The next designer handbag you buy is likely to bear a “Made in Cambodia” label.
Fashion companies, eager to diversify their supply chains, were already expanding into production sites in Southeast Asia as alternatives to China.
“The shift has been under way,” said Steve Lamar, executive vice president of American Apparel & Footwear Association.
Steven Madden Chief Executive Officer Edward Rosenfeld said on the company’s most recent earnings call that it has been shifting production of its handbags to Cambodia from China.
The maker of shoes and accessories sees 15 percent of its handbags coming from Cambodia this year, with this percentage doubling in 2019.
“Our head of handbag sourcing is actually over there right now, working on a plan to ramp that up.”
Tapestry, the luxury company behind Coach and Kate Spade handbags, has adopted a similar strategy, boosting its Vietnamese production and leaving less than 5 percent of its sourcing from China.
Investment Incentives
“Cambodia does offer pretty good investment incentives like tax holidays,” said Matt van Roosmalen, country manager for Cambodia at Emerging Markets Consulting, an investment advisory firm focused on Southeast Asia.
“As long as the tariff exemptions persist, companies will be more incentivized to invest production capacity in Cambodia.”
Cambodia footwear exports rose 25 percent in 2017, while garment exports increased 8 percent in the same period, according to an annual report by the National Bank of Cambodia, which attributed the growth in part to increased demand from the U.S.
In addition to the tariff threat, wages have risen steadily in China, while Cambodia remains one of the lowest-cost countries when it comes to labor. According to estimates provided by Oxford Economics, labor cost in Cambodia is a quarter of China’s.
Source : Bloomberg | The Cambodia Daily
