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Are We Ready for a Mass Exodus from China? All Signs Point to…Maybe

The feelings on a China sourcing exodus are about as disjointed as the president’s tweets on the subject.

During Sourcing Journal’s exclusive Tariffs & Turmoil event on Monday—in which senior apparel and footwear executives participated in a seminar deconstructing the current tariff landscape—attendees were mixed over whether manufacturers are prepared, willing or even able to relocate their operations from China to another country.

As with many companies, BBC International has a significant base in China, and Robert Mingione, senior VP of men’s footwear, said they’re evaluating how much of their operations should remain. He described the industry sentiment as “cautiously optimistic”—both when it comes to the ability to relocate from China and whether the tariffs will necessitate the action.

While Maria Nyline-Asker, president of children’s apparel manufacturer Ayablu, agreed that companies were evaluating whether sourcing bases were dynamic and diversified enough, she was less buoyant about the level of difficulty in making such a move, noting the typical 6- to 12-month product lifecycles. “To be able to move quickly is not something easily done,” she said.

Laurel Harvey, an importer at women’s wear manufacturer One Step Up, put it more bluntly: “I don’t think they’re ready.”

Retail analyst and consultant Jan Rogers Kniffen, however, said he hasn’t spoken to anyone who isn’t moving out of China as fast as they can. When asked about the industry’s readiness for a mass exodus, he was frank: “We’re having a mass exodus from China.”

He cited Croc’s expectation to dramatically scale back its production in China with just 10 percent in the country by 2020 as just one example. “Everybody is doing it just as fast as they can find the capital to put into the plant, the workers to train and the supply chain logistics to move it.”

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Could all of this time have been better spent elsewhere? Perhaps.

“The distraction it’s creating is causing some of us to take our eye off the ball,” said David Shalom, VP of Poof Apparel, “and it’s also causing us to make some decisions that we wouldn’t normally make if we were focused on our business day-to-day.”

Also lost is the time stolen from companies’ abilities to address other pressing issues, such as sustainability, said BBC’s Mingione, a key priority for both the apparel and footwear industries.

From a retail perspective, Kniffen was less certain that this was proving to be detrimentally distracting. “I’m not sure they’re getting a negative effect on the rest of their business,” he mused. “It doesn’t seem to have slowed down automation in the stores at all. Everyone is still trying to do that. It doesn’t seem to have slowed down online [operations]. In fact, maybe it’s going to increase the emphasis online. I don’t see them avoiding or not looking at something they were looking at and not allocating resources.”

Still, despite all the doubt, uncertainty and ambiguity surrounding the tariff tranches, there may be something to say about the necessary conversation that’s been forced—and even some unexpected silver linings.

“It’s pushed people to go beyond their comfort zones to other countries,” said Mingione. “[There are] other areas of opportunities in these other countries: new cultures, new methods of production. With each new culture, you learn about the ways they do things.”

Kniffen reinforced that this turmoil is just an acceleration of a trend that was already occurring: “I think by next year we’ll say, ‘Oh my god, who knew they could move so fast?’”

Listen to our latest podcast episode to learn what the AAFA’s Steve Lamar has to say about how the tariffs might affect the holiday season, the “loophole” that could close and ways to head off the threat.