Dive Brief:
- An uncertain economy in the U.S. and managing forced labor risks are among the top concerns for fashion executives this year, according to the Fashion Industry Benchmarking Study released last month.
- Another top concern among the survey respondents is shipping delays and supply chain disruptions. Some 17% of respondents said this was their top business challenge this year.
- Despite economic concerns, about 75% of respondents reported feeling optimistic or somewhat optimistic about their sourcing and business outlook over the next five years, an improvement from 69% a year ago, according to the report. Some 54% of respondents expect their companies’ profit margins to improve somewhat in 2024, according to the report.
Dive Insight:
The 11th annual report was released by the United States Fashion Industry Association and conducted with Sheng Lu, a professor in the Department of Apparel and Fashion Studies at the University of Delaware. Inflation and the U.S.’s economic outlook, along with mitigating the risk of forced labor, were also the biggest concerns for the same group in last year’s survey. The issue ranked third among the group in 2022.
The report also noted brands were looking to better understand their supply chains to mitigate the risk of forced labor.
More than 90% of respondents said they were “making more efforts to map and understand” their supply chain, including the sourcing of fibers and yarn in finished products. Similarly, nearly 90% of respondents said they were mapping their entire apparel supply chains from Tier 1 to Tier 3 this year, up from about 40% over the past few years, per the report.
Since the implementation of the Uyghur Forced Labor Prevention Act — a 2022 law that bans products from Xinjiang region in China — more than 80% of respondents said they “intentionally reduce sourcing from high-risk countries.” About 75% of respondents say they “banned the use of Chinese cotton in the apparel products” they carry, per the report.
UFLPA compliance has been dominating the conversation around fast fashion giants Shein and Temu. In 2023, lawmakers asked both companies, along with Nike and Adidas, to detail their compliance with the law.
To mitigate risk, 45% of respondents are considering sourcing destinations beyond Asia. However, fewer respondents this year said they plan to cut apparel sourcing from countries in Asia other than China.
Some 43% of respondents sourced less than 10% of their products from China this year, which USFIA said was a record. In 2018, 18% of respondents said this.
This year, more respondents cited sourcing from India than from Bangladesh, for the first time since the survey began, per USFIA. Nearly 60% said they plan to expand apparel sourcing from India over the next two years.
Additionally, 52% of respondents want to expand apparel sourcing from members of the Dominican Republic-Central American Free Trade Agreement over the next two years. This marks an increase from last year, when 40% of respondents said this.
Other concerns cited by fashion executives included managing geopolitics and other political instability related to sourcing; protectionist trade policy in the U.S.; increasing production and sourcing costs; meeting consumers’ demands; and market competition from e-commerce.
