What the RMG industry can do to secure a bigger share of the US market

A recent survey by the United States Fashion Industry Association (USFIA) brought good  news for Bangladeshi apparel entrepreneurs. It revealed US buyers' intention to source more from Bangladesh in the next couple of years. The report titled 'The 2021 Fashion Industry benchmarking Study' was released in July in Washington DC and was widely covered by our mainstream media.

The news item is authentic, the survey report is credible and the organisation publishing the study has a strong reputation. 

USFIA members and affiliates include business enterprises across the value chain, which come together to remove barriers to textile trade. Not just another trade body, it is rather an association of frontline brands, retailers, importers and wholesalers of textile and apparel. 

More in the cohort are service providers like consultants, customs brokers, freight forwarders, law firms, logistics providers, steamship lines, and testing and certification companies that help those brands, retailers, importers, and wholesalers. On a branch, they also have academic institutions as members.

In their talk about benchmarking annual reports—the eighth in the series, there are data-driven predictions and industry insiders' information about the dynamics of the industry in 2022 & 2023. American brands like Levi's, Walmart, JCPenney, Kohl's, Ralph Lauren, Macy's, or American Eagle were among the respondents of the study who also sit on the board of USFIA. 

Inspired by the survey findings, we have made an attempt to analyse our 28-billion-dollar industry: where we are now and where we can be at the onset of 2024.

The Strength

Apparels made in Bangladesh continue to enjoy a significant price advantage over other Asian and non-Asian nations. Unit price of apparel products from Bangladesh averages $2.50, against the industry average of $2.60. 

The BGMEA website shows ten strengths of Bangladeshi RMG industry, with competitive price, safety, and commitment as the top three. The Alliance and Accord kept us safe while we can be boastful of our own commitment having nine of the world's top 10 green garment factories.

Then why did Vietnam topple Bangladesh in 2020? Both fell from 2019's heights; Vietnam fell by 7 percent, Bangladesh by 15. What if there were no pandemic? Could we have retained our runner up spot? How would we have fought Chinese investment in Vietnam?

One might reach a decision when we factor in the three other components: weakness, opportunity, and threat. 

The Weakness

China, Vietnam, and even India practice diversity while we still struggle with basic wearables. Covid-19 has reshaped people's apparel choices greatly and stores are flooded with sweatshirts and sweatpants. We do not make them. 

The Opportunity

Vietnam has several issues with the US. Pending investigations under Section 301 of the Trade Act of 1974 may be a blessing in disguise for us. The dispute over Vietnam's currency practice and use of illegal timber was exposed during the Trump administration, and still is to be completely resolved.

The US-China Trade war drove the tariffs up. The report states, "US fashion companies had to pay an average 23.4 percent import duty rate for apparel (HTS 61 and 62) imports from China in 2020, much higher than 16.5 percent back in 2017 (or 1.08 billion additional tariffs)."

Also, allegations of forced labour in Uyghur disrupts China's prospects in the long term.

The Threat

Covid-19 continues to leave its impact in sourcing and business operations for the second year in a row. Almost everything, starting from shipping and logistics to raw materials, from exchange rate changes to labour cost, have all shot up in 2021.

In the face of surging sourcing costs, American buyers are actively thinking of relocating their sourcing destinations, and play in a shorter supply chain. 

To make matters worse, the global container shortage is causing shipping delays and supply chain disruptions. Near-shoring is the new buzzword! Sourcing more from the US-Mexico-Canada Trade Agreement (USMCA) countries or other prospective producers from western hemisphere is becoming popular. The Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) members have seen a significant rise in orders in 2020.

How do we turn the tables then? Can we confront the threats and cash in the opportunities? Some clues are hidden in the records of the past five years preceding the pandemic.

Alas, just when we were breaking the 5 billion bracket after five years, the deadly disease struck. But export to the US was not hurt significantly, and the market share rose to an all-time high.

The trend continues this year. We are flying high, and registered an impressive 15.38 percent growth in the first five months. The closest in the past was 11.74 percent in 2015. China and Vietnam are still ahead though, with astounding 26.17 and 19.48 percent growth rates. Adding June, the Export Promotion Bureau (EPB) says, the 2020-21 financial year ended with 15.54 percent growth.

This pie is getting larger! With more people being vaccinated and shopping malls opening their doors across the coasts, Americans are buying more. Common wisdom says the 64 billion Covid-19 hit total is sure to rise and Bangladesh has a bigger slice to claim. 

We must do what we said we will; diversify. Since the domination of basic cotton made apparel is over, we must cater to the on demand, artificial fiber high-end garments.

Chinese shares mostly went to Vietnam in 2018 along with a robust Chinese investment of $270 million. China is making sure their fair share stays in Vietnam. An intelligent way to crack this hornet's nest would be offering the same products at a far lesser price. Who else can do it if the marketers of 'competitive price' cannot?

Setting up state-of-the art factories for high end products is the call of the hour. Big factories require big money injections. Big money may come from beyond boundaries. Paradoxically, glass walls in the industry are public knowledge. Frontrunners never welcomed FDI.

The rules of the game are changing, so shall we.

Al Mamoon

Al Mamoon is a former Commercial Counselor at the Los Angeles Consulate.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.