With manufacturing costs rising in China, and the recent mishaps in Bangladesh India seems to have a better future as a world sourcing hub. However, Harry van Dalfsen, President IAF feels India still has a long way to go. As Bangladesh’s extremely low labour costs play a role and China’s one stop shop ease of doing business still scores. However, the root causes are diverse and complex.
Further talking about how Europe and the US are looking at current dynamic apparel sourcing scenario apparel from Asia Dalfsen says “We have coined the term '2nd phase post MFA sourcing’. That is, after the disappearance of quota, China has rapidly attained its current dominance in apparel production, but now, in view of rising costs and sluggish markets, especially in the west, again a period of relatively big chance in sourcing patterns is taking place. There are some real movements out of China, especially into Bangladesh and some smaller moves into location closer by the markets (such as Turkey for Europe) and also brands and retailers are actively looking in places they weren’t before (Birma, Africa).”
Ever evolving China
Talking about how China’s role has changed Dalfsen, says, “Remember that only 30 years ago, its role on the world scene was negligible. Then it became the production powerhouse and now as the retail market for fashion is fast becoming more mature.” According to Dalfsen, entering the Chinese market as a European brand for instance is easier said than done. But also vice versa, building a brand in China and selling in the US, EU, India, ASEANor other markets is a huge challenge.
Dalfsen feels Europe especially many medium sized brands (about € 50 million turnover on average) that are strong in their home markets still have to start exporting to another continent such as to China. However, now it has been observed that department stores and multi-brand stores from China are actively travelling to Europe and the US to find good medium sized brands.
IAF's role as a manufacturers' federation
Bangladesh has emerged as the second largest country for sourcing but recent events there forced European and US brands to rethink. Explaining this further Dalfsen opines, “The European Accord and the US Alliance on worker safety in Bangladesh have quickly allowed for firms to stay in Bangladesh while at the same time communicating that they are actively participating in the prevention of these tragedies. So I think we will not see a big drop in exports of apparel from Bangladesh.”
While IAF cannot and legally may not get involved in pricing, Dalfsen feels that the focus in global responsibility is shifting from compliance to real improvements. These improvements must be common investments occurring in the entire supply chain. ”On the other hand, few other industries are so fragmented and competitive and this is of course reflected in fights for margin within the supply chain,” he sums up.