Structural Changes in the Fashion Retail Supply Chain

What have the been the major changes in fashion retail supply chains, over the last decade or so?

There was a big shift, a few years back, from the Far East production, which is still a fairly large part of a retailer’s production base, but less so than it used to be about 10 or 15 years ago. The shift has now been closer to home as prices, in China especially, have risen. The standard of living in China has been going up, wages have been going up steadily, over the last few years. Therefore, the cost of manufacturing garments has also risen. Retailers have seen fewer and fewer reasons to go for the saving, in terms of cost, by producing in China. They have been going for the slightly more expensive production, closer to home. In the case of Mango, for instance, or Zara, we are talking about the Mediterranean region. Again, a little bit more expensive, compared to China, but at the same time, you are much closer, which gives you some other advantages that, of course, are worth money. For example, reaction times in being able to be closer to the fashion.

Last but not least, one of the other advantages is that if you go and buy, particularly in China, or in Bangladesh in some cases, you will, typically, deal with large factories, which are set up to do a large-run productions. Whereas, if you produce closer to home, often, your minimum quantity requirements are lower and that also gives the retailer a little bit more flexibility, when it comes to deciding what is a winning product and being able to make some kind of test for the product, before putting all your money into it.

So it is likely that the retailer would use the Far East, large scale, buying deep, for outerwear or jackets and those items which are always in stock or with stable demand? Then moving closer to home, you have the more fashionable, trendy items of clothing?

That’s a pretty good generalisation. You have two main reasons why you are producing in one country, rather than another such as the Far East or, let’s say, Turkey or maybe some European production. One of the reasons is just that you are faster to the market and you are able to order smaller quantities at any one time. The other reason is also that there are some specialisations, in terms of what garments are made in each country. You will find that for heavily constructed garments, such as outerwear, which have a lot of components, you don’t typically want to try and produce that in a country like Turkey, closer to home, because the cost advantage is still very much with the Far East, with regards to that.