U.S. apparel and fashion sourcing executives have reported increasing sourcing risks in 2024, ranging from navigating an uncertain economy and managing forced labor risks to responding to shipping disruptions and rising geopolitical tensions, according to the U.S. Fashion Industry Association’s 2024 Fashion Industry Benchmark Study.
More than half of respondents identified “inflation and economic outlook in the US” and “managing forced labor risks in the supply chain” as their top business challenges for the year. Additionally, “shipping delays and supply chain disruptions” and “managing geopolitics and other sourcing-related political instability” have recently emerged among the top concerns. About 45 percent of respondents rated the “protectionist trade policy agenda in the US” as a top challenge, up from 15 percent in 2023.
While overall sourcing cost pressure eased in 2024, with more respondents expecting only a slight increase in costs, higher cost pressures were reported from “factory labor costs,” “compliance with social, environmental and factory regulations,” and “shipping and logistics.” However, the sourcing and business outlook for 2024 showed a modest improvement from the previous year. More than 60 percent of respondents expect growth in their companies’ apparel sourcing value or volume, a notable increase from the previous year, according to the study.
In addition, more than half expect profit margins to improve somewhat and 75 percent are optimistic or somewhat optimistic about the next five years, with large companies more optimistic than smaller ones. More than 90 percent plan to increase hiring over the next five years to support business growth.
U.S. fashion companies are leveraging sourcing diversification to mitigate rising market risks and uncertainty in 2024. Respondents reported sourcing from 48 countries for apparel, up from 44 in 2023. Nearly 70 percent of large companies source from 10 or more countries, up significantly from previous years, and more small and midsize companies source from six or more countries. Nearly 80 percent of respondents plan to source from the same or more countries through 2026, with company-level approaches varying: some plan to work with fewer suppliers while others intend to source from more.
Managing forced labor risk in the supply chain remains a priority for U.S. fashion companies in 2024. Companies have taken a comprehensive approach to comply with the Uyghur Forced Labor Prevention Act (UFLPA) and mitigate forced labor risks, implementing an average of six distinct practices across their operations. More than 90 percent are making efforts to map and understand their supply chain, including the sources of fibers and yarns in finished products. Nearly 90 percent report mapping their entire apparel supply chain from Tier 1 to Tier 3, a significant increase from previous years.
More than 80 percent are intentionally reducing sourcing from high-risk countries, and 75 percent have banned the use of Chinese cotton. About 45 percent are exploring sourcing destinations beyond Asia to mitigate forced labor risks, and fewer respondents plan to reduce sourcing apparel from Asian countries other than China directly. Respondents call for greater transparency in UFLPA enforcement by U.S. Customs and Border Protection and suggest focusing solely on “bad actors.”
American fashion companies remain concerned about the deteriorating bilateral relationship between the United States and China and plan to further reduce their exposure to China. A full 43% of respondents sourced less than 10% of their textile products from China this year, compared with 18% in 2018. Nearly 60% no longer use China as their primary apparel supplier, a significant increase from pre-pandemic levels. While China remains economically competitive in apparel sourcing, non-economic factors such as the risks of forced labor and geopolitical tensions are driving companies to shift sourcing out of China. Nearly 80% plan to further reduce apparel sourcing from China over the next two years, with large companies particularly eager to “de-risk.”
U.S. fashion companies are actively exploring new sourcing opportunities, focusing on emerging destinations in Asia and the Western Hemisphere. For the first time since the survey began, more respondents reported sourcing from India than Bangladesh, and nearly 60 percent plan to expand sourcing from India in the next two years. Guatemala, Mexico, and Egypt all made the list of the top ten most-used apparel sourcing destinations in 2024, with improved utilization rates.
A record 52 percent of respondents plan to expand sourcing from members of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) over the next two years, with most companies considering this part of their overall sourcing diversification strategy. However, 75 percent identified a lack of sufficient access to textile raw materials as a bottleneck to sourcing more apparel from CAFTA-DR members. The United States-Mexico-Canada Trade Agreement (USMCA) has also influenced sourcing decisions, with about 65 percent of respondents sourcing from Mexico and Canada, up from 40 percent in 2019-2020.
Respondents underscore the importance of immediately renewing the African Growth and Opportunity Act (AGOA) before it expires in September 2025 and extending it for at least another ten years. This year, respondents reported sourcing from seven AGOA members, an increase from previous years. More than 86 percent support renewing AGOA for at least another ten years, with none opposing the proposal. About 30 percent have already stopped sourcing from AGOA members due to the pending renewal and associated political uncertainty, a figure that could rise to half if AGOA is not renewed by the end of 2024. In addition, 30 percent emphasize the importance of maintaining flexible rules of origin in AGOA for sourcing from the region.
U.S. fashion industry executives report that sourcing risks will increase in 2024, including economic uncertainty, forced labor and geopolitical tensions, according to the U.S. Fashion Industry Association. Inflation, supply chain issues and trade policies are the top challenges. Companies are diversifying sourcing, reducing reliance on China and exploring new markets.
Fibre2Fashion (DP) Press Desk
