Outlook 2023– Key Issues to Shape Apparel Sourcing and Trade

In December 2022, Just-Style consulted a panel of industry experts and scholars in its Outlook 2023–what’s next for apparel sourcing briefing. Below is my contribution to the report. All comments and suggestions are more than welcome!

2023 is likely another year full of challenges and opportunities for the global apparel industry.

First, the apparel industry may face a slowed world economy and weakened consumer demand in 2023. Apparel is a buyer-driven industry, meaning the sector’s volume of trade and production is highly sensitive to the macroeconomic environment. Amid hiking inflation, high energy costs, and retrenchment of global supply chains, leading international economic agencies, from the World Bank to the International Monetary Fund (IMF), unanimously predict a slowing economy worldwide in the new year. Likewise, the World Trade Organization (WTO) forecasts that the world merchandise trade will grow at around 1% in 2023, much lower than 3.5% in 2022. As estimated, the world apparel trade may marginally increase between 0.8% and 1.5% in the new year, the lowest since 2021. On the other hand, the falling demand may somewhat help reduce the rising sourcing cost pressure facing fashion companies in the new year.

Second, fashion brands and retailers will likely continue leveraging sourcing diversification and strengthening relationships with key vendors in response to the turbulent market environment. According to the 2022 fashion industry benchmarking study I conducted in collaboration with the US Fashion Industry Association (USFIA), nearly 40 percent of surveyed US fashion companies plan to “source from more countries and work with more suppliers” through 2024. Notably, “improving flexibility and reducing resourcing risks,” “reducing sourcing from China,” and “exploring near-sourcing opportunities” were among the top driving forces of fashion companies’ sourcing diversification strategies. Meanwhile, it is not common to see fashion companies optimize their supplier base and work with “fewer vendors.” For example, fashion companies increasingly prefer working with the so-called “super-vendors,” i.e., those suppliers with multiple-country manufacturing capability or can make textiles and apparel vertically, to achieve sourcing flexibility and agility. Hopefully, we could also see a more balanced supplier-importer relationship in the new year as more fashion companies recognize the value of “putting suppliers at the core.”

Third, improving sourcing sustainability and sourcing apparel products using sustainable textile materials will gain momentum in the new year. On the one hand, with growing expectations from stakeholders and pushed by new regulations, fashion companies will make additional efforts to develop a more sustainable, socially responsible, and transparent apparel supply chain. For example, more and more fashion brands and retailers have voluntarily begun releasing their supplier information to the public, such as factory names, locations, production functions, and compliance records. Also, new traceability technologies and closer collaboration with vendors enable fashion companies to understand their raw material suppliers much better than in the past. Notably, the rich supplier data will be new opportunities for fashion companies to optimize their existing supply chains and improve operational efficiency.

On the other hand, with consumers’ increasing interest in fashion sustainability and reducing the environmental impact of textile waste, fashion companies increasingly carry clothing made from recycled textile materials. My latest studies show that sourcing clothing made from recycled textile materials may help fashion companies achieve business benefits beyond the positive environmental impacts. For example, given the unique supply chain composition and production requirements, China appeared to play a less dominant role as a supplier of clothing made from recycled textile materials. Instead, in the US retail market, a substantial portion of such products was “Made in the USA” or came from emerging sourcing destinations in America (e.g., El Salvador, Nicaragua) and Africa (e.g., Tunisia and Morocco). In other words, sourcing clothing made from recycled textile materials could help fashion companies with several goals they have been trying to achieve, such as reducing dependence on sourcing from China, expanding near sourcing, and diversifying their sourcing base. Related, we are likely to see more public dialogue regarding how trade policy tools, such as preferential tariffs, may support fashion companies’ efforts to source more clothing using recycled or other eco-friendly textile materials.

Additionally, the debates on fashion companies’ China sourcing strategy and how to meaningfully expand near-sourcing could intensify in 2023. Regarding China, fashion companies’ top concerns and related public policy debates next year may include:

  • How to fully comply with the Uyghur Forced Labor Prevention Act (UFLPA) and reduce the forced labor risks in the supply chain?
  • What to do with Section 301 tariff actions against imports from China, including the tariff exclusion process?
  • How to reduce “China exposure” further in sourcing, especially regarding textile raw materials?
  • How should fashion companies respond and mitigate the business impacts of China’s shifting COVID policy and a new wave of COVID surge?
  • What contingency plan will be should the geopolitical tensions in the Asia-Pacific region directly affect shipping from the region?

