The vast majority of American fashion companies stated that “the economic and commercial impact of the new crown epidemic” is the main business challenge in 2020. The business difficulties caused by the new coronavirus epidemic will not disappear soon, and American fashion companies must prepare for the mid- to long-term impact of the epidemic.
★ Supply chain disruption: The new crown epidemic has caused serious supply chain disruptions for American fashion companies. Disruptions come from multiple sources, including labor shortages, shortages of textile raw materials, and significant increases in transportation and logistics costs.
★Sales decline: The coronavirus pandemic has led to widespread sales declines and order cancellations among U.S. fashion companies. Almost all fashion companies (96%) expect their sales revenue to decline in 2020.
★ Order cancellations: Due to reduced sales and severe disruption to business operations, all businesses said they have postponed or canceled purchase orders to some extent. Almost half of retailers said they will still cancel or postpone purchase orders after the second quarter of 2020. Another 40% of retailers anticipate that they may still cancel or postpone orders even into the fourth quarter of 2020 or beyond. Suppliers in China, Bangladesh and India are most affected by order cancellations or delays.
★ Response: Fashion companies say they are trying a variety of ways to minimize the financial impact of the coronavirus, including exploring alternative sourcing options, leveraging free trade agreements or trade Preferential schemes and taking advantage of customs rules such as duty rebates and export first sales.
Affected by the COVID-19 epidemic and the deterioration of the business environment, fashion companies have become more conservative in forecasting the prospects of the fashion industry in the next five years. , but there are still factors for optimism.
★ Half are optimistic: The number of people who feel optimistic or somewhat optimistic about the next five years has dropped rapidly from 65.3% in 2019 to a new low of 57.9%. In contrast, nearly one-third of fashion companies have a pessimistic or relatively pessimistic view of the future of the fashion industry, which is the highest proportion since the survey was launched in 2014.
★ Increased employment: The job market appears to be the only positive aspect of the U.S. fashion industry during the pandemic. Nearly 90% of fashion companies still plan to increase hiring over the next five years, which is similar to last year’s results and well above the approximately 80% in the 2014-2017 period.
The COVID-19 epidemic and the escalating economic and trade frictions between China and the United States have had a major and widespread impact on the purchasing behavior of American fashion companies. Influence.
★Increased costs: “Increased production and procurement costs” was listed as the fourth largest business challenge faced by fashion companies in 2020. Notably, for the second year in a row, fashion companies said “transportation and logistics” was the cost they were most concerned about in 2020. As many as 90% (63% last year) of fashion companies clearly stated that the United States’ Section 301 actions against China have increased the company’s procurement costs.
★De-Sinicization: The COVID-19 epidemic and the trade war are pushing American fashion companies to further reduce their “China business.” Although “China + Vietnam + Multi-Country” is still the most popular sourcing model among fashion companies, about 29% of fashion companies said that they purchased more from Vietnam than from China in 2020, compared with 2019. 25%.
★Order transfer: While American fashion companies are reducing purchases from China, they are mainly transferring orders to Chinese competitors in Asia. 100% (compared to 77% last year) of fashion companies said they had “moved some Chinese purchase orders to other Asian suppliers” this year. But there is no clear evidence that U.S. fashion companies have increased their purchases from the Western Hemisphere.
Despite the financial and operational challenges faced during the epidemic, American fashion companies have not ignored the potential of procurement. Persistent.
★Social Responsibility: More than 70% (63% last year) of fashion companies stated that they plan to allocate more resources to sustainable development and social responsibility by 2022.
★Supply chain map: The vast majority of companies stated that they have drawn up supply chain maps (recording supplier names, locations and functions) to fulfill their sustainable and socially responsible purchasing commitments ).
★Supply chain challenges: Fashion companies pointed out that “suppliers are not fully cooperative or unwilling to share information” and “the particularity of the textile and apparel industry makes it difficult to Tracking outside of suppliers” and “Insufficient internal budget or staff to map the supply chain” are the top challenges in mapping the supply chain.
★Supplier audits: All fashion companies say they audit their suppliers. About 65% of fashion companies (compared to 50% last year) said they use both third-party certification programs and in-house compliance teams.
