American fashion companies are actively diversifying their apparel-sourcing base to India amid growing risks and market uncertainties in Bangladesh, as per a study by the United States Fashion Industry Association (USFIA).
Conducted in joint venture with the University of Delware, the study, titled, ‘2024 Fashion Industry Benchmarking Study,’ highlights issues such as shipping delays, supply-chain disruptions, and geopolitical instability as top concerns for US brands and retailers in 2024.
According to this study, nearly 60 per cent of respondents plan to expand apparel sourcing from India over the next two years, surpassing plans for any other Asian country. India's advanced local textile-manufacturing capability allows for less reliance on imported components, a significant advantage over countries like Bangladesh, Cambodia, and Vietnam. Additionally, India's strategic partnership with the United States is seen as involving relatively lower geopolitical risks.
Conversely, interest in expanding apparel sourcing from Bangladesh has decreased, with only 48 per cent of respondents expressing such plans, down from 52 per cent in 2023. High social-compliance risks, including labor protests over minimum wage increases, remain a major concern. One respondent noted that while Bangladesh is known for its price competitiveness, its export potential is limited by a lack of product diversification beyond basic cotton items and knitwear.
Conducted from April to June 2024, the study surveyed executives from 30 leading fashion brands, retailers, importers, and wholesalers. It also shows increased sourcing from other Asian countries like Cambodia, Indonesia, and Pakistan, with narrowing gaps in utilization rates compared to top-tier countries.
Expressing concerns over Bangladesh losing business to competitors, FazlulHoque, Former President, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), says, factors like high production costs, energy shortages, increased wages, and rising interest rates are eroding Bangladesh's competitive edge. Additionally, lack of duty benefits in the US market and political instability are further complicating the situation.
As per official figures from the Office of Textiles and Apparel (OTEXA), Bangladesh's RMG exports to the US fell by 12.31 per cent to $2.90 billion during the first five months of FY24. In contrast, India’s apparel exports to the US declined by just 2.06 per cent to $2.08 billion during the period.