Meanwhile, driven by various economic and non-economic factors, fashion companies will likely further explore ways to “bring the supply chain closer to home” in 2023. However, the near-shoring discussion will become ever more technical and detailed. For example, to expand near-shoring from the Western Hemisphere, more attention will be given to the impact of existing free trade agreements and their specific mechanisms (e.g., short supply in CAFTA-DR) on fashion companies’ sourcing practices. Even though we may not see many conventional free trade agreements newly launched, 2023 will be another busy year for textile and apparel trade policy deliberation, especially behind the scene and on exciting new topics.

By Sheng Lu

Discussion question: As we approach the middle of the year, why do you agree or disagree with any predictions in the outlook? Please share your thoughts.

Author: Sheng Lu

Professor @ University of Delaware

11 thoughts on “Outlook 2023– Key Issues to Shape Apparel Sourcing and Trade”

  1. Each new year brings on new opportunities and challenges in the fashion industry since it is a forever changing industry. One specific part I want to discuss is how fashion brands are working towards sourcing more sustainably. After taking this course and learning more about the issues involving suppliers when it came to transparency, unsafe working conditions, low wages, etc, it really forced brands to work on this. Consumers began looking deeper into brands they shop with to see how the brands are assuring safe practices when sourcing overseas. Although in this article it says how brands have “voluntarily” began releasing information about their suppliers, in my opinion I think that they did not really have much of a choice if they wanted to prove to their consumers that they take these issues very seriously and want to be transparent to show they have nothing to hide. It technically is voluntary, but if they do not provide information to consumers, it makes consumers question the brands morals, honesty, and overall image.

  2. Based on this article, I have a very positive outlook on the future of the global apparel industry. With aspects of improving sourcing sustainability and sourcing apparel products using sustainable textile materials, I think there is so much opportunity to tackle the problems that have come with the rise of fast fashion brands. It makes me inspired for what the industry will bring next and how consumer’s will change their shopping behaviors. In regards to some of the issues like a decrease in consumer demand, there is still some positives. As stated, the falling demand may actually help reduce the rising cost of sourcing and the pressure facing fashion companies in the new year. Overall, I think there is a lot to be excited for in this coming year and I can not wait to see how the industry and consumers change and grow.

  3. As the fashion industry pushes forward into 2023 I hope to see a lot of changes. While there are many things that require change, the one that I think has been on people’s minds the most as of late is sustainability. Socially, there has been a huge pushback of fast fashion. Why this might not be represented to a notable degree yet, I think as time goes on many people are becoming more aware of where they shop and what ripple effects this might have. Currently I have been seeing many online retailers saying “sustainably made” or “made of recycled material” for certain products. While this is moving in the right direction, sustainability has become an umbrella term for many fashion retailers. So while maybe the material is sourced properly or the manufacturing requires less water or produces less waste, this is only part of the issue. These things do not outweigh workers rights and safety as well as livable wages. So while putting these sustainability labels on garments it only tells so much about the overall affects of making this product. The sustainability term needs to be expanded on so customers can become aware and hopefully we can start seeing big changes in all aspects of the apparel industry.

  4. As many others have already said, I agree that there are changes in the fashion industry each year because of how fast paced it is. While I agree with your points in this reading, I think something to consider with the slowed economy and “buyer” driven industries, is social media and the rise of influencers on different platforms. These influencers portray themselves and their lives as super glamorous and if you use or wear the same products as them, you will also live this glamorous life. Although some are not as influenced as others, I think this lifestyle desire and increase will contribute to consumer’s buying habits in 2023. When this happens, fashion brands and retailers will source from wherever they can to get these products in the quickest so more shoppers will purchase from them versus competitors, which could affect their sustainable souring practices.

  5. The outlook for the global apparel industry in 2023 is mixed, with both challenges and opportunities on the horizon. According to various international economic agencies, such as the World Bank and the IMF, the world economy is expected to slow down in 2023, leading to weakened consumer demand and potentially affecting the volume of trade and production in the apparel industry. However, this slowdown in demand may also help alleviate the rising cost pressures in sourcing.

    Fashion brands and retailers are likely to continue their trend of diversifying their sourcing strategies, leveraging relationships with key vendors and reducing their dependence on China. Brands and retailers are also focusing on sustainability, with a growing interest in sourcing apparel made from recycled materials and developing a more transparent and socially responsible supply chain. I wonder if this is really true, or if we will continue to see fast fashion brands thrive like they had in the past couple years.

    2023 is also expected to bring more debates and discussions about China sourcing strategies and near-sourcing options. Fashion companies are likely to face questions about how to fully comply with the Uyghur Forced Labor Prevention Act, reduce forced labor risks, and mitigate the impacts of shifting COVID policies and geopolitical tensions in the Asia-Pacific region. On the other hand, the discussions around near-sourcing are expected to become more technical, as fashion companies explore ways to bring the supply chain closer to home and consider the impact of existing free trade agreements.

