The sourcing environment facing US fashion companies has significantly shifted over the past few years, from Covid-related supply chain disruptions, hiking inflation and economic slowdown, to rising geopolitical tensions.

A content analysis of the annual reports of 30 of the largest US fashion brands and retailers from 2018 to 2023 aims to identify these companies’ most critical evolving sourcing practices, including their sourcing destination adjustment, primary sourcing factors, and emerging sourcing-related “hot topics.”

The findings provide critical market intelligence, informing US fashion companies about their peers’ emerging sourcing trends and popular practices. The results can also help policymakers understand what’s behind the macro trade statistics and develop appropriate policies supporting fashion companies’ global operation and business growth in 2024.

Sourcing diversification versus concentration 

First, maintaining a relatively diverse sourcing base remains common among US fashion companies. Results show that large-size companies today typically source from more than 20 countries. For example, company number four, a leading US sportswear brand, says: “As of 31 May 2023, our contract manufacturers operated 291 finished goods apparel factories located in 31 countries.” Likewise, company number six disclosed that its "products were primarily obtained from approximately 340 independent contractor manufacturing facilities in approximately 35 countries.” Company number nine, a well-known specialty chain brand, says its "vendors have factories in about 25 countries.”  

One critical factor behind fashion companies’ sourcing diversification strategies is that no single supplying country is “perfect,” given the increasingly complex sourcing factors. For example, according to the 2023 Fashion Industry Benchmarking Study released by the US Fashion Industry Association this summer (2023), while fashion companies rated many Asian supplying countries as competitive regarding costs and flexibility, there were common concerns about social and environmental compliance risks associated with sourcing from the region. In comparison, in general, sourcing from Western Hemisphere countries could offer US fashion companies the benefits of speed to market. However, the relatively high production costs and lack of production capacity often make it challenging to place large-volume sourcing orders or source items beyond basic apparel categories from the region.  

Instead, sourcing diversification allows fashion companies to balance various sourcing factors. For example, according to company number 19, a prominent US fashion company with a diverse portfolio of brands, “the (sourcing diversification) approach provides us with the greatest flexibility in identifying the appropriate manufacturers while considering quality, cost, timing of product delivery and other criteria.”  

Another critical factor motivating fashion companies to diversify their sourcing base is the need to mitigate the increasing risks in the supply chain. For example, over the past few years, many US fashion companies have experienced supply chain disruptions caused by unpredictable incidents resulting from Covid-related lockdowns and geopolitical tensions to new trade regulations. Thus, sourcing diversification enables companies to adapt quickly to market uncertainties and enjoy supply chain flexibility and resilience. According to company number 11, a well-known brand focusing on underwear products its "balanced approach to product supply, which relies on a combination of owned, contracted and sourced manufacturing located across different geographic regions, increases the efficiency of our operations, reduces product costs, diversifies risk and offers customers a reliable source of supply.” 

Second, while US fashion companies are not necessarily leaving any particular countries they source from, many have substantially reduced the number of vendors they work with over the past few years. Specifically, out of the 30 fashion companies the study examined, over 60% explicitly mentioned they consolidated their sourcing base at the vendor level from 2017/2018 to 2022/2023, although the degree varied. For example: 

• Company number 4, a leading sportswear brand, cut its contracted factories from 363 to 291 (or down 19.8%) 
• Company number 6, which owns several jeans and sportswear brands, reduced its contracted factories from 1,000 to around 340 (or down 66%) 
• Company number 9, a well-known specialty clothing store, cut its vendors from 800 to 250 (or down 68.8%)  
• Company number 26, a specialty clothing store targeting the youth, cut its vendors from 150 to around 119 (or down 20.7%) 
• Company number 28, a discount department store, cut its vendors from 3,100 to around 2,800 (or down 9.7%). 

Associated with the trend of “country diversification and vendor consolidation,” US fashion companies are increasingly interested in working with “super vendors,” e.g., those with multiple country presence or vertical manufacturing capability. The use of “super vendor” can also be observed in fashion companies’ willingness to give more sourcing orders to their top suppliers. For example, company number 18, a casual and outdoor wear retailer, reduced its vendors from 200 in 2017/2018 to 110 in 2022/2023, but increased the cap of sourcing orders for its top 10 vendors from 40% to 47% over the same period. Similarly, company number 9, a specialty clothing chain, allowed its largest vendor to supply around 8% of total products in 2022, up from 5% in 2017/2018. Overall, working with “super vendors” allows US fashion companies to strengthen their relationship with key vendors without losing the benefits of sourcing flexibility, agility, and maintaining a geographically diverse sourcing base.  

