Fashion companies are moving production back to nearby countries - because shorter distances offer higher benefits than lower labor costs.
It is easy to find out where our T-shirts, shirts, blouses and jeans are sewn. Just take a look at the label: Made in Bangladesh, Pakistan or China.
Most of the clothing in the low and medium price segment has been sourced from Asia for many years. The main reason for this is that wages are lower there. But the production sites are moving back closer to Europe, as shown in a recent study conducted by the management consultancy company McKinsey. This trend is referred to as «Nearshoring».
For this study, acting in collaboration with RWTH Aachen and the Digital Capability Center Aachen, McKinsey calculated the potential of automation technologies. In addition, 188 experts from the fashion industry were interviewed. The result: Four out of five procurement managers in fashion industry expect a massive shift in production away from overseas regions, particularly Asia, to European and Mediterranean countries in the next few years.
According to the study, producing a pair of jeans in Turkey costs three percent less than in China if you add up the costs for transport and import. This is because the delivery times are extremely shortened, says study director Karl-Hendrik Magnus. Thus, Fashion companies can react much faster to trends and adapt their collections accordingly. It takes up to 30 days for a piece of clothing from Southeast Asia to travel by ship before it arrives in the western stores - while transport from Turkey only takes three to six days.
The faster fashion arrives at the store, the better
Shopping is a pastime for many people. Many a person strolls through boutiques almost every week and looks out for new trends. The retailers have reacted to this behavior. Many fashion chains such as H&M therefore offer new clothes every week. The faster trendy fashion is in the store, the more products can be sold at full price without discount campaigns.
Automation will be an additional boost for production in Europe. The clothing industry is still lagging behind other sectors in this area. However, some technologies are now ready for the market, for example robots and laser technologies for processing jeans. According to the study, automation could save 40 percent of working hours on complicated clothing over the next decade - and even up to 70 percent on simple items. McKinsey says it could take only 11 minutes to produce a simple pair of jeans instead of the currently 36 minutes.
Another advantage of nearshoring is the decrease in environmental pollution. This is because nearshoring enables more production on demand, says McKinsey expert Magnus. «This means less clothing waste.» He expects sustainability to become a key reason for fashion customers to buy a product by 2025.
This trend is confirmed by Manuela Beer, head of PKZ. «Customers are increasingly paying attention to where the products come from.» They often ask whether the goods were manufactured in Europe. PKZ therefore increasingly produces knitwear, shirts, suits and jackets under its own brands Paul Kehl and Paul in Europe, namely in Italy, Portugal and Eastern Europe.
Europe as a production location also makes it possible to react to weather fluctuations, says Beer. Another advantage is that the production conditions can be controlled better. At the same time, the competition is getting tougher. The fashion companies therefore check their processes. Everything has to go faster and the companies aim at achieving improved quality assurance. Luxury labels such as Prada, Gucci or Louis Vuitton also mainly produce in European countries.
Pascal Weber, spokesman for the fashion house chain Chicorée, emphasizes: «Our main production countries are still China and Bangladesh. However, production is increasingly shifting back to Europe.» Chicorée is currently producing over 30 percent of its clothes in Italy, Greece or Turkey. The department stores Manor and Globus are also increasingly producing their own brands in Europe.
Calida productions made in Europe to 80 percent
The fashion chain H&M is continuously increasing the proportion of its European suppliers, whereby 80 percent of the brand’s goods are still sourced from Asia. At the Swiss company Calida, on the other hand, the share of productions made in European is already more than 80 percent of the company’s total productions. The company plans to expand this even further.
Other Swiss fashion labels have taken their steps even further. The St. Gallen fashion house Akris mainly produces its products in Zurich and Mendrisio, while the underwear manufacturer Zimmerli has its own factory in Ticino.