Bangla Desh: The Next Hot Spot in Apparel Sourcing? Projected to Surpass Vietnam

Top Apparel-Sourcing Hot Spots Next 5 Yrs, 2012-20In 2010, China dominated European and US markets for ready-made garments, accounting for about 40 percent of the import volume in each region. A recent McKinsey survey, however, found that 86 percent of the chief purchasing officers in leading apparel companies in Europe and the United States planned to decrease levels of sourcing in China over the next five years because of declining profit margins and capacity constraints.

With about $ 15 billion in exports in 2010, ready-made garments are the country’s most important industrial sector; they represent 13 percent and more than 75 percent of GDP and total exports, respectively. McKinsey forecasts export-value growth of 7 to 9 percent annually within the next ten years, so the market will double by 2015 and nearly triple by 2020.

Our survey of chief purchasing officers found that European and US companies that focus on the apparel market’s value segment plan to expand the share of their sourcing from Bangladesh to 25 to 30 percent by 2020, from an average of 20 percent now.

% of Respondents
Top Apparel-Sourcing Hot Spots Next 5 Yrs, 2012-20

In our study, all the respondents identified attractive prices as the most important reason for purchasing in Bangladesh. They also said that price levels there will remain highly competitive in the future, since they expect significant efficiency increases to offset rising wage costs. Half of the respondents mentioned capacity as the second-biggest advantage of Bangladesh’s ready-made-garment industry. With 5,000 factories employing about 3.6 million workers (of a total workforce of 74.0 million), Bangladesh is clearly ahead of other Southeast Asian suppliers in this respect. It also offers satisfactory levels of quality, especially in value and entry-level midmarket products.

Source: Sept–Nov 2011 McKinsey survey of 28 European and US chief purchasing officers from leading apparel companies that together account for $ 46 billion in total apparel-sourcing value and 66% of all apparel exports from Bangladesh to Europe and the United States

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http://www.mckinseyquarterly.com/Bangladesh_The_next_hot_spot_in_apparel_sourcing_2948.