Shifting apparel sourcing base 

In line with official trade statistics, US fashion companies’ apparel sourcing base has shifted substantially over the past few years in response to the evolving business and regulatory environment. Specifically: 

On the one hand, many US fashion companies have intentionally reduced their apparel sourcing from China, given the US-China tariff war, deteriorating bilateral relations, and the forced labour concerns with China’s Xinjiang region (XUAR). Specifically, more than one-third of the 30 examined companies explicitly mentioned their strategy to reduce finished garments sourcing from China. For example: 

• Company number 5, an iconic US apparel brand, used to source around one-third of its apparel from China. However, only 19% of the company’s products came from China in 2023
• Company number 2, an activewear retailer, used to make about 10% of its products in China. However, as of 2022, China was no longer among the company’s top 5 suppliers.  
• Company number 19, which owns a diverse portfolio of clothing brands, cut its apparel sourcing from China from 50% to just 23% of the company’s total. 
• Company number 22, which focuses on childrenswear, reduced its sourcing from China from 19% to a single digit. 

Furthermore, several US fashion companies indicated their “reducing China exposure” strategy would continue, implying China’s market share in the US apparel import market could decrease further. For example, company number 17, which owns a broad portfolio of licensed brands, says, “…to maximise regional opportunities and mitigate our potential exposure to risks associated with new duties, tariffs, surcharges, or other import controls or restrictions, as it has been the case with China, where we have been reducing the amount of production over time in favour of production in other parts of Asia that better serve our sourcing strategy.” Company number 19 adds, “We expect that the percentage of our products sourced from producers located in China will decrease in the future.” 

Nevertheless, even though fewer finished garments are coming from China, US fashion companies admit that China will continue to play a critical role as a textile raw material supplier as no immediate practical alternative is available. For example: 

• Company number 2, an activewear retailer, says, “During 2022, 43% of our fabrics originated from Taiwan, 19% from China Mainland, 16% from Sri Lanka, and the remainder from other regions.” 
• Company number 13, a sportswear giant, explains that “In Fiscal 2023, our top five suppliers provided approximately 38% of the fabric used in our apparel and accessories. These fabric suppliers have primary locations in Taiwan, China, Turkey and Malaysia” 
• Company number 19 says, “While we are working to diversify our supplier base and reduce the concentration of manufacturing from China in the future, the majority of fibres included in our apparel and other products currently originate in China even if the products are manufactured elsewhere.” 
• Company number 20, a specialty clothing chain focusing on trendy and fashionable items, says, “During fiscal 2022, we sourced most of our finished products with partners and suppliers outside the US and we continued to design and purchase fabrics globally, with most coming from China.” 

In other words, because textile manufacturing relies heavily on capital and technology, building textile production capacity outside China will be considerably longer and more challenging than finished garments.  

On the other hand, in line with trade statistics, US fashion companies consider other Asian suppliers, such as Vietnam, Bangladesh, Cambodia, and Indonesia, as their top choices as China’s alternatives. For example, company number 4, a leading sportswear brand, substantially increased its apparel sourcing from Vietnam from 16% in 2017/2018 to 29% in 2023. Likewise, company number 9, a well-known specialty clothing store, did not source much from Vietnam and Indonesia, but it placed 30% and 17% of its sourcing orders with the two countries in 2022, respectively. In comparison, few fashion companies explicitly mentioned moving their sourcing orders from China to Western Hemisphere countries or other regions. 

Furthermore, considering Asian countries’ demonstrated competitiveness in production costs, efficiency, and flexibility supported by the region’s highly integrated supply chain and unparalleled production capacity, it is unlikely that US fashion companies will significantly reduce their sourcing from Asia, at least in the short to medium terms. 

Emerging 2024 sourcing strategies

Fashion companies’ annual reports also repeatedly mention several themes concerning their evaluation of the overall sourcing environment that deserve our attention. 

Geopolitics  

Geopolitics generally refers to “geography, economics, and demography on the politics and especially the foreign policy of a state.” Specifically, US-China relations, nearshoring from the Western Hemisphere, and the Russia-Ukraine conflict are on the radars of many US fashion companies. 

First, as previously highlighted, the deteriorating US-China relations, escalated trade tensions expanded from tariffs to forced labour, and the potential trade disruptions have concerned US fashion companies significantly. Multiple brands have expressed their worries. For example: 

• Company number 1, a North American apparel manufacturer, says, “These changes (tariff changes), or the imposition of any further duties on Chinese goods, could negatively impact our operations.” 
• Company number 9 mentions, “US-China relations, and recent tariffs and bans imposed by the United States and other countries has introduced greater uncertainty with respect to future tax and trade regulations.” 

