COVID-19 impact on US apparel supply chain

COVID-19-impact-US-apparel-supply- chain

Imports and consumption of apparel goods by the United States is gone down by 63% in 2020, says a research. The research also forecasts the economy of the US will down by 3%.

COVID-19-impact-US-apparel-supply- chain
Figure: This downtrend of fashion consumption in the USA has a deep impact on the whole apparel supply chain. 

Besides, the up-to-date statistics from the Office of Textiles and Apparel (OTEXA) demonstrate that the adverse impact of COVID-19 on U.S. apparel imports deepened further in April 2020. Specifically, but not unexpectedly, the value of America’s readymade garment (RMG) imports severely reduced by 44.5% in April 2020 from a year ago.

From January to April 2020 period, the value of U.S. RMG imports cut by 19.6% year over year, which has been much poorer than the performance in the 2008-2009 global financial crisis (down 11.8%).

This downtrend of fashion consumption has a deep impact on the whole apparel supply chain. Mainly the apparel manufacturing countries have been hit hard, which shows in the graph below.


The global leader in apparel export, China took the hardest hit in the COVID-19 pandemic. China’s apparel exports to the USA continue to decline—its value reduced by a new record of 59.0% in April 2020 compared with a year ago (and -46.4% drop year to date). This outcome is also poorer than the official Chinese statistics, which stated a total 22% drop in China’s RMG exports in the first four months of 2020).

Vietnam remained as the top apparel exporting country in the USA market in April 2020 for the 2nd consecutive months surpassing China. China’s RMG market shares in the American apparel import market remained as low as 18.2% in April 2020 (was 30% in 2019), although it somewhat improved from only 11% in March 2020.

With relations between U.S.-China at a new low, there have been more increased discussions on moving some of the textile and apparel supply chains out of China and spread apparel sourcing from the Asia region as a whole. And China’s lost market shares have been grabbed mostly by other Asian suppliers, particularly Vietnam (19.7% YTD in 2020 vs. 16.2% in 2019) and Bangladesh (9.8% YTD in 2020 vs.7.1% in 2019).

Nevertheless, no clear evidence has recommended that U.S. fashion brands and retailers are giving more apparel sourcing orders to suppliers from the Western Hemisphere.

From January to April of 2020, still, only 9.4% of U.S. apparel imports came from CAFTA-DR members (down from 10.3% in 2019) and 4.1% from NAFTA members (down from 4.5% in 2019).

As a reflection of weak demand, the unit price of U.S. apparel imports was lesser in the first four months of 2020 (price index =102.1) compared with 2019 (price index =104.7). Apparel imports from China have seen the most noteworthy price decrease so far (price index =71.5 YTD in 2020 vs. 83.5 in 2019).

But historically, the USA as a civilization is more consumerist compared to Europe. The youth population with a custom of regular spending will cause the US to maintain a higher consumption and more importantly, faster return to normal consumption levels once the pandemic situation passes over.

Meaning, Bangladesh’s apparel exports to the US markets, has high growth potential.

It will not be a big blow for the apparel exporters if the virus does not prolong long. In that case, their consumption will gradually increase with the recovery of the economy, says Mostafiz Uddin, Managing director of Denim Expert Limited.

And a recent data of the Office of Textiles and Apparel (OTEXA) affiliated with the US Department of Commerce shows that Bangladesh fetched US$2.24 billion through exporting readymade garments (RMG) to the US market during the period from January to May 2020 as compared to $2.55 billion of the corresponding period of 2019.

Throughout the period, Bangladesh transported 808 million square meters of apparel items which was 905 million square meters in the same period of last year.