Following a year of dampened demand, the first quarter of 2024 has seen a rise in sourcing activity both overseas and in nearshoring locales, and that could represent a light at the end of the tunnel for retail.
China has been a big beneficiary of the revival in business, according to QIMA’s Q2 2024 Barometer, released this week. While the sourcing superpower saw its exports slip by massive margins—overall U.S.-bound exports plummeted 13 percent last year, the largest drop in three decades—Q1 revealed evidence of a bounce back.
In its survey of more than 800 businesses, QIMA found that U.S. demand for inspections and audits of China-based factories and suppliers grew by 12 percent year over year. The trend mirrors the results of the group’s latest buyer survey, wherein 59 percent of U.S. buyers said they plan to increase business volumes within the country this year. OTEXA data from February showed U.S. sourcing of apparel from China up 17 percent from the year-ago period—a notable jump after a year-long slump.
European buyers rebounded even more quickly, with buyers from Germany, France and the Netherlands all upping their China inspection and audit requests by 30 percent or more in the first quarter. The growth tracks: 68 percent of European buyers queried in QIMA’s March Sourcing Survey said they planned to maintain or increase sourcing volumes from China.
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Interest in the country’s sourcing sector has also remained high across Asia, Central America and South America, with double-digit inspection and audit demand growth across these markets.
China is far from the only recipient of new sourcing business, though. Following a “slow” 2023, QIMA said demand for global textile and apparel inspections grew by 20 percent in Q1.
Western brands bumped up procurement from Bangladesh, “instilling optimism that the country’s export sector will perform better this year compared to 2023, when a political crisis halted a significant portion of Bangladesh’s manufacturing,” QIMA analysts wrote. Unrest plagued the country’s garment industry as factory workers violently clashed with security forces over the country’s minimum wage.
EU nearshoring regions, like Turkey, Morocco, Egypt and Jordan, also saw double-digit expansion in audit and inspection demand. Notably, India—one of the landscape’s more established and prolific players, saw much slower growth in interest (7 percent) from Western buyers.
Despite the upward trajectory of China and South Asian sourcing locales, nearshoring has gained ground in Western markets—especially Europe—as buyers surveyed by QIMA indicated it would when surveyed several months ago.
As of Q1, home and neighboring supplier markets account for 15 percent of all purchasing by European brands and retailers, up from 13 percent in 2023 and 11 percent the year prior, the group’s research showed. Suppliers in France, Germany and Bulgaria saw stronger demand from within the EU, along with traditional sourcing regions around the Mediterranean like Jordan and Egypt. “The latter suggests that European businesses’ supplier partnerships in the region are staying resilient in the face of the current geopolitical risks in the Red Sea region,” the report said.
U.S. brands and retailers are realizing their nearshoring ambitions at a slower pace. While 54 percent previously told QIMA that nearshoring and reshoring would represent significant elements of their 2024 supply chain strategies, year-over-year growth in demand for inspections and audits in the Western hemisphere was only marginal, the group said, with Mexico leading the charge as the top sourcing destination for North American buyers.
Still, the “swell in procurement” has led to gains across the globe, analysts wrote. The increased interest in inspections and audits can be tied to ambitions to increase and expand sourcing. Multiple factors are likely contributing to that demand, from “fading recession fears and improved consumer sentiment in the West to inventory replenishment following the holiday season, as well as brands relying on larger shipments to mitigate longer freight transit times on routes affected by the Red Sea crisis.”