Why Latin America is the Best at Small Brand Apparel
The impact of COVID-19 raised awareness about the environmental consequences that consumption habits have on the planet. Companies that demonstrate purpose-driven solutions and sustainable commitments as part of the core business are increasing to remain relevant. Important regional retailers, like Cencosud in Chile and Grupo Éxito in Colombia, are addressing sustainable concerns by offering consumers to receive their old clothes in exchange for vouchers or including second-hand brands and small entrepreneurs in their marketplaces. Apparel and footwear players were forced to accelerate digitalisation to remain competitive. According to Euromonitor International, the apparel and footwear industry sales through e-commerce increased 126% in 2020. Although consumers' preferred mode of shopping remains in-person to purchase apparel and personal accessories products in 2021, online options like phone and computer purchases keep gaining ground in Latin American with 42% and 36%, respectively according to Euromonitor’s digital consumer survey. Pandemic Effects on Small Brand Apparel Due to the effects of the pandemic, consumers are increasing their interest in brands that offer a combination of technical, stretch and street attributes for a more relaxed look. Prolonged confinements diminished social occasions and the accelerated adoption of work from home is promoting the transition towards a more 'carefree' appearance of daily life.
Online shopping is here to stay as consumers have noticed and increasingly value the convenience and security of online services as a consequence of the pandemic. Latin American digital wallets like Fpay, Mercado Pago and Tpaga, will help expand the online opportunities to the unbanked population and increase consumers' brand loyalty.
Mexico Leads the Way
According to a forecast by EY Rapid-Growth Markets, by 2022 Mexico will be home to 10 million RGM (rapid growth markets) households with an annual income of more than US$ 35,000. This indicates that Mexico will be self-sufficient to concentrate on its domestic market to drive demand. Also, this will make the country a huge investment hub. The textile and apparel sector of Mexico is one of the largest manufacturing sectors of the country's economy.
In the recent past, fast fashion brands like H&M, American Eagle, Forever 21 etc have shown interest in expanding business in Mexico. The country has also urged these brands to source apparel from Mexico instead of Asian countries. The textile and apparel sector of Mexico has earned an esteemed reputation for adapting to changes in demands and trends, which definitely augurs well for the industry.
1. Mexico’s Potential
The textile and apparel industry contributes 4.7% to the Mexican Gross Domestic Product in terms of manufacturing. Textile pitches in with 1.3% whereas apparel accounts for 2.5% of the overall figure. These sectors also generate approximately 20% employment in the country. The country also takes pride in being the first Latin American supplier of textile products to the United States.
Currently, Mexico exports synthetic fiber mixed with artificial fiber like rayon. Mexico's fabrics with textured polyester dyes are also in demand globally and the county is also manufacturing and exporting upholstery fabrics and industrial fabrics for the automotive industry to neighboring countries. Textile machinery and equipment is another growing sector as Mexican textile and apparel manufacturers focus on the latest technology to survive competition from other developing nations.
On the brighter side, Mexico's textile and apparel industry is predicted to become the largest economy in Central and South America within a decade. The country is now looking at expanding business in the United States of America and also eyeing improving trade relations with other countries. The textile and apparel sales in the domestic market are also likely to improve as per capita income of Mexico's 120 million plus population is growing at a high rate.
Moreover, there is scope for higher sales in the domestic market, given that Mexico has a population of 120.3 million, which is becoming increasingly prosperous.
2. Strengths and Challenges
Mexico's textile and apparel sector is adjusting to changes that the global textile industry has witnessed in terms of quality, competition, production deadlines, technology and other factors. The country's textile and apparel sector has some advantages over its international rivals. Mexico enjoys a well-established supplier chain, a highly skilled work force and good communication infrastructure. Though China too has these advantages, Mexico's proximity to the United States of America has led to endless opportunities for Mexican textile. The country has signed numerous free trade agreements that give it an edge over competitors.
Apart from well-structured domestic organizations, Mexican manufacturers have complete access to international fairs, where the Mexican textile products enjoy a high degree of repute. Furthermore, with saturation in Brazil's fashion market, Mexico has emerged as a smaller giant, which is attracting investment in textile and apparel. Government institutions are providing a global platform to Mexican textile, which is capable of competing with international manufacturers in terms of cost and quality.
Yet, rising imports and falling exports are some of the major concerns for Mexican textile and apparel. Mexico's reliance on other countries for its raw material is a major hurdle in its path to success. Mexico needs to make its domestic market stronger, as its burgeoning middle class can benefit from the textile and apparel sector. comes
3. New Import Rules
Recently, Mexico announced a set of new measures to combat 'unfair' trade practices in textile and apparel imports. According to Inside US Trade and Sourcing Journal Online, a minimum reference price for imported textile and apparel products would be established. Thus, if shipments are reported to enter at below the fixed price, these would be investigated by the government and further imposition of duties and taxes will be levied.
Mexico will also implement a new financing mechanism with total available credit of around US$ 30 million to help the domestic textile and apparel industry upgrade machinery and equipment, follow innovative strategies and launch new products. The Mexican Service Agency for the Commercialisation and Development of Agricultural Markets is working on the purchase support standpoint between domestic cotton producers and textile manufacturers.
This new policy is designed to strengthen the Mexican textile sector and increase its competitiveness at global level.
Conclusion
Mexico is one of the most promising emerging market economies of today. Its textile and apparel sector has received positive reviews from its trading partners including the United States of America, Canada, China and Peru. The healthy income indicates smooth growth of textile in domestic terms. Mexico's textile and apparel is a budding sector that is already attracting huge investments.
Though China remains a giant as far as textile and apparel outsourcing is concerned, Mexico is considered a safe haven for workers. Mexican textile plants have superior safety and labor relation records. China, India and Bangladesh have the advantage of cheap labor, but international brands are concerned about workplace safety measures in these countries. The twin accidents in different textile industries of Bangladesh attracted worldwide attention and since then, brands are more focused on ethical production.
Mexico's safety standards are extremely high and there is a long list of requirements for manufacturing plants that include emergency exits and stairs, safe places for workers, mandatory evacuation routes, fire detection and fire extinguishing safety equipment.
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