The 2024 USFIA Fashion Industry Benchmarking Study offers a detailed examination of the current landscape and strategic priorities shaping US fashion companies' global operations. Released annually by the United States Fashion Industry Association (USFIA) in collaboration with the University of Delaware, this year's report unveils critical insights into how industry leaders are navigating unprecedented challenges, from economic volatility and geopolitical tensions to supply chain disruptions and regulatory complexities. The study, is a deep dive into the business landscape of 30 leading US fashion companies, paints a picture of an industry under pressure. As the fashion industry grapples with multifaceted risks and opportunities, the study provides a comprehensive analysis of key findings that underscore the sector's resilience and adaptive strategies amidst a rapidly evolving global environment.

Rising sourcing risks amidst economic uncertainty

The study reveals significant concerns among respondents regarding sourcing risks. Over half of the surveyed companies cited managing forced labor risks and navigating an uncertain US economy as their top challenges. The emergence of issues like shipping delays and geopolitical instability underscores the evolving landscape of global sourcing. Almost 45 per cent respondents rated “Protectionist trade policy agenda in the United States” as a top five business challenge, up from 15 per cent in 2023.

Sourcing diversification strategies

To mitigate these risks, US fashion companies are diversifying their sourcing bases. A notable trend is the increase in sourcing from multiple countries, with nearly 70 per cent of large companies now sourcing from 10 or more countries. This diversification aims to enhance resilience against disruptions while allowing flexibility in supply chain management strategies through 2026. Nearly 80 per cent said they plan to source from the same number or more countries till 2026, in order to reduce sourcing risks effectively.

Focus on forced labor mitigation

Addressing forced labor remains a critical priority. Companies have intensified efforts to comply with regulations like UFLPA, with an average implementation of six distinct practices to ensure supply chain transparency. Over than 90 per cent said they are “Making more efforts to map and understand our supply chain, including the sources of fibers and yarns contained in finished products.” Notably, there's been a significant increase in mapping entire supply chains, reflecting a proactive approach to risk management. And another 80 per cent said they “intentionally reduce sourcing from high-risk countries” in response to the UFLPA’s implementation.

Declining China exposure

Reflecting geopolitical tensions, a growing number of US fashion companies are reducing their dependence on China. This trend, accelerated by perceived risks and regulatory environments, sees 80 per cent respondents planning further reductions in Chinese sourcing over the next two years. Nearly 60 per cent no longer use China as their top apparel supplier in 2024.

Exploration of new sourcing opportunities

Amidst these shifts, companies are exploring new sourcing destinations. India has seen increased utilization rates, surpassing traditional Asian peers like Bangladesh. This year, more respondents reported sourcing from India (89 per cent utilization rate) than from Bangladesh (86 per cent utilization rate) for the first time since the survey began. Also, nearly 60 per cent said they plan to increase apparel sourcing from India over the next two years. Moreover, countries like Guatemala, Mexico, and Egypt are gaining traction, driven by proximity and trade agreements like CAFTA-DR and USMCA.

Importance of trade agreements

Respondents emphasized the renewal of trade agreements such as AGOA, crucial for sourcing from Sub-Saharan Africa. Overwhelming support exists for extending AGOA for another decade, highlighting its integral role in global supply chain strategies.

Recommendations and future outlook

Looking ahead, the study outlines a dynamic five-year outlook for the US fashion industry, emphasizing the need for adaptive hiring strategies and continued focus on social responsibility and sustainability. As companies navigate competitive sourcing landscapes and evolving regulatory frameworks, maintaining flexibility and proactive risk management will be paramount.

The findings also underscore the industry's trade policy priorities for 2024, advocating for clarity and support in navigating international trade dynamics. The 2024 USFIA Fashion Industry Benchmarking Study provides a comprehensive snapshot of the sector's current challenges and strategic responses. As global conditions evolve, US fashion companies are recalibrating their supply chains and operational strategies to foster resilience and sustainability in a complex global marketplace. This report serves as a crucial resource for stakeholders seeking insights into the evolving dynamics of the fashion industry and the strategic imperatives shaping its future.