Which countries will play a part in the future of apparel?
We recently discussed the history of the apparel industry, discovering how it really took off with the explosion in manufacturing during the Industrial Revolution. This led to today’s multibillion-dollar trade, which employs one in eight people.
Now, we’re looking to the future of the apparel industry. Which counties are likely to be bigger players 10 years from now and why? Who are the big names today that might be on their way out? And what does all this have to do with the Roman Empire?
What’s the apparel export industry like today?
Currently, China rules the roost when it comes to clothing manufacturing and exporting. The figures show they are responsible for one third of all global exports, and when you take their domestic market into consideration, they’re probably responsible for close to half of all apparel manufacturing.
The second closest country is Bangladesh, with 6.2% of global exports, followed by Vietnam with 5.2%. India is next with 4.4%, just ahead of Germany with 4.3%.
The top ten countries on the list are responsible for two-thirds of global exports, with the rest of the world making up the remaining third.
Why things are changing
Nothing lasts forever. If the Roman Empire can fall, so too can China’s dominance of apparel manufacturing. So what warning signs are there on the horizon? Who are China’s Visigoths, ready to sweep in and sack Beijing? Well, just as there’s no one specific reason the Roman Empire fell, there’s no one specific threat to the market. The following three areas however do raise a red flag…
Cost of labour
China is becoming a victim of its own success. As China’s economy has grown and standards of living have improved, the average wage of Chinese factory workers has risen significantly. In 2010, the average manufacturing wage in China was approximately $2.20 per hour; today, it’s around $6–$7 per hour and continues to increase.
The reason they became the world’s biggest manufacturer was because of cheap labour. Now, that same reason is why brands are looking to other countries.
Supply chain resilience
Companies learned many lessons during the Covid pandemic, one of which was not putting all your eggs in one basket. Covid exposed vulnerabilities in relying too heavily on single-country suppliers. From factory shutdowns to transportation bottlenecks, companies faced delayed orders, increased costs and lost revenue.
Businesses now realise the importance of a diversified and resilient supply chain, pursuing a multi-country manufacturing strategy to minimise risk. By spreading production across several countries, they can better handle localised disruptions without major delays or financial losses.
Government policies and trade agreements
Governments in many emerging economies offer tax breaks, reduced tariffs and other incentives to attract foreign investment in their manufacturing sectors.
For example, Ethiopia’s government has invested heavily in the development of industrial parks dedicated to textile and apparel manufacturing, which offer facilities with built-in infrastructure, easy access to utilities, and reduced operating costs. Similarly, the African Growth and Opportunity Act (AGOA) offers Ethiopia duty-free access to the U.S. market, making it a more attractive option for U.S.-based brands.
Benefits for the apparel industry
While it might be bad news for China and the other top export countries, there are benefits to a growing competition.
Cost-efficiency and supply chain flexibility – By establishing manufacturing operations in multiple countries, brands can strategically lower production costs.
Enhanced flexibility to meet demand shifts – When production is diversified, brands gain the ability to scale operations based on demand in specific regions. This flexibility allows brands to meet customer needs faster, reduce inventory holding costs and respond more adeptly to seasonal or market-specific trends.
Reduced impact from disruptions – Relying on multiple production locations reduces the impact of localised issues such as natural disasters, political unrest or supply chain bottlenecks. With a multi-location strategy, brands can shift production from one country to another if issues arise, mitigating risk and enhancing reliability for consumers.
Investment in Green manufacturing technologies – Countries keen to attract foreign investment in the apparel sector are increasingly focusing on eco-friendly practices to appeal to sustainability-driven brands.
Compliance with global standards – To compete on a global stage, many countries are aligning their manufacturing standards with internationally recognised environmental and labour standards, such as ISO certifications or those set by organisations like the Better Cotton Initiative.
Reducing dependence on export markets alone – For many global brands, producing in emerging markets allows them to reduce dependency on saturated Western markets and take advantage of growing demand within the regions where the products are made. This approach not only cuts expenses but also reduces the carbon footprint associated with long-haul logistics.
Challenges and risks of shifting to emerging countries
Obviously, such a big change to any business is going to come with issues.
Quality control and infrastructure
While emerging markets offer cost savings, some manufacturers in these regions may not have the same experience or technology level as those in more established countries. This can lead to inconsistencies in product quality, especially when scaling up production quickly to meet global demand.
Quality control can suffer, leading to defects, higher rejection rates and potentially harming a brand’s reputation. To mitigate this, brands often need to invest in training, monitoring and regular audits, which adds to costs and logistical complexity.
Ethical and environmental concerns
Emerging regions may not have the same level of regulation around working conditions as established manufacturing hubs, raising concerns about worker safety, fair wages and working hours.
With growing consumer awareness of labour practices in the apparel industry, brands are under pressure to ensure compliance with ethical standards even in regions where local laws might be more lenient.
In some emerging countries, environmental regulations may also be less stringent, increasing the risk of pollution from apparel production, such as water pollution from dyeing processes or waste from textile production, something we’ve talked about before in great detail.
As consumers and watchdog organisations demand more sustainable practices, brands can face backlash if they source from regions with lax environmental policies.
Political and economic instability
Many emerging regions face political uncertainties that can impact business operations. Political unrest, protests, or changes in government policies can disrupt production schedules and cause delays. Brands have to be prepared for such disruptions by having contingency plans in place, potentially by sourcing from multiple countries or by maintaining some production capacity in more stable regions, which increases operational complexity.
Changing trade policies and tariff risks
Emerging markets can be subject to shifting trade policies, both internally and from international trade partners. Brands have to stay vigilant about these shifts and may need to develop strategies to adjust their production plans, such as by diversifying supply chains across multiple countries. This constant need for adaptability can add strain to supply chain management and may require expert legal and trade consultancy, which incurs additional costs.
Balancing opportunity and risk
While shifting to emerging regions offers considerable advantages in terms of cost and growth potential, it is not without its challenges.
Brands must balance the financial and strategic benefits with the risks associated with infrastructure, ethical practices and stability. This often requires a comprehensive risk management approach, including quality control systems, ethical compliance measures and contingency planning for economic or political shifts.
By proactively addressing these challenges, companies can leverage the opportunities of emerging markets while maintaining brand integrity and resilience.
So that’s the how and why new emerging regions might challenge China’s dominance over the coming years, but which countries are the ones to look out for?
That’s the focus for our next few posts as we drill down into the different geographic regions and have a look at which countries might be the ones to watch.