Editor’s Note: This article was originally written by Patrick Lamson-Hall for the Sourcing Journal. It is republished here with permission from the publication.
The exodus continues, as importers who sell to major US retailers report plans to move out of China. They blame heightened raw materials costs, financing difficulties within China, and the increasingly difficult logistics of managing a long supply chain. A recently released report, Capital Business Credit’s (CBC) Global Retail Manufacturers and Importers Survey, showed that 1/3 of US based importers are considering abandoning Asia entirely, and 50% have already moved some production out of China.
“While China will continue to be the dominant player when it comes to the manufacturing of goods sold in the U.S. there is an interesting shift that is occurring,” said CBC executive chairman Andrew Tananbaum. “The lending environment combined with a number of other factors including cost of labor, raw materials and logistics have made manufacturing in other countries – most importantly the U.S. – more attractive. As the American economy continues to recover, and retail sales continue to improve, the manufacturer/importer relationship will be critical in ensuring that enough goods are made and shipped to keep store shelves stocked.”
Survey results indicate that manufacturing is being moved to Vietnam (33.3%), the US (27.8%), Pakistan (22.2%) and Bangladesh (16.7%).
These trends are unsurprising, considering the flurry of media reports in the last year regarding increased labor costs and difficulties in China. However, few have predicted that importers will abandon Asia entirely. China will remain the major supplier to US retail stores for years, but the abandonment of Asia after leaving China indicates that, for some companies, the difficulty of diversifying sourcing outweighs the benefits of lower costs.
A separate survey by CBC indicated that importers are expecting spring and summer 2012 to show significant increases in consumer spending. 40% believe that 2012 summer season will have greater sales than last year. 47% responded that their retail partners ordered 3-5% more merchandize, and 23.5% indicated that orders increased by 10% or more. However, respondents also indicated that retailers are continuing discounting trends from last year, with 62% replying that margin pressures remain.
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