Diversifying supply chains and considering new manufacturing markets are some of the key ways fashion businesses can curb ongoing uncertainty around sourcing.
This is according to International Sourcing Expo Australia's (ISEA) global exhibition director Julie Holt.
Speaking with Ragtrader, Holt said that "the 2019 business model is redundant" after a "confluence of events" that started with the COVID-19 pandemic.
"Whether that be shipping raw materials or labour, changing consumer behaviours across price, occasion and workforce participation," she said.
To combat this, Holt said brands and retailers need to restructure their sourcing operations.
"They need to think about consolidating operations with others, or taking in-house functions, such as sourcing of raw materials, or delivery.
"Also, astute manufacturers should pay attention to things like the fact that the top end of manufacturing in fashion is kind of this massive capacity.”
Holt said this is because it's often tied to international travel - “which is very muted; still is.”
“And that might be a way for them to unlock access to new producers or provide more high value additions to the mid-market ranges.”
According to Holt, this is part of understanding the dynamic underlying shifts in the supply market, such as ending monetary support by governments, and having to adapt to environmental changes.
"I mean, oftentimes, I'm dealing with companies from different countries and, you know, the power's out,” she said.
"There's just big risk in some of the traditional supply countries with things like that.
Due to all these factors, Holt said the era of sourcing from one region is over.
"Companies need to be really adept at shifting their supply markets or pivoting very quickly - which price places a premium on decision-making, which is also related to transparency.
"So all these things that have been talked about for years have suddenly become much more important. Not only for growth, but just mere survival.
With supply chains continuing to be disrupted, particularly across Asia, Holt said that for Australia, this means a rationalisation of product assortments and SKUs.
"Consumer values are probably going to shift from price to utility, or basically getting the product in hand.”
This also includes shorter lead times based on an expedited seasonality or trend that can capture and retain buyers with more impulse purchases.
"I think product turnover and cash flow will be prioritised over margin. And recovery across sourcing countries and value segments will be complicated and uneven.
To sum up, Holt said that Australian manufacturers and importers need to consider new sourcing frontiers such as Turkey and India, which she said are known for quality production, manageable, and have the capacity.
New markets for Australian apparel manufacturing
According to Holt, both India and Turkey are tipped to become the new key players in Australia’s global textile sourcing market.
Starting with India, she said the country's outlook as a major sourcing and apparel market is very strong.
According to India’s Department of Commerce, it’s merchandise exports to Australia in 2021-22 have grown by 168%, with similar growth seen in the first quarter of FY23.
The Indian apparel industry is also looking at 20% growth in exports to Australia in 2023-24. These figures can be attributed to the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) signed in April this year.
Further, India’s textile tradition is revered according to Holt, while offering sustainable benefits to its buyers.
“They also benefit from strong access to natural raw materials, such as silk, jute and cotton, and allows it a capability in artisanal and handmade products,” Holt said.
“They've got a comparative advantage in skilled labour, as well as access to the raw materials.
They also hold strength in the value chain, Holt added, from fibre to finished goods, with 95% of their production occurring domestically.
“The government's invested substantially in growing capability in technical textiles, which we may not associate with India so much,” she continued. “But this is a new area, and it's going to probably cascade right across the textile sector.
“The other good thing for India is that they recently concluded the economic and trade agreement with Australia - they've got one pending with the UK.”
Holt continued, saying that India also wants to grow integrated textile and apparel manufacturing products throughout the country.
“That's going to really boost capacity and capability and, I guess, different kind of advantages with access to particular ports and trade routes.”
At the International Sourcing Expo launching in Melbourne this November, Julie said India’s participation is around 25% higher than ever before.
“They're just really, really focused on understanding the Australian market, among others,” Holt said. “It's a big part of the export of the country, I guess.
“Probably smart to try and move in on a bit of China as well.”
With Turkey, Holt said that they are one of the top three suppliers to the European Union.
“They are looking very much at US,” Holt revealed. “I think Australia is now a focus country for them. They're a bit of a bridge between East/West aesthetic - they've got really quality production, they've got a real heritage.
“I think they've got a pretty mobile labour force and great design. Pretty, pretty strong digital economy.”
She said that in relation to the ISEA’s events, Turkey is emerging as a growing force.
“They're bringing the Istanbul Textile and Raw Material Exporters Association to the show [this year]. There's probably 12 companies participating from Turkey.
“And it's not just small stands. I mean, they're taking a major footprint in the show, because they've simply got so much to show, and they're very focused on Australia.”
China and the move towards sustainability
With China’s ongoing covid-zero policy, Holt said Australia's overseas manufacturing and sourcing will shift to countries with “familial links and accessibility.” These include countries like India and Turkey.
“Similarly, I think countries like Turkey, which is making efforts to engage with the Australian market through presence in trade shows… is probably well positioned to tap into consumer mindsets,” Holt said
These consumer mindsets, continued Holt, “have been shifting away from fast fashion and more towards garments that have a positive story behind them, and are likely to be more enduring.”
“India and Turkey particularly are probably prone to take in some new kind of contract, and because they're also known very much for their sustainability initiatives.”
According to Holt, circular fashion is a key concern for overseas manufacturers, which plays into the consumer demand for sustainable fashion that she said has become stronger than pre-pandemic sentiment.
“I think it's the interplay of the pandemic disruption for raw materials and consumer sentiment, with consumers being very mindful now about what they wear,” Holt said.
“Environmental and social priorities are suddenly writ large - they've had nominal discussions for years. Now it's quite central.”
As for China, Holt said that pressures are likely to ease by early next year and production will resume at some scale.
“Although, I think the production of the final value to the products will occur in other countries,” she said.
“[It's] going to be more centralised, other countries that can assist with not only core capability, but I guess more security, trade routes and logistics.
“And just because there's a whole new agenda of bilateral and regional trade manufacturing agreements to sign to store capacity, it puts in workforce security across the region.
“So I think they're going to be the beneficiary of shifts in production.”