★Circular Economy: U.S. fashion companies are actively exploring new ways to improve sustainability and social compliance in sourcing, including contributing to building a circular economy.
In response to the changing business environment, U.S. fashion companies will continue to adjust their purchasing base and purchasing methods.
★ Supplier consolidation: The pace of sourcing diversification is slowing, and more and more U.S. fashion companies are turning to consolidating their existing sourcing base. Nearly half of fashion companies said they planned to “source from the same number of countries but work with fewer suppliers”, compared with last year’s survey.The first ratio is 40%.
★Changes in purchasing volume: The company will continue to adjust its purchasing base, but at a more modest scale than in the past. For the first time since the survey was conducted in 2014, this year no fashion company plans to significantly increase sourcing from any particular country or region of the world. This result warns of the seriousness of the economic crisis currently faced by American fashion companies and suggests that economic recovery after the epidemic may be a long and slow process.
★China’s prospects: China is likely to remain an important source of procurement for U.S. fashion companies. However, non-economic factors, such as Xinjiang-related issues, may complicate a company’s purchasing decisions.
★Prospects of Vietnam and Bangladesh: Benefiting from US fashion companies reducing purchases from China, Vietnam and Bangladesh are expected to play a greater role as major apparel suppliers in the US market.
★Made in the USA: In light of supply chain disruptions during the pandemic, U.S. fashion companies are more actively exploring “Made in the USA” sourcing opportunities to increase agility and flexibility and Reduce procurement risk. About 25% of fashion companies expect to increase some amount of sourcing from the United States in the next two years, which is the highest level since 2016.
Due to changes in procurement patterns, fashion companies have generally stated that they have reduced their use of free trade agreements and trade preference programs this year. .
★ Low usage: Only three free trade agreements and trade preference programs have higher usage compared to last year, including the Africa Growth and Opportunity Act (AGOA) , Egypt’s Qualified Industrial Zone (QIZ) and the United States-Korea Free Trade Agreement (KORUS).
★Main reason: One of the main factors causing the decrease in FTA and preferential program utilization this year is the decrease in purchases by US fashion companies from these FTA and preferential program members. In the first five months of 2020, the share of apparel entering the United States through trade preference arrangements fell to 15.1%, the lowest level since 2008.
★Rules of origin: Due to various reasons, U.S. fashion companies cannot always enjoy tax-free treatment even if they purchase from member countries of free trade agreements or trade preference programs. Restrictive rules of origin remain the reason why U.S. fashion companies are unable to take full advantage of the FTA.
Fashion companies have shown a willingness to use the United States-Mexico-Canada Free Trade Agreement (USMCA) for apparel procurement. More willingness and interest.
★ Incumbent Purchasers: For companies already using NAFTA for procurement, an overwhelming majority (77.8%) said they were “prepared to receive any benefits of USMCA immediately,” an increase from 2019 An increase of more than 31%.
★New buyers: Even for fashion companies that do not use NAFTA or do not source from the region, about half of the fashion companies this year said they “may consider purchasing from NAFTA in the future.” Procurement North America” and explore the benefits of USMCA.
★Rules of origin: Some fashion companies have expressed concerns about the rules of change of origin. These concerns appear to be primarily focused on denim products.
Fashion companies are concerned about the use of the African Growth and Opportunity Act (AGOA) and sourcing from sub-Saharan African countries. Enthusiasm has grown.
★ AGOA: Nearly 37% of fashion companies (compared to 27% last year) said they have sourced more textile clothing from Sub-Saharan Africa since the AGOA Act was renewed in 2015 .
★Third country fabric clauses: More than 40% of fashion companies said that the AGOA Act and its “third country fabric clauses” are crucial for them to purchase from the sub-Saharan region.
★ Investment willingness: However, fashion companies still have little interest in investing directly in the sub-Saharan region. About 27% of fashion companies said that the temporary nature and uncertainty of AGOA discouraged them.
★Outlook: As the expiration date of AGOA rapidly approaches, discussions about the future of the agreement and the prospects for procurement from the sub-Saharan region have begun to become intense. Fashion companies suggested “renewing AGOA for another ten years without major modifications to its existing regulations” or “replacing AGOA with a permanent free trade agreement, mutually reducing tariffs and continuing to allow third-country fabrics.” </p
