-identified importers/wholesalers (67 percent) and self-identified brands (40 percent).

Who Said What

This is the ninth USFIA Benchmarking Survey and the findings tell a story that is not a surprise— these are very challenging times for the fashion industry. Some of the challenges affecting brands and retailers are the same key issues that you see in the news every day. Inflation and rising cost pressures are the top concern for the fashion industry and, for the first time in our nine-year history, every survey respondent says they expect that costs will increase, including for yarns and fabrics… Brands and retailers face a difficult balancing act. There are problems with the availability of textile inputs and late deliveries, but the solution is not necessarily ordering earlier, since more companies also report that they are dealing with higher inventories and weaker consumer demand.

— Julia K. Hughes
President
U.S. Fashion Industry Association 

 
 
  • Dated posted: 20 July 2022
  • Last modified: 20 July 2022
 
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