[The situation has been quickly evolving. Please check the updated analysis: How Might Covid-19 Affect Apparel Sourcing and Trade ]
- The real impact of the coronavirus is yet to come. Western fashion brands and retailers know that sourcing from China is always slow in January and early February because of the Chinese New Year (CNY). Instead, the immediate economic impact of the coronavirus right now is on China’s domestic retail market, as many stores (including well-known clothing and footwear brands) have been closed.
- As the disease continues to spread quickly, the concerns about the outlook of sourcing from China are growing. Even though factories in China are scheduled to reopen on February 3, according to the latest government announcement, over dozens of major cities in the country have been locked down (encircling roughly 50 million people so far), making it impossible for many workers to return to their job. Further, it is hard to predict how long such an unprecedented large-scale lockdown will last.
- Many Western fashion companies are in the status of “wait and see what is going to happen.” Some delays in the arrival of their orders seem unavoidable. However, shifting sourcing orders to other countries does not seem to be a quick solution at this point either for three reasons: 1) China remains the single largest textile and apparel supplier with no alternatives (see the table above); 2) other apparel exporting countries (especially those in Asia) rely heavily on textile raw material, such as yarns and fabrics made in China. 3) for apparel factories in Asia and Africa, it is not rare to see their management team is from China. However, starting from the end of January, countries around the world have begun to impose travel restrictions targeting Chinese travelers.
- While last year’s tariff war had already pushed Western fashion brands to source less from China, the coronavirus could accelerate companies’ sourcing diversification strategy further. Western fashion brands and retailers may also see their overall sourcing cost to go up as it requires additional resources to move products around and build new supply chains.
3 thoughts on “Apparel Sourcing in the Shadow of Coronavirus (updated February 2020)”
This was very interesting to read, I had to no idea the extent of the effects of the coronavirus!
One of the many Western fashion brands that has been impacted by the coronavirus is Nike. I recently read an article that stated that the virus outbreak in China has caused the company to not only receive a 17 billion dollar depreciation in their market value, they have also shut down half of their stores in China. The implications of this virus extends far beyond people getting sick, it is too negatively impacting the value of international brands such as Nike!
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