All talk no action from US firms looking to nearshore garment production, says GlobalData

Garment factories close to the US looking to steal share from China makers must address fabric production infrastructure and expand into more categories if they hope to convince brands to relocate, says GlobalData, a leading data and analytics company.

The conversation around nearshoring has intensified in the time between the US declaring a trade war with China and the arrival of COVID-19, with more brands looking to exit the sourcing powerhouse to lessen the risk of supply chain disruption and boost speed-to-market capabilities by bringing production to locations closer to home like Central and North America.

Yet, few have managed to successfully shift production out of China at scale. According to US trade data, for the first nine months of 2020, only 9.1% of US apparel imports came from members of the Dominican Republic-Central America free trade agreement (CAFTA-DR) down from 10.3% in 2019, while 4.4% came from members of the US-Mexico-Canada agreement, down from 4.5% in 2019. China still holds the lion’s share of the US apparel market at 39.93% in 2019.

Hannah Abdulla, Apparel Correspondent at GlobalData, says: “One thing that has benefitted Chinese garment manufacturers over the years is their diverse offering and their ability to vertically integrate supply chains.

“In Central America, garment manufacturers dominate in production of cotton and synthetic knit shirts, so only really appeal to brands whose penetration in that category is high. China operates as a Jack-of-all-trades if you will and there’s a real convenience aspect in that for buyers, among other factors.

“The hype around nearshoring still very much exists and there is a real opportunity for manufacturers to lure brands out of China to destinations that are closer to home. Yet, in order to truly compete, they need to expand into more categories. Brands that are able to source multiple items from one location will be more incentivised to shift.” 

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