US buyers rethink denim apparel sourcing with changed business environment!

From Jan.-Sep. ’19 to the same period of 2021, Bangladesh has gone past Mexico to become the top denim apparel exporter to USA
In just 2-year time, Pakistan has surpassed China and is about to overtake Vietnam too in denim category
China has seen a drastic decline as its exports of denim apparels to USA have reduced by more than half!
Unit prices of denim apparels sourced by USA (in dozen) have fallen by 4.38% in 2-year period

Denim has always been the king of casual wardrobe and USA, being the top garment importer in the world, has seen a tremendous uptick in its denim market over the decades. Amid the COVID-19 crisis, the US market for denim jeans is estimated at US $ 16.40 billion in 2021, as per Global Industry Analysts Inc., (GIA), which is around 25 per cent of the global denim apparel market.

The market value estimated by GIA is well supported by the import data released by OTEXA which says USA has imported US $ 2.54 billion worth of denim clothes in Jan.-Sep. ’21 period noting 28.56 per cent Y-o-Y growth. In terms of quantity, the import stands at 27.07 million dozen with a yearly growth of over 30 per cent. However, as compared to pre-COVID period, USA hasn’t yet seen normalcy in its denim apparel sourcing and declined by around 10 per cent in values and 5.74 per cent in quantities.

Of total denim apparel imports done by USA in Jan.-Sep. ’21, men and boys’ jeans shared US $ 1.27 billion value, noting 35.14 per cent Y-o-Y surge; while women and girls’ jeans accommodated US $ 1.20 billion, growing by around 23.70 per cent on yearly note. The remaining miniscule values were contributed by denim skirts and denim jackets.

The chart is prepared by the Data Analysis Team of Apparel Resources

Behind this data, there has been a massive disruption, during COVID-19, which indicates US denim buyers have changed their sourcing preferences. One of the major changes that has been witnessed is the shrinking unit prices that is likely to hurt exporting destinations if continued for a longer period. In Jan.-Sep. ’19, unit prices per dozen of the imported denim apparels by USA were US $ 98.26, which shrunk to US $ 95.10 in the same period of 2020 and prices further reduced to US $ 93.95 in the 9-month period of 2021.

This decline of 4.38 per cent in 2-year period signals towards the fact that US buyers are sourcing more of basic jeans commodities and searching for low cost destinations. And, seeing data, it is safe to say that the US buyers are on continuous lookout for alternative destinations in denim category.

Bangladesh, which was behind Mexico in 2019 by a fair margin, has now surpassed the Latin American country in 2021. Mexico ships high-fashion denim to USA but has declined by around 24.62 per cent in 2021 over 2019. At the same time, Bangladesh has seen significant increase of 23.74 per cent in 2021’s first 9-month period as compared to the corresponding period in 2019. (Refer Table 1)

The major difference between two is the prices they are offering to USA. The UVR of ‘Made in Bangladesh’ denim apparels were US $ 78.33 per dozen in Jan.-Sep. ’21, while Mexico shipped per dozen denim apparels at US $ 111.80.

In an era of massive cost-competitiveness, high UVR from Mexico as against USA’s average UVR for per dozen denim apparel import is definitely hurting its exports despite being in close proximity to the USA and getting an advantage of ‘zero’ duty rates for jeans shipped to USA under USMCA.

By further analysis of the data, it is found that China’s dominance has come to an end not just in terms of values and quantities but also in terms of unit prices that have been massively contracted in 2 years’ time. China stood 2^nd in the tally till Jan.-Sep. ’19 and the average UVR of the shipped denim clothing were US $ 97.14 per dozen, that are now reduced to US $ 75.24 per dozen (down 22.54 per cent) while the country has further slipped to 5^th position in the tally.

The advantages from China’s decline seem to be grabbed by Pakistan that has silently been making strong footprints in denim apparel exports to USA. The export values of Pakistan were just US $ 194.94 million in denim category during Jan.-Sep. 19 period, which has grown to US $ 275.89 million in Jan.-Sep. ’21. This value is now more than China’s export to USA and narrowly close to Vietnam’s figure (Refer Table 1) as both the countries have been witnessing sluggish denim shipment over the months!

Countries	Table 1: USA Import: Value-wise Shipment of Denim Apparels (Top 5 Destinations)
	January to September			% Change (2019 vs 2020)	% Change (2020 vs 2021)	% Change (2019 vs 2021)
	2019	2020	2021
Bangladesh	420.36	395.87	520.15	-5.83	31.39	23.74
Mexico	625.84	321.97	471.78	-48.55	46.53	-24.62
China	564.55	238.75	274.63	-57.71	15.03	-51.35
Pakistan	194.94	168.85	275.89	-13.38	63.39	41.53
Vietnam	263.04	267.38	278.69	1.65	4.23	5.95
World	2825.11	1978.12	2543.10	-29.98	28.56	-9.98

(All values are in US $ million)
Source: OTEXA
Compiled by: Apparel Resources

Countries	Table 2: USA Import: Volume-wise Shipment of Denim Apparels (Top 5 Destinations)
	January to September			% Change (2019 vs 2020)	% Change (2020 vs 2021)	% Change (2019 vs 2021)
	2019	2020	2021
Bangladesh	5230068	5035567	6638166	-3.72	31.83	26.92
Mexico	5670038	2850409	4218959	-49.73	48.01	-25.59
China	5814601	2648072	3651501	-54.46	37.89	-37.20
Pakistan	2116441	1909054	3143512	-9.80	64.66	48.53
Vietnam	2609704	2652707	2624118	1.65	-1.08	0.55
World	28727575	20796451	27078180	-27.61	30.21	-5.74

(All quantities are in dozen)
Source: OTEXA
Compiled by: Apparel Resources

Table 3: UVR Comparison of Denim Apparel Shipment to USA from Major Destinations

S. No	Country	UVR (in US $ per dozen)
		Jan.-Sep. ’19	Jan.-Sep. ’20	Jan.-Sep. ’21
1	World	98.26	95.1	93.95
2	Bangladesh	80.31	78.7	78.33
3	Mexico	110.43	112.97	111.8
4	China	97.14	90.09	75.24
5	Vietnam	100.67	100.9	106.37
6	Pakistan	92.39	88.4	87.86