Garment industry has become one of the most important industries in the world. One of the main reasons for this is the increase in the population of the world as well as an increase in the birth rate. For this reason, many developing countries are considered for garment manufacturing because of the low cost of labor as well as the low cost of raw materials available to the country. One such country is Vietnam, which has the competitive advantage of low-cost production because of cheap raw materials and low labor costs as well.
Overview of the Garment Industry of Vietnam
Vietnam is among the leading garment manufacturers in the world. After China, Vietnam is in the race to become the second most important garment producer as well as exporter in the world. As a matter of fact, Vietnam is in direct competition with the garment industry of China in terms of pricing for the garments manufactured. As of 2022, the revenue generated by Vietnam in terms of the apparel market amounted to US$5.91 billion while the market is forecasted to grow at a staggering rate of 5.54% per annum between 2022 and 2026. The biggest subsector of the garment industry of Vietnam is the women’s garment market which makes up $2.95 billion in 2022.
Another aspect that highlights the improving position of the garment industry in Vietnam is the volume of the garment market which is forecasted to reach 1,383 million pieces by 2026. Massive growth in the revenue of the apparel market in Vietnam is forecasted in 2023 which is going to be 8.7%. Vietnam is a developing country which is why there isn’t much demand for royal and luxury clothing. Statistics show that 97% of the sales in the apparel market of Vietnam go to the sale of non-luxury clothes.
Garment Industry of Vietnam | Detailed Analysis
The garment industry of Vietnam is a diverse one and produces a range of clothing which includes shirts, pants, casual wear, underwear, uniforms, and even formal pants. Vietnam has contracts from few of the biggest garment retailers in the world including ZARA, Mango, and Calvin Klein as well. The low cost offered by manufacturers in Vietnam results in mass orders from these companies. There are many low-level players as well which are growing.
Few of the most important garment industry manufacturers in Vietnam include Ha Nam Textiles, Thanh Cong Textile Garment Investment Trading, Hanoi Textile & Garment Joint Stock Corporation, TNG Investment & Trading, Thai Son S.P Sewing Factory. Customers, G & G II Garments Factory Vietnam and Hue Textile Garment Joint Stock Company.
The per person revenue generated in Vietnam from the sales of apparel is quite low at around $59.7 as of 2022. In Italy, the per person revenue from the sales of apparel is $820 while in the USA, it is up at $930.
One of the reasons for the low revenue per person in the apparel market of Italy is the low cost of items manufactured and low prices as well. According to one report, the cost of living in Vietnam is 53% less compared to the USA. The report also suggested that clothing is about 29% cheaper in Vietnam as compared to the USA.
However, another important factor is the low income of the people in the country. Women in the country are not actively working and mainly stay at home. Those that do are not employed in high-performing service sectors; rather they are indulged in manufacturing or agriculture which are not high-paying sectors for any economy. The GDP per capita of Vietnam is $4121 while that of the USA is $62,200 as of 2022. This provides the explanation as to why the per person revenue generated is so low in the women’s apparel market as well as other sectors.
In addition to that, due to the low income of the country, there is mass demand for cheap and affordable clothing as compared to luxury clothing which also brings down the per person revenue generated. Big brands do not operate in Vietnam because of low demand.
Garment Market of Women in Vietnam
The biggest subsector of the garment industry in Vietnam is women’s apparel which accounted for $2.5 billion in 2022. This sector is forecasted to grow at a high rate of 5.68% between 2022 and 2026, annually. However, per person revenues in the women’s apparel market are just $29.8 as of 2022. This is quite a low amount as compared to several other countries. In Italy, the per person revenues generated from the sale of apparel were $368.6 which is around 10.5 times the amount it is in Vietnam.
In addition to that, the women’s apparel market is forecasted to reach a massive volume of 546.4 million pieces by 2026. The per person volume in the women’s apparel market of Vietnam is just 4.6 pieces as of 2022 . This is quite low and shows that a single woman does not even have 5 dresses on average. Statistically, this shows that women do not have much spending power, otherwise trends in other countries such as the USA show that women have an average of 33.4 pieces as of 2022.
The statistics in the women’s garment market of Vietnam highlight the fact that there is a limited local demand for the garments and the country heavily relies on exports for the successful running of the garment industry. Without the exports, the country’s garment industry will struggle as the local demand isn’t much high.
Garment Market of Men in Vietnam
The men’s garment market is the second largest sub-sector of the garment industry in Vietnam and accounted for $1.88 billion in revenue as of 2022. This is also a fast-growing sector for the industry as it is growing at a rate of 5.72% per annum CAGR between 2022 and 2026. One of the shocking figures about the garment market of men in Vietnam is that per person revenues account for $19.09 only. The three main reasons for this include
- Limited demand for clothing or repeat purchases
- Low-income earnings leading to a lower disposable income
- A low standard of living is generally acceptable in Vietnam
- The mindset of the citizens of not buying many clothes
Another key figure to understand is that the average volume per person in the men’s apparel market is just 2.6 pieces as of 2022. Although the unemployment rate in Vietnam is just around 2.2%, most people are employed in either agriculture or the manufacturing sector where the wages / salaries / daily earnings are not much to buy clothing. According to one report by the United Nations, the poverty rate in Vietnam is 9.1% which indicates that an absolute 9 million people are living in poverty.
In addition to that, people in Vietnam prefer to spend on other commodities and not much on clothing as a generally accepted phenomenon. Despite all these negative aspects, the average volume per person in the men’s garment market of Vietnam is forecasted to increase at a rate of 9.4% by 2023.
Garment Market of Children in Vietnam
The children’s garment market in Vietnam is also one of the growing sectors of the country’s industry. There are some astonishing statistics in this particular segment that indicate the odd pattern of buying garments in Vietnam. As of 2022, children’s apparel amounted to $1.07 billion while the market is forecasted to grow at an annual rate of 4.83% between 2022 and 2026. The per person revenue for this segment is $10.81. One reason why this is low is that the garments for babies and children are cheaper as compared to those for adults.
In addition to that, the total volume of children’s garments is forecasted to reach 525.3 million pieces in 2026. One astonishing fact about the children’s garment market in Vietnam is the average volume per person is 4.6 pieces which is equivalent to women’s apparel and more than the men’s apparel market. This indicates that the parents in Vietnam are more focused on buying clothes for their children as compared to themselves. They are prioritizing their children and compromising on their own clothing.
It also highlights the mindset of the people who are not self-focused and are fine with buying clothes for others.
Export Market of Garment Industry of Vietnam
As stated earlier, the primary benefit of low-cost labor and raw materials has made Vietnam one of the direct competitors of the Chinese garment manufacturing industry. The low-cost produced garments are exported to several countries with USA, EU, and Japan on the top. As of 2020, the exports of textiles and garments for Vietnam were $35 billion while in 2021, the exports amounted to $39 billion. As of 2022, the total garment exports of