23008_Nearshoring Report

Major retailer buyers are actively employing strategies to source products closer to their markets of consumption particularly as the supply chain interruptions over the past several years had a significant impact on many businesses. The 2023 BoF-McKinsey State of Fashion survey found that 65% of fashion executives said they were considering nearshoring to address supply chain challenges and that 85% of Western European respondents said that they were expecting to increase their supply from Türkiye as the preferred location for nearshoring, followed by Eastern Europe and Northern Africa.

BENETTON

Italian fashion retailer Benetton announced in 2021 that it had shifted more than 10% of its production from China, Vietnam, India, and Bangladesh to European production facilities that year and was aiming to cut down its production by half in Asia by the end of 2022, Instead it plans to focus on markets like Tunisia, Serbia, Croatia, Egypt, and Türkiye for manufacturing, which the company believes will provide more control over production and transportation costs as well as meaning shorter lead times and less risk of supply chain disruptions.

APPAREL & TEXTILES Imports of apparel and textiles into Europe totalled USD 335 billion in 2021 and whilst the majority of this was imported from China, Bangladesh and Vietnam, a significant – and growing – proportion is from nearby countries such as Türkiye and Morocco as well as intraEurope trade from countries including Germany, Italy, Spain, France and Portugal.

Nearby countries such as Türkiye and Morocco as well as CEE countries including Poland, Romania and Bulgaria benefit from low labour costs , even relative to costs in farther-away locations such as China, India and Vietnam. Nearer countries also offer competitive dynamics, especially when factoring in other lower transport costs and many also enjoy low or no import cost environments, either being within the EU or benefiting from wide-ranging trade agreements involving with no or low tariffs and without trade limits for imports from these countries which allow relatively low cost of movement of goods. They also enjoy physical proximity to markets in Europe (as therefore lower transport costs and less potential supply chain disruption). This geographic closeness and therefore shorter lead times from factory to shop floor means that locations within or near to Europe are particularly attractive for fast fashion businesses for which the swift production of clothing and footwear is essential for their business models.

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