State of the U.S. Textile and Apparel Industry: Output, Employment, and Trade (Updated September 2019)

1

The size of the U.S. textile and apparel industry has significantly shrunk over the past decades. However, U.S. textile manufacturing is gradually coming back. The value added of U.S. textile manufacturing totaled $19 billion in 2018, up 25% from 2009 and reaching its highest level in the past ten years. In comparison, U.S. apparel manufacturing dropped to $9.2 billion in 2018, its lowest level in history (Bureau of Economic Analysis, 2019).

2

Nevertheless, the share of U.S. textile and apparel manufacturing in the U.S. Gross Domestic Product (GDP) dropped to only 0.14% in 2018 from 0.57% in 1998 (Bureau of Economic Analysis, 2019).

3.jpg

The U.S. textile and apparel manufacturing is also changing in nature. For example, textiles had accounted for nearly 70% of the total output of the U.S. textile and apparel industry as of 2018, up from 58% in 1998 (Bureau of Economic Analysis, 2019). Meanwhile, clothing had only accounted for 12% of the total U.S. fiber production by 2012, suggesting non-apparel textile products, such as industrial textiles and home textiles have become a more important part of the industry (Census Bureau, 2019).

4.jpg

5

Despite the growing popularity of “Made in the USA”, manufacturing jobs are NOT coming back to the U.S. textile and apparel industry. From January 2005 to August 2019, employment in the U.S. textile manufacturing (NAICS 313 and 314) and apparel manufacturing (NAICS 315) declined by 44.3% and 59.3% respectively (Bureau of Labor Statistics, 2019). However, improved productivity is one important factor behind the job losses.

7

6

8

10

Consistent with the theoretical prediction, U.S. remains a net textile exporter and a net apparel importer. In 2018, the U.S. enjoyed a $1391million trade surplus in textiles and suffered a $79,406 million trade deficit in apparel (USITC, 2019). Notably, over 40% of U.S.-made textiles (NAICS 313 and 314) were sold overseas in 2018, up from only 15% in 2000. Meanwhile, from 2009 to 2018, the value of U.S. yarns and fabrics exports increased by 31.3% and 43.6% respectively (OTEXA, 2019). On the other hand, because of the regional trade patterns, close to 70% of U.S. textile and apparel export still, go to the western hemisphere today.

by Sheng Lu

Discussion questions:

  1. Why or why not do you think the U.S. textile industry and the apparel industry are in good shape?
  2. Based on the statistics, do you think textile and apparel “Made in the USA” have a future? Please explain.
  3. What are the top challenges facing the U.S. textile industry and the apparel industry in today’s global economy?

American Giant: $108 Hoodie Made in the USA

Untitled

Discussion questions:

  1. Is it still meaningful to promote apparel 100% “Made in the USA” in today’s global economy? Why or why not?
  2. From the video, what is your evaluation of the strength, weakness, opportunity, and threat of American Giant’s business?
  3. From the video and our class discussions, why or why not do you think the U.S.-China tariff war has benefited textiles and apparel “Made in the USA”?
  4. Will you be interested in working in a textile mill/garment factory as featured in the video after graduation? Why or why not?
  5. Any other thoughts/reflections from the video?

[For FASH455: 1) Please mention the question number in your comments; 2) Please address at least TWO questions in your comments]

Additional readings:

Demystify the “Made in the USA” Apparel Sourcing Strategy

While the majority of apparel consumed in the United States come from overseas, “Made in the USA” is growing in popularity. According to the 2018 U.S. Fashion Industry Benchmarking Study released by the U.S. Fashion Industry Association (USFIA) in July 2018, around 46 percent of surveyed U.S. fashion brands and apparel retailers report currently sourcing “Made in the USA” products, even though local sourcing typically only account for less than 10 percent of these companies’ total sourcing value or volume.  Likewise, the State of Fashion 2019 report published by Business of Fashion (BOF) and McKinsey & Company in November also forecasts that over 20 percent of U.S. fashion companies’ sourcing volume could be from nearshore by 2025, thanks to automation technology and consumers’ increasing demand for speed to market.

