4 key US apparel import trends to watch in 2021
US fashion companies have been tweaking their sourcing strategies in response to the turbulent business environment
The Covid-19 pandemic, coupled with a damaging trade war with China, made 2020 an unprecedented year for US apparel trade and sourcing. How have fashion companies adjusted their sourcing strategies in response to the turbulent business environment? And how will US apparel sourcing patterns evolve in 2021? Here Dr Sheng Lu, associate professor in Fashion and Apparel Studies at the University of Delaware, digs into the trade data to shed some light on the latest trends in US apparel imports and critical issues to watch in the year ahead.
#1: US apparel imports will continue to rebound in 2021 – but uncertainty remains Since Covid-19 broke out in the United States in March 2020, it has had a more significant negative impact on US apparel imports than the 2008 global financial crisis.
As Table 1 shows, measured by value, US apparel imports suffered a 23.5% decline last year compared with a 12% drop in 2008. The drop in US apparel imports from China (down nearly 40%), members of the US-Mexico-Canada Trade Agreement (USMCA) – down 30% – and members of the Central America Free Trade Agreement (CAFTA-DR) – down 28% – was substantial.
Table 1: Growth rate of US apparel imports (by value) Source of imports2009 vs 2008 (global financial crisis)2020 vs 2019 (Covid-19)World-
Source: Calculated based on OTEXA (2021) data
Nevertheless, thanks to consumers' continuous spending on clothing, US apparel imports began to rebound quickly in May 2020. As Table 2 shows, the post-Covid recovery of US apparel imports has been more robust than during the 2008 global financial crisis, even though it started from a much lower level. This also supports the view that there is no severe structural issue in the US economy right now, which is very different from the situation back in 2008. Table 2: Recovery process comparison
While it is hoped that US apparel imports will continue to recover in 2021, it remains too early to tell when trade volume will return to its pre-pandemic level. As Covid-19 is the primary cause of the economic recession, conventional monetary or fiscal policy tools are less useful to boost the economy unless the pandemic is under control. Notably, affected by the surge of Covid cases and related new lockdown measures, the value of US apparel imports alarmingly altered the V-shape recovery trajectory and fell by 15.7% year-over-year in December 2020 – the worst performance since September 2020. This rollback also implies that US fashion companies and their suppliers may have to be flexible with their sourcing and production plans in 2021, including dealing with new order cancellations and postponed deliveries.
#2: Asia will remain the dominant sourcing base for US fashion companies
Table 3: Competitiveness as apparel sourcing bases – Average scores (5=best)
Source: 2020 USFIA Fashion Industry Benchmarking Study
Measured by value, more than 70% of US apparel imports still came from Asian countries in 2020 – a pattern that has stayed stable for over a decade. Except for China, other leading Asian apparel suppliers all gained market shares in 2020 from a year earlier. This includes Vietnam (19.6% in 2020 vs 16.2% in 2019), ASEAN members (32.3% in 2020 vs 27.4% in 2019), Bangladesh (8.2% in 2020 vs 7.1% in 2019), and Cambodia (4.4% in 2020 vs 3.2% in 2019). According to the 2020 US Fashion Industry Benchmarking Study released by the US Fashion Industry Association (USFIA), Asian suppliers overall enjoy two competitive advantages as apparel sourcing bases: sourcing cost, and flexibility and agility. These two factors are also the most relevant during the pandemic. For example, as both US consumers and fashion companies continue to struggle financially, controlling the sourcing cost will be more of a priority in companies' sourcing decision-making than other factors like speed to market. Likewise, during the pandemic, apparel sourcing is easily disrupted by factors ranging from labour shortages, lack of textile raw materials to port closures. With their highly integrated regional supply chains and vast production capacity, Asian vendors can in general offer more flexibility and agility than apparel suppliers in other regions of the world. Asian countries are also likely to maintain these two critical competitive advantages in 2021.
#3: US fashion companies are NOT giving up China – although they continue to reduce their "China exposure" China's prospects as a sourcing base for US fashion companies seems to become ever more "mysterious" due to the competing information we receive. For example, measured by value, China only accounted for 23.7% of US apparel imports in 2020, a new record low for the past ten years. However, according to the media, some sourcing orders returned to China in October 2020 as factories in many other Asian countries struggled with Covid-related lockdown measures. A detailed review of trade statistics suggest three critical trends to watch in 2021 regarding apparel sourcing from China.
First, it still makes economic sense to source apparel from China. "Made in China" enjoys two unique competitive advantages over other clothing supplying countries in the short term. The first is its unparalleled production capacity, allowing US fashion companies to place orders for any products in any quantity. For example, industry sources indicate that from March 2020 to January 2021, US fashion retailers brought to market around 11,500 different "Made in China" apparel products (measured by Stock Keeping Unit, SKUs), compared with only 5,000 SKUs sourced from Vietnam or India. Over the same period, the variety of apparel items made by Bangladesh, Cambodia, Indonesia and Sri Lanka was even more limited – around 1,000 SKUs for each country.
China's other advantage is its local textile production capacity, meaning US fashion companies seldom worry about textile supply when sourcing garments from China. In comparison, many other Asia-based apparel producing countries still rely heavily on imported yarns and fabrics, many of which are supplied by China. In other words, the relatively complete local textile and apparel supply chain in China may help US fashion companies mitigate the risk of disruptions during the pandemic. Table 4: Diversity of US apparel sourcing bases