The year ahead is one that will go down in history. Greater China will for the first time in centuries overtake the US as the world’s largest fashion market. It will be a year of awakening after the reckoning of 2018 — a time for looking at opportunities, not just challenges.
In the US and in the luxury sector it will be a year of optimism; for Europe and for struggling segments such as the mid market, optimism may be in short supply. Far-sighted companies will make bold moves in automation and AI, and will disrupt themselves before others do it for them. Consumers will make or break brands based on trust. And global economic and political trends hover over the whole picture.
From the 1970s until 2004, the textiles trade was governed by the Multi Fibre Arrangement Global Value Chains in Apparel : (MFA), a system of quotas that limited bilateral imports of specific types of textiles and apparel. While it preserved some production in high-wage countries, the system also prevented any single developing country from dominating the textiles
export market. The New China Effect China’s rapid rise has had an outsized impact on apparel trade. Now, new market forces are poised to upend trade again.
Digital technologies have made it easier for small brands to build awareness and sell to customers, helping them capture a
disproportionate share of growth. And that’s before transportation is taken into account. Today, even from a mere landed-cost price perspective, nearshoring can be economically viable in certain cases due to savings in freight costs and customs duties. For instance, a US apparel company that moves production of basic jeans from either Bangladesh or China to Mexico can maintain or even slightly increase its margin, even without higher full-price sell-through.
For Europe, as another example, reshoring from China to Turkey can reduce landed-cost prices for denim by 3 percent. Nearshoring works where full onshoring doesn’t: bringing production back to the US or to Germany will not yet result in breaking even. From a landed-cost perspective it is becoming more attractive for production to move closer, but not to come all the way home.