• Company number 19, once again explains that “Significant tariffs or other restrictions placed on Chinese imports and any related countermeasures that are taken by China could have an adverse effect on our financial condition or results of operations.” 

Notably, US fashion companies regard sourcing from China as increasingly risky, with the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) in June 2022. Generally, UFLPA prohibits importing any textile and apparel into the US that was “manufactured wholly or in part with forced labour in the People’s Republic of China, especially from the Xinjiang Uyghur Autonomous Region (XUAR).” As Company number 1 says, “There is nonetheless a risk, given the presence of XUAR origin cotton in global supply chains, that our business could be affected by these restrictions.” Company number 2 adds, “The Uyghur Forced Labor Prevention Act and other similar legislation may lead to greater supply chain compliance costs and delays to us and to our vendors.” Company number 14 reiterates, “Trade regulations issued by the US government related to forced labour in the Xinjiang Uyghur Autonomous Region of China and other regions may affect our sourcing operations and the availability of raw materials.” 

However, as a subtle change, US fashion companies appear to be less “enthusiastically” advocating for removing the Section 301 punitive tariffs on imports from China. This shift could be because of the forced labour concern tied to apparel “Made in China” or the substantially reduced trade volume.  

Second, due to the decoupling and derisking from the China movement, US fashion companies have begun actively exploring nearshoring sourcing opportunities in the Western Hemisphere, particularly from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). For example, Company number 1, the North American manufacturer, disclosed that “(our) company relies on a number of preferential trade programmes (…) including the Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR (…) Collectively, these agreements strengthen US economic relations and expand trade with Central America, the Dominican Republic, and Haiti.” Company number 10, an American multinational off-price department store corporation, also says, “contracting in the Western Hemisphere gives us greater flexibility, shorter lead times and allows for lower inventory levels for the US market.” 

Consistent with companies’ evaluation, the US Fashion Industry Association’s 2023 Fashion Industry Benchmarking study also found that “Over 80% of respondents report sourcing apparel from CAFTA-DR members in 2023, a notable increase from 60% in the past few years.”  

Third, some US fashion brands have also voiced concerns and challenges associated with their Vietnam sourcing, often caused by Vietnam’s heavy reliance on China for textile raw materials. For example, company number 26 notes, “during the pandemic, (our) company increased its air freight usage in response to inventory delays imposed by temporary factory closures in Vietnam.” Company number 15, a global outdoor and active lifestyle brand, echoes, “Our exposure to these risks is heightened in Vietnam, where a significant portion of our contract manufacturing is located.” 

Relatedly, a Hinrich Foundation study in July 2023 raised a red flag about apparel “Made in Vietnam” being exposed to Xinjiang cotton. According to the study, China accounted for nearly 30% of Vietnam’s cotton imports in 2021, and differentiating between Xinjiang cotton and those imported from other regions proved incredibly difficult. 

Additionally, several US fashion companies regard the Ukraine-Russia war as another major geopolitical factor that may affect their global business. For example,  

• Company number 5 says, “We have also voluntarily elected to suspend operations in Russia in protest of the conflict.”  
• Company number 6 states, “In response to the ongoing conflict in Ukraine, all (company) operated retail locations within Russia are permanently closed.”  
• Company number 9, a well-known specialty chain, describes specific concerns with Russia & Ukraine, “The ongoing conflict between Russia and Ukraine has caused and continues to cause instability and disruption in global markets.” 

Sustainability and social responsibility  

With consumers and society’s growing awareness of apparel production and consumption’s environmental and social impacts, sustainability and social responsibility have become critical components of fashion companies’ sourcing strategies. 

It is noteworthy that aside from climate change and forced labour, which are typically addressed as risk factors, US fashion companies generally hold an optimistic and forward-looking perspective for sustainability, such as new technologies and endeavours toward more sustainable production and sourcing. Specifically:  

First, US fashion companies increasingly regard forced labour in the supply chain as a significant sourcing risk, even without specific references to the UFLPA and China. For example:  

• Company number 1 notes, “Forced labour is a general human rights risk in the manufacturing industry throughout the supply chain.” 
• Company number 4, a leading US sportswear brand, expresses that “The employment of foreign migrant workers specifically creates an increased risk of forced labour.”  