However, the detailed practice of the “Made in the USA” apparel sourcing strategy–including who is sourcing, what products are sourced, and what the typical price range of these products remain largely unknown.

To answer these questions, we recently analyzed the pricing, product assortment and inventory information of over 90,000 fashion retailers and 300,000,000 fashion apparel products at the Stock-Keeping Unit (SKU) level based on EDITED, a big data and business analytics tool developed for the fashion industry. For the research purpose, we selected apparel products newly launched to the U.S. market in the past twelve months (i.e., between 1 December 2017 and 30 November 2018) with “Made in the USA” explicitly mentioned in the product description. Below are the key findings:

First, “Made in the USA” apparel overall are treated as a niche product in U.S. fashion brands and retailers’ sourcing portfolio.

During the 12 months we examined (1 December 2017-30 November 2018), 94 out of the total 348 retailers (or 27 percent) sold “Made in the USA” apparel in the U.S. market. The top 10 sellers list includes BOTH retailers that focus on the value market such as Walmart and relatively high-end department stores such as Bloomingdale and Saks Fifth Avenue. However, even for these top sellers, “Made in the USA” apparel accounted for less than 8 percent of their total product offers on average.

Second, U.S. fashion brands and retailers are most likely to source“Made in the USA” apparel for relatively fashion-oriented items, particularly bottoms (such as skirts, jeans, and trousers), dresses, all-in-ones (such as playsuits and dungarees), swimwear and suits-sets.

The competitive edge for these product categories in the retail market, in general, increasingly depends on unique designs, high product quality, and speed to market, which makes sourcing from the United States commercially beneficial. In comparison, imported products are more concentrated on basic fashion items often competing on price in the U.S. retail market, including tops (such as T-shirt and polo shirt), underwear, and nightwear.

It is also interesting to note that “Made in the USA” apparel were predominately women’s wear (92 percent), whereas imported clothing adopted a more balanced gender combination (63 percent women’s wear and 37 percent men’s wear). Because the fashion trends for women’s wear usually are shorter-lived and harder to predict, this result once again indicates that seeking quick response and shorter lead time for stylish and trendy items could be an important incentive for local sourcing by U.S. fashion brands and retailers.

Third, consistent with the common perception, “Made in the USA” apparel overall are pricier than imported ones in the U.S. retail market.

Taking the U.S. apparel retail market as a whole, close to 40 percent of “Made in the USA” offering in the past 12 months targeted the premium or luxury market, compared with only 20 percent of imported products.  In contrast, as few as 18 percent of “Made in the USA” offering were in the value market, which, however, accounted for approximately 60 percent of all imported apparel sold in the U.S. market. In totality, it seems U.S. fashion brands and retailers are purposefully targeting “Made in the USA” apparel for less price-sensitive segments of the market to balance the high domestic production cost.

On the other hand, when examining U.S. fashion brands and retailers’ pricing strategy at the product level, “Made in the USA” clothing was still priced much higher than imported ones for almost all major apparel categories, except hosiery. Notably, in the past 12 months, the average unit retail price of “Made in the USA” clothing was 99.2 percent higher than imported ones in the value and mass market and 36.0 percent higher in the premium and luxury market. This interesting phenomenon supports the arguments that U.S. consumers somehow are willing to pay a premium price for products with the “Made in the USA” label.  

Additionally, during the past 12 months, around 46.3 percent of “Made in the USA” apparel were sold at a discount compared with more than 54.6 percent of imported ones. The advantage of proximity to the market, which makes speedy replenishment for in-season items possible, is an important factor behind the more successful control of markdowns for “Made in the USA” products. For example, data shows that U.S. fashion brands and retailers replenished approximately 12.7 percent of their “Made in the USA” offering in the past 12 months but only 2.8 percent of imported clothing.

