Global apparel sourcing landscape this year has been changing due to the sluggish demand as global brands and retailers are pushing for higher sourcing from China and lower from Bangladesh. The inspection-and audit-demands by western apparel buyers in Bangladesh have witnessed a 10-percent decline year-on-year (YoY) during January to September period of 2023 while it increased by 14 percent in case of China, first of its kind since 2019, according to a latest report.
“Bangladesh exports have been struggling this year, including its flagship textile and apparel sector, where QIMA data shows a 10-percent year-on-year dip in demand for inspections and audits during the first nine months of 2023.”
The US-based buyers in particular appear to be scaling back textile and clothing sourcing from Bangladesh, adds the report by QIMA, a quality control and supply chain audit company that operates in over 100 countries. Export Promotion Bureau (EPB) data also revealed that Bangladesh garment exports in October witnessed about 14 percent YoY decline to US$ 3.16 billion, monthly lowest since August 2021 when the sector earned only $2.73 billion.
Agreeing with the findings, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said that work orders were lower for the last several months due to slow global demand fuelled by high rate of inflation and interest on bank loans in the importing countries caused by the Russian-Ukraine war.
Echoing Hassan, Fazlul Hoque, former president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said: “We are not in a good situation and there is less possibility of improving it in next few months.”
He, however, said QIMA’s stake in Bangladesh is not much as there are many other inspection organizations working here. Regarding China, he said he is not sure about the findings but China is behaving desperately to grab orders.
During the past few years, in the wake of tariffs wars, Covid-induced lockdowns and geopolitical uncertainty, the Western buyers have shifted significant volumes of orders from China to other supplier markets, including China’s competitors in South- East and South Asia as well as near-shoring regions.
Interest in China sourcing may be picking up again among the US- and EU-based buyers – in the first nine months of 2023 – the relative share of China in their supplier portfolios has increased for the first time since 2019, according to the report.
As consumer spending in the West is slowing down due to fears of economic downturn, brands and retailers may be prioritizing China as a supplier again, to leverage the benefits of its well-established manufacturing infrastructure, the report noted.
“This trend is particularly apparent in the textile and apparel sector. QIMA data for the first nine months of 2023 shows demand for textile inspections and audits in China growing by 14 percent YoY globally and by 17 percent YoY among Western buyers.”
QIMA offers supplier audit, laboratory testing and product inspection services in Asia, Africa, Australia, Europe and North America and South America. It helps more than 30,000 global brands, retailers, manufacturers, and food growers achieve quality excellence. The QIMA report, however, suggested that Bangladesh should diversify its supplier offering to protect its exports from future shocks.
“The country’s apparel industry, which is currently heavily cotton-oriented, can benefit from branching out into manmade textiles,” it said.
Bangladesh holds 34.7 percent share in the EU’s cotton imports, whereas its share for non-cotton garments is only 12 percent. Outside of the RMG sector, there is a lot of export potential in other consumer goods, such as footwear, leather, and home textiles, among others, it said.
It added that the electrical and electronic goods also offer valuable export opportunities, but to compete on the global stage in this field, Bangladesh needs to strengthen local institutions responsible for internationally recognized certifications. “Additionally, ensuring that manufacturers have access to the necessary testing facilities is vital for success.”
Despite some challenges including infrastructure, power availability and security, Mexico, which has surpassed China as the US’s largest trading partner in 2023, saw demand for inspections and audit growth by 17 percent YoY in the third quarter. It is because Mexico offers many benefits to US-based buyers, such as geographic proximity, zero tariff, low labour costs and a relatively mature manufacturing base, it added.
The country has been attracting new business at an impressive pace (by some estimates, Mexico’s industrial space has grown 30 percent since 2019). Meanwhile, EU-based brands are still doing a lot of business with suppliers around the Mediterranean as QIMA data found double-digit expansion in demand for inspections and audits in Q3, 2023. This YoY growth was observed in well-established supplier markets such as Turkey, as well as newer manufacturing partners that include Jordan, Tunisia and Egypt, according to the report.