• Company number 7 says, “The violation, or perception of any violation, of any labour, immigration, manufacturing safety or other laws by any of our vendors or their US and non-US manufacturers, such as use of child labour, (…) could damage our brand image or subject us to boycotts by our customers or activist groups.” 
• Company number 11 declares, “We have a zero tolerance policy against issues such as child labour.” 
• Company number 12, a lifestyle specialty retailer for young adults, indicates “We are very clear with our vendors that we have zero tolerance for forced labour.” 

Second, US fashion companies increasingly emphasise climate change as a significant risk factor. Notably, among the 30 brands this study assessed, 25 (approximately 83%) explicitly reference climate change as a threat to their supply chain stability and may incur higher sourcing costs. For example: 

• Company number 1 states, “Strategies addressing climate-related risks and ensuring business continuity are necessary, now more than ever.”  
• Company number 4 says, “Climate change may also exacerbate challenges relating to the availability and quality of water and raw materials.”  
• Company number 11 claims, “Our business is susceptible to risks associated with climate change, including through disruption to our supply chain and the productivity of our contract manufacturing, potentially impacting the production and distribution of our products and availability and pricing of raw materials.”  
• Company number 17 writes, “Our business is susceptible to risks associated with climate change, including potential disruptions to our supply chain and impacts on the availability and costs of raw materials.”  

On the other hand, US fashion companies began to more proactively take actions to respond to consumers’ growing calls for sustainable apparel production and sourcing. Terms such as using preferred or recycled materials, supply chain transparency and traceability, and emerging sustainability technologies have been more frequently mentioned in companies’ annual or ESG reports. For example: 

• Company number 17 says, “Increase the usage of environmentally preferred materials to comprise 32.6% of the brand’s global materials footprint.” 
• Company number 2 says, “Our goal is to use preferred materials in 100% of our products by 2030.”  
• Company number 9 states, “We collaborate with suppliers to increase the supply of preferred raw materials.” 
• Company number 12 reports that the, “(Company) is committed to transitioning to more sustainable materials to reduce our environmental impacts through an emphasis on recycled and responsibly sourced fibres.” 

The 2023 USFIA Fashion Industry Benchmarking Study also found that nearly 60% of surveyed US fashion companies say at least 10% of their sourced apparel products already use recycled or other sustainable textile materials, with another 60% of surveyed companies planning to substantially increase sourcing apparel made from sustainable or recycled textile materials of the next five years. 

Meanwhile, US fashion companies attach great importance to improving supply chain transparency and traceability. Compared to the past, fashion companies are more willing to invest in new technologies and digital tools, allowing them to map supply chains and achieve sustainability goals more effectively. For example: 

• Company number 12, a lifestyle specialty retailer for young adults, mentions, “Transparency is essential to addressing the greater issues that plague supply chains in our industry… Our 3D visualization technology increases right-first-time product. Use of this technology has saved approximately 8,000 samples, 16,000 yards of fabric waste.” 
• Company number 19, a prominent US fashion company with a diverse portfolio of brands, says, “We have prioritised increasing traceability within our supply chain.”  
• Company number 15 says, “(We) began working with the Open Apparel Registry (OAR) to expand supply chain disclosure capabilities via our Transparency Map.” 

• Company number 9 states that “By validating our sustainability claims, we avoid greenwashing while also building trust with customers… Higg FEM participation within and beyond our apparel factories and fabric mills and assessing scope three GHG emissions in certain parts of our supply chain…” 

US fashion companies have actively engaged with industry associations and other industry communities outside the company to stay informed about sustainability trends and learn best practices. For example: 

• Company number 19, says, “(We) have membership in Better Cotton (BC), the world’s leading sustainability initiative for cotton” and “membership in Textile Exchange, a global non-profit organisation.” 
• Company number 9 mentions, “(We) external commitments to The Fashion Pact and the UNFCCC Fashion Industry Charter for Climate Action.” 
• Company number 2 says, “(We are) contributing as a lead funder in the $250m Fashion Climate Fund established by the Apparel Impact Institute.” 

In conclusion, US fashion companies’ sourcing strategies will likely continue to evolve in 2024 and beyond. However, critical trends identified in this study, such as reducing China exposure, mitigating sourcing risks through diversification, strengthening the relationship between vendors, addressing forced labour and geopolitical risks, and building a more sustainable and transparent supply chain, will be worth keeping an eye on.  

About the authors

Emilie Delaye is a world scholar and research assistant at the University of Delaware. Dr. Sheng Lu is an associate professor and graduate director of fashion and apparel studies at the University of Delaware.