Outlook 2025: What’s plaguing the apparel supply chain?
16-12-2024
OUTLOOK 2025: WHAT’S PLAGUING THE APPAREL SUPPLY CHAIN?
Challenges in the apparel sector in 2025 will come from stiffer competition with the rise of cheap Chinese online retailers, tougher incoming legislation on environmental and social responsibility, and ever-evolving trade policy.
Just Style has tapped into its pool of apparel industry experts who all agree on one thing: 2025 is going to be anything but plain sailing as competition heats up and the industry battles rising costs and tougher rules on environmental and social responsibility.
2025 apparel challenge: Stiff competition
Matthijs Crietee, IAF secretary general, tells Just Style with the likes of Shein and Temu, competition has grown “several tens of billions stronger and the pathway to success by way of business as usual becomes much narrower,” while Matt Jeffers, CEO of Accenture concedes the likes of Shein and Temu have “cornered the value end of the market.”
“Whilst this trend continues, striking a balance between protecting profit margins and retaining customer loyalty will become increasingly challenging,” he says.
And the age-old tactic of pressuring suppliers to drop prices in order to remain competitive is no longer employable, warns Crietee.
While plans around cracking down on the de minimis loophole, under which Shein and Temu are said to benefit, are being weighed by the US, Dr Sheng Lu, professor at the University of Delaware says the proposals being considered — which suggest removing textile and apparel products entirely from de minimis — could be an “earthquake” for other fashion companies utilising the rule heavily.
2025 apparel challenge: Legislation looms
As the fashion sector looks to make good on its promise of lowering its impact and ultimately meeting its commitment under the Paris Agreement, the focus – nay, pressure – on sustainability is inevitably ramping up. Globally, governments are now imposing stricter rules and laws that will hold fashion brands and retailers accountable for their impact on the environment and the goings on in their supply chains.
Robert P. Antoshak, partner at Gherzi Textil Organisation, warns apparel brands must gear up for regulatory changes “by proactively adapting to expected regulations”, especially those related to sustainability and labour practices.
MAS Holdings chief operating officer Shakthi Ranatunga, notes stricter sustainability regulations are emerging globally, creating a challenge but also an opportunity for those that can “lead through innovative, transparent practices that align with evolving expectations.”
While Leyla Ertur, head of sustainability at H&M is hopeful the legislation “levels the playing field” when it comes to sustainability.
She says: “We know that increased legislative attention on the industry presents opportunities and can help to accelerate the progress for us to jointly address industry-wide issues. At a time when we need to really start walking the talk, sustainability action will move from being voluntary to mandatory, and all brands will have to start taking action. Ultimately, it will help customers to make informed decisions about where they spend their money, as well as accelerate the transformation of our industry.”
However there are concerns around the ‘complexity’ of navigating the new and incoming regulations.
Steve Lamar, CEO and president of the American Apparel and Footwear Association says costs are expected to be elevated as the industry attempts to balance incoming tariffs and manage regulatory requirements.
“And we are doing this while working to keep fashion affordable, in addition to being responsible and safe. In the US, we’ve seen a host of state-level chemical, environmental, reporting, and due diligence requirements, and proposals, and expect individual states to continue pushing hard in this area, particularly if the Federal Government is unable to craft national strategies to match what is occurring nationally in other parts of the world.”
Crietee meanwhile is concerned by a combination of “heavy legislation and weak enforcement” which he adds could create unfair competition, punishing the companies that are making investments in sustainability.
And Rick Horwitch, chief of sustainability and supply chain strategy at Bureau Veritas Consumer Services calls for more “clarity and guidance” on what these regulations mean.
But Lu says regardless of how companies feel about the incoming legislation, all apparel brands and retailers must look at doubling down on sustainability objectives: “It is an irreversible trend for fashion companies to allocate more resources to comply with upcoming or newly implemented sustainability and environmental-related legislation, whether from the EU or the US state level. Unlike in the past, when being more sustainable only meant adding operational costs or paying a “one-time fee,” today’s new generation of sustainability-focused regulations — such as Extended Producer Responsibility (EPR) — requires companies to shift their mindset and demonstrate continuous improvement.”
2025 apparel challenge: Trade policy changes
Fashion brands and retailers, particularly in the US, are bracing for more expensive trading as US President Donald Trump announced he would be hiking tariffs on China, Canada and Mexico from Day 1 of his term in office.
Lu points out that today’s fashion business is highly global and relies heavily on the frequent movement of goods and services across borders. Thus, the uncertain and protectionist nature of US trade policy during Trump’s second term could present significant challenges to the fashion industry in 2025.
“Of particular concern is that Trump’s new tariff actions would raise fashion companies’ sourcing costs, create additional inflationary pressure, reduce US consumers’ purchasing power on clothing, and trigger retaliatory trade measures from US trading partners, ultimately hurting the US economy. Notably, when the 7.5% Section 301 tariff was imposed on selected Chinese clothing products in 2018, the US Consumer Price Index (CPI) growth was relatively low at 1.9%.
However, imposing a 20% global tariff, a 60% tariff on Chinese products, and the existing 15%-30% regular tariff on clothing when the CPI is historically high is like “adding fuel to the fire.”
However, imposing a 20% global tariff, a 60% tariff on Chinese products, and the existing 15%-30% regular tariff on clothing when the CPI is historically high is like “adding fuel to the fire.”
He also wonders what the Trump Administration plans to do with the expiring African Growth and Opportunity Act (AGOA) and the Haiti HOPE/HELP Act which he says has been “highly beneficial” to the US apparel and textile sector.
Crietee agrees tariffs will be problematic noting they “simply transfer money from companies and consumers to governments”
“Given the predominant balance of power in apparel supply chains, I fear that a major part of this money will come from manufacturers,” he adds.
But there is a general consensus we can expect to see more on the nearshoring front in 2025, a trend which may be accelerated as a result of tariff proposals.
Randy Carr, CEO and president of emblem and patch manufacturer World Emblem says: “The recent port strikes have only underscored the need for more localised production that reduces the reliance on distant, often disrupted supply chains. We expect this shift to improve production agility and strengthen supply chain resilience for US companies, with substantial reductions in lead times and transportation costs.
“By relocating production to neighbouring countries like Mexico, businesses can reduce transportation costs, shorten lead times, and gain greater oversight of manufacturing processes. Nearshoring has the potential to boost the growth of Mexican manufacturing exports to the US from $455bn today to an estimated $609bn in the next five years, according to Morgan Stanley Research.”
However, Jeffers says it is important to point out that nearshoring will put further pressure on price points and will take effect slowly, especially in new countries such as those in North Africa.
AAFA’s Lamar believes knowledge and partnership will be key in navigating this and says companies need to foster greater collaboration with their supply chain partners, who will be responsible for managing new diligence and responsible and diverse sourcing programmes.
“Fast changing and comprehensive regulations, and an uncertain tariff future (including the likelihood that new US tariffs trigger retaliatory tariffs), will mean supply chain partners need to be increasingly connected to one another and with appropriate government officials so they can both inform those policies while they are being crafted and respond to new policies that take effect.
“Winners in 2025 and beyond will be those who are ready to embrace the challenges, and who can do so while staying focused on delivering to their competitive advantage, whatever that may be.”
Just Style also consulted its experts on how the apparel sector can seize any opportunities arising in 2025.
By Just Style
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