Price competition intensifies at the top

Over the course of 2021, half of the top 10 apparel suppliers to the US experienced a price decline on a per unit of apparel basis, with China remaining unbeaten for the fourth consecutive year.

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Just Style analysed full-year import data from the US Office of Textiles and Apparel (OTEXA) which officially reveals the top 10 apparel suppliers to the US during 2021, and China’s per-unit price of garments was the lowest at US$1.76 from $1.79 a year earlier – a fall of 1.7%.

Four others, including the next two largest suppliers of clothing to the US — Vietnam and Bangladesh, also saw a year-on-year decline in per-unit price of apparel, of 0.9% and 0.72%, respectively. Vietnam, however, remains among the three most expensive supplier countries with a per-unit price of apparel of $3.28.

Indonesia, which booked the greatest decline in per-unit price of apparel of 1.83% remains the most expensive at $3.74, while India’s price per unit of apparel had the second greatest decline in per-unit price of apparel of 1.8% and was the fourth most expensive at $3.27.

Price spikes

At the other end of the spectrum, Honduras saw the greatest price per unit increase at 13% to $3.05.

Pakistan’s per-unit cost of apparel also jumped by 11.7% to $2.48. After China, however, it remains the cheapest apparel supplier to the US on a cost per-unit of apparel basis.

Cambodia also experienced a surge in price of 8.8% to $2.72 per unit, as did Mexico of 6.2% to $3.43.

El Salvador saw a 2.25% increase in price to $2.72 per unit of apparel.

China maintains rock-bottom pricepoint 

Compared to 2019/20, in which China’s per-unit price of apparel shipped to the US fell dramatically by 20%, the decline in 2021 has been relatively modest.

And it’s important to note while China’s share of the US apparel market was experiencing a downward trend from 2017, it is on the up once again, standing at 37.8% in 2021compared with 36.6% in 2020and it remains the largest apparel supplier to the US. It is attractive to apparel buyers thanks to the size of its supply base, its range of skills, its quality levels, its product variety, and the completeness of its supply chain.

Over the last few years, US apparel brands and retailers have felt the effect of political tensions with Beijing – a trade-war resulting in tit-for-tat tariffs adding to the list of concerns when it comes to sourcing from China. Other factors weighing heavy on the minds of sourcing executives include allegations of forced labour in the Xinjiang region of China, which is responsible for 80% of the country’s cotton production.

A common theme currently among apparel sourcing executives is the desire to reduce their leverage on China for apparel sourcing which could offer some indication as to why many of the major apparel supplier countries to the US are lowering their prices.

It’s interesting to look at the trend over the last four years:

•  In 2018, 40% of the ten major apparel supplier nations to the US experienced a year-on-year decline on a price per unit basis. This fell to 30% in 2019 which indicates prices were broadly on the up.

•  Then the pandemic hitand garment makers were desperate to retain business and appeal to US buyers. In 2020, just one of the ten countries upped its price per unit of apparel shipped to the US, with the remaining nine experiencing price declines.

•  2021 and things appear to be stabilising to some degree. However, the price per unit of apparel declines experienced by Vietnam, Bangladesh, Indonesia and India make for an interesting point about how these countries want to be first in line to steal business away from China as buyers look to diversify their apparel sourcing strategies.

Pakistan is gaining popularity

In terms of the actual amount, it ships to the US, Pakistan’s share of the US apparel market is small. But it is growing.

In 2021 it reached a decade-long high of 3.04%. Its price per unit of apparel has also steadily risen over the last four years – except for the dip in 2020 due to the anomaly that is Covid.

This tells us one thing; Pakistan wants to be noticed and rightly so.

It’s attractive to buyers since it provides the fabrics the garment industry requires at competitive prices. As the industry is local, there are no shipping costs and despite the global logistics crisis, there are no added lead times.

Pakistan’s textile industry recognises that today their most important customer is the apparel industry. It has worked hard to meet the needs of the sector and provides quality goods at reasonable prices.

It offers flexible minimum order quantities (MOQ), which is an important service during these difficult times but will become even more important as the apparel industry moves away from basic commodities to higher-value added fashion.

Another point of attraction is its increasing stability. The Pakistan government has ensured a level playing field between the local textile sector and the apparel industry, working with industry to limit disruption during the height of the Covid-19 crisis, while still making every effort to limit new outbreaks.

The grand scheme of things

Of course, it’s important to point out that just because China is the cheapest to the US on a per unit of apparel basis, 2021 continues to present a series of challenges that drive the cost of sourcing clothing up. Some of the key things to note include shipping price hikes, rises in the price of fuel, logistics and worker wage rises – it makes sense there is such a big push to on-shore or at the very least near-shore some apparel production.

Interestingly, all of the major Central American apparel supplying countries to the US – Honduras, Mexico and El Salvador – experienced price per unit of apparel rises during the year of 13%, 6.2% and 2.25%, respectively.

One of the other key issues to note is the lack of factories that have the ability to almost “do-it-all” in the way China, and now some other Asian countries like Bangladesh, India and Pakistan, do. Central American factories tend to specialise in a specific type of garment, for example, shirts or T-shirts.

What is going to be interesting to watch over the next year or so is whether China’s rock-bottom pricepoint, along with its all-encompassing offer is enough to retain US apparel buyers. When we consider all the other factors at play, does it work out more cost-effective for US buyers to relocate their sourcing away from China to several other destinations that are closer to home?