In conclusion, the findings of this study concur with the view that “Made in the USA” apparel are still relevant today. Meanwhile, it does not seem to be the case that “Made in the USA” apparel and imported ones are necessarily competing with each other in the U.S. retail market. With apparel sourcing increasingly requiring striking a balance among various factors ranging from cost, flexibility, compliance to speed to market, it is hopeful that “Made in the USA” apparel will continue to have its unique role to play in U.S. fashion brands and retailers’ merchandising and sourcing strategies.

By Sheng Lu

USITC Releases New Study on the State of the U.S. Textile and Apparel Manufacturing Sector

Untitled

A recent study released by the U.S. International Trade Commission (USITC) provides a comprehensive review and valuable insights into the state of textile and apparel manufacturing in the United States. According to the study:

First,  data suggests a mixed picture of the recovery of textile manufacturing in the U.S.

  • Total capital expenditures in plants and equipment for the textile sector increased by 36 percent in the 2013–16 period. Interesting enough, much of the new investment is by foreign firms, including new investments by Chinese and Indian firms, as well as by firms from Mexico, Canada, Turkey, and Saudi Arabia.
  • U.S. textile shipments increased in 2017 to $39.6 billion, but remained 3 percent below the 2013 level. The result suggests that rather than simply increasing capacity, some of the new investment is likely replacing existing equipment, as firms upgrade and modernize their manufacturing processes and/or focus their operations on different products. [Note: shipments measure the dollar value of products sold by manufacturing establishments and are based on net selling values, f.o.b. (free on board) plant, after discounts and allowances are excluded]
  • At $10.6 billion, U.S. textile exports in 2017 were also below the five-year high of $12.1 billion in 2014.
  • Employment in the textiles sector declined by 4 percent from 131,000 in 2013 to an estimated 126,000 in 2017. Meanwhile, official data on labor productivity index for yarns and fabrics show steady declines during 2013–16.

Second, some evidence suggests that reshoring has taken place in recent years in the apparel sector, although on a modest scale.

  • For the 2013–16 period, capital expenditures were up 5 percent to $301 million, suggesting capital investment in the apparel sector may be increasing, as the industry begins to adopt more labor-saving technologies.
  • Domestic shipments of apparel showed modest increases in the past two years, reaching $12.0 billion in 2016 and $12.5 billion in 2017, after a record low of $11.5 billion in 2014 and 2015.
  • Employment in the apparel sector steadily declined during 2013–17, down 21 percent from 145,000 workers in 2013 to 120,000 workers in 2017. Official data on labor productivity also showed steady declines during 2013–16.
  • U.S. fashion companies continue to source apparel from the United States, although in a relatively small amount.

Third, the advantages of making textiles and apparel in the United States include:

  • Advantages of producing textiles in the United States include local and state incentives for investment, and the benefits afforded by free trade agreement (FTA) preferences (i.e., the “yarn-forward” rules of origin) that encourage the use of U.S.-produced inputs in downstream production in FTA partner countries, energy cost and the availability and reliability of high-quality cotton. Meanwhile, product innovation and automation are important aspects of the U.S. textile sector’s competitiveness strategy.
  • Advantages of producing apparel in the United States include improved lead times, better quality control, and more flexible production. Many domestically made products also use “Made in USA” branding to capitalize on the buy-American trend and the appeal of “Made in USA.” The adoption of various automation and digital technologies to accelerate the process of product development, improve the fit of the final product and reduce the needs for skilled sewing operators may also help improve the competitiveness.  

Textile and Apparel “Made in the World”

NCTO-textile-final

garment_industry_inline_02

NorthCarolina4

$_3

m_58a7bf17680278972302d0a2

presentation1

While shopping in SoHo (NYC), Nicole Farese, a student from FASH455, found the label of a Splendid sweater reads “Made of Italian Yarn” and “Made in China”. Splendid is a casual wear store which is known for their high-quality clothing sold at a premium price.

Exercise: Check your wardrobe and can you find any clothing that is also made through a “global supply chain?” Please feel free to submit your picture with a brief description of your item to shenglu@udel.edu.

