QIMA Data Suggests Fashion Can’t Seem to Quit China

Date: Thursday, November 29, 2020
Source: Sourcing Journal

Despite continued geopolitical uncertainty and strained trade relations, new data shows that China sourcing is picking up.

During the first nine months of 2023, U.S. and European importers reported an increase in the relative share of China suppliers in their sourcing portfolios for the first time since 2019, according to QIMA‘s latest survey. The quality control and compliance group’s quarterly barometer report taps into trade trends and shifts in supply chain strategy, based on its work with global brands.

Brands seem to be turning back to China after diversifying sourcing to other parts of Asia and nearshore regions in the Western Hemisphere According to QIMA‘s findings, fears of a recession could be responsible for brands running right back to the “world’s factory.”

QIMA found a 14 percent year-on-year global increase in textile and apparel buyers’ demand for inspections and audits in China, and 17 percent among Western buyers. By contrast, similar demands for inspections and audits in “textile powerhouses” Bangladesh and India decreased between January and September. South Asia shrank to 15 percent of sourcing market share in 2023, from 17 percent last year. China captured one basis point during the same period, bringing its market share to 49 percent, QIMA data showed.

Bangladesh in particular has struggled with weakening demand, with textile sector inspections and audits falling 10 percent this year. U.S. buyers in particular are scaling back production in the nation, and QIMA attributed the shift to a lack of diversity in exports. Bangladesh’s garment industry could grow by adopting more manmade textiles, as it mostly uses cotton, and by branching out into other product categories like footwear, QIMA said.

Another country is forging closer trade ties with the U.S., however. Mexico surpassed China as America’s biggest trading partner this year, with demand for QIMA audits and inspections up 17 percent from 2022. Earlier this year, more than half of the U.S. and E.U. clients QIMA surveyed about nearshoring said close-to-market sourcing would play an integral role in their strategy.

Mexico’s benefits, from duty-free access to the U.S. market to geographic proximity and low labor costs, have helped the country to attract business, despite challenges with infrastructure, energy, and security. In the E.U., brands are increasingly turning to suppliers in the Mediterranean, with QIMA data showing double-digit increases in demand for audits and inspections in places like Turkey. Less mature manufacturing markets like Jordan, Tunisia and Egypt are also seeing growth.

Younger production bases are working to overcome issues with product quality as they work to scale their local industries. “Overall, less mature supplier markets tend to have higher rates of product defects,” QIMA said. Products are found to be outside of Acceptable Quality Limits (AQL) more often in these markets, especially as they take on greater volumes of new business. Mexico, for example, saw product defect rates more than double between January and September, compared with the same period in 2022, as it receives more orders from U.S. brands.

Buyers that changed sourcing geography in the past 12 months reported 13 percent more issues with ensuring product quality than those that did not, and were 15 percent more likely to face problems finding adequate production capacity. However, for many brands, the upsides seem to outweigh the drawbacks; just 46 percent of brands that said they shifted sourcing locales said they experienced problems sticking to production and shipping schedules, compared to 58 percent of brands that stuck with their established sourcing partners. Buyers sourcing from less mature markets like Mexico also had fewer issues managing lead times and inventory. Just 34 percent said they experienced setbacks related to forecasting demand, compared with 52 percent of buyers that stuck with their original sourcing partners.

[Read from the original source.]