  6. I really enjoyed this blog post! I strongly believe that he fashion industry must be held accountable for the environmental issues it creates, and enjoyed reading about how the apparel and sourcing industry can be shaped to help that. The introduction of sourcing clothing made from recycled textile materials is something that sparked my interest, as well as how it may help fashion companies achieve business benefits beyond the positive environmental impacts. It’s a win win for everyone! I will interested to see how these new sourcing opportunities will show and how soon we will see it when shopping in the mall or department stores.

  7. First off, I am not surprised that the industry is facing a slowing demand, based on my own experience as a buying intern last summer. The companies that I was meeting with highlighted the impending recession and warned us that it would continue on into 2023 with slowing demand and smaller growth rates. Although this isn’t good news for fashion companies, I am intrigued by the fact that those who work in the fashion industry are able to see, feel, and predict what will happen in the future correctly.

    Secondly, the news of sustainable sourcing and an increase in using sustainable textiles gaining ground on their initiatives is laudable. I am personally excited to start in the industry at a time when sustainability has been thrown into the spotlight, demanding attention from businesses after years of consumers’ campaigns and pushes for more regulations. Additionally, the idea of sourcing recycled materials from closer countries or even our own is encouraging for sustainable fashion. I wonder how this may change U.S. textile production and how it will change sourcing partners for U.S. companies.

  8. It is apparent that companies around the world are facing many challenges, especially in the textile and apparel industry. From sourcing, supply chain, and sustainability issues, it is important for fashion brands to monitor these impacts in order to create a business model that is stable and sustainable. Furthermore, the COVID-19 pandemic and the micro/macro economic impacts that followed have severely complicated these already complex processes. As the post mentioned, the apparel industry is highly consumer-driven, and consumers are changing their buying behaviors due to the macro-environment the world has been experiencing. Moreover, it is interesting to see how companies are repositioning themselves based on these results. Our class discussions about the opportunities near-shoring and sourcing diversification can provide for companies provided a new perspective for how brands can minimize risk and reduce business complications in the future.

  9. One trend the article predicted for 2023 that I strongly agree with was improving sourcing sustainability and sourcing apparel products using sustainable textile materials will gain momentum in the new year. There are various reasons why improved sourcing sustainability and the use of sustainable textile materials in garment goods are predicted to gain traction in the next year: Consumers are growing more conscious of the environmental and social consequences of their purchases. As a result, people are looking for more environmentally friendly solutions and are ready to spend more for things that correspond with their ideals. Pressure from stakeholders: Brands and retailers are under pressure to improve their sustainability practices from investors, workers, and customers. This involves lowering waste and carbon emissions, improving labor conditions, and employing environmentally friendly products. Sustainable material innovation: The discovery of new sustainable materials makes it simpler for companies to manufacture sustainable products while maintaining quality and style. Materials created from recycled plastic bottles, organic cotton, and biodegradable materials are examples of this.

  10. As we are entering the middle of the year, I agree with the predictions in the outlook especially the first prediction of weakened consumer demand in the slowed economy we are facing. While demand for clothing is still popular, the US is facing increased inflation and consumers have to prioritize what they are spending their money on. As a consumer, I find myself purchasing less garments due to the recession and high inflationary period we are in.
    I also think that improved sourcing strategies are something fashion brands are heavily reliant on this year due to many consumers being more aware of where and how their clothing is made. This is where sourcing diversification comes into play which will help the US veer away from sourcing from China and avoid Chinese IP issues and unfair labor practices. Sourcing diversification will allow the US to start more nearshoring sourcing practices which will give them leverage in the supply chain and sustainability practices.
    Overall, I think that 2023, so far, has been a year where we have new innovations in the fashion industry where we are going to face growth in the future regarding sustainability and sourcing practices. Many US fashion brands are beginning to adopt new practices that are appealing to consumers and hopefully will aid in economic growth.

  11. Overall, I think we can look forward to an increasingly better future in terms of sustainability, sourcing, and diversification practices. This is very promising for the apparel sector. I think these three turning points will have a huge impact as a whole. Despite a weaker economy in 2023, companies will benefit from the lowered sourcing costs. I think this year we can definitely look forward to a more conscious industry, as countries are being restored post-pandemic, as well as becoming more environmentally and socially aware. What we are learning in class paired with the publication of this article, is interesting to see how much we have accomplished in 2023. In terms of diversification, the U.S. should look to source more products from the Western hemisphere. This would allow for them to source more locally, help out smaller businesses at a cheaper cost.

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