BIS Released Assessment Report of the U.S. Textile and Apparel Manufacturing Sector

bis

The Bureau of Industry and Security (BIS) under the U.S. Department of Commerce recently released its assessment report of the U.S. textile and apparel (T&A) manufacturing sector. The report was based on a survey of 571 U.S. T&A manufacturers in summer 2017. These respondents include 230 textile mills (NAICS 313), 128 textile product mills (NAICS 314), and 213 apparel manufacturers (NAICS 315).

Below are the key findings of the study:

The state of the U.S. textile and apparel (T&A) manufacturing sector

  • U.S. T&A manufacturing has shrunk significantly: the value of T&A shipments (seasonally adjusted) in 2016 ($68 billion) was almost 56% decrease in real terms since 1995 ($153 billion).
  • U.S. T&A manufacturing has undergone substantial structural change: textiles and textile products accounted for 82% of the total shipments of the U.S. T&A industry as of 2016, compared to 57% in 1995. Notably, only 18% of shipments came from apparel manufacturing in 2016, compared to 43% in 1995.
  • U.S. T&A manufacturing sector is hiring less: Between 1990 and 2016, total employment decreased by 79%, from 1.7 million to 352,000 workers; over the same period, over 86% of apparel manufacturing jobs disappeared.
  • U.S. T&A manufacturers are making more capital investments: The overall total Capital Expenditures (CAPEX) of the 571 respondents increased 90 percent from 2012 to 2016 (from $1.6 billion to $3.1 billion). Particularly, the CAPEX of textile mills grew by 80 percent over that period—mostly on “Machinery, Equipment, and Vehicles.”
  • North Carolina hosted the largest number of U.S. T&A facilities (22 percent of the respondents), followed by Georgia (10 percent), and South Carolina (9 percent).
  • China, Mexico, and Canada are the most popular destinations for foreign investments by U.S. T&A manufacturers.

Competition landscape and factors

  • Respondents listed a total of 1,309 U.S. competitors and 552 non-U.S. competitors. Chinese companies were cited as the number one source of foreign competition.
  • “Quality,” “Lead Time,” and “Innovation” were the top three competitive advantages of U.S. T&A manufacturers as they related to foreign competition. “Labor Costs” was regarded as the top disadvantage of U.S. T&A manufacturing.
  • 43 percent of respondents believed that reshoring was occurring in U.S. T&A manufacturing. Almost all of these respondents believed that “Shorter Lead Times” and the “Marketability of the ‘Made in USA’ Label” were the factors driving the trend.
  • The Affordable Care Act (ACA), Minimum Wage regulations (Federal, State, and Local), and U.S. Trade Policy were the top governmental regulations and provisions cited as negatively impacting the competitiveness of U.S. T&A manufacturers.
  • 61 percent of respondents reported that they had difficulties hiring and/or retaining employees for their T&A operations, specifically production line workers such as operators and machine technicians. The skill gaps in the labor market for those positions were by far the biggest ones identified for the industry.
  • 43 percent of respondents believed that reshoring was occurring in T&A manufacturing (i.e., the practice of transferring a business operation that was moved to a non-U.S. location back to the United States.) Textile manufacturers were more likely to be aware of reshoring.

Trade and U.S. textile and apparel manufacturing

  • On average, respondents say 48 percent of their textile and textile products are “100 percent made in the U.S.”, while for apparel it was around 54 percent.
  • U.S. T&A exports dropped 10 percent between 2012 and 2016, from $2.2 billion to $1.98 billion. On average, exports accounted for only 12 percent of respondents’ total sales.
  • 33 percent of respondents considered themselves to be dependent on foreign sources for supplies, which was highest among textile mills.
  • 37 percent of respondents reported that they considered themselves to be dependent on non-U.S. sourcing for their machinery or equipment.

Berry Amendment and U.S. textile and apparel manufacturing

  • For textile mills, an average of 12 percent of U.S. output was Berry Amendment-related; for textile product mills the average was 21 percent, and for apparel production, it averaged 26 percent. 67 percent of respondents believed that the Berry Amendment had a positive impact on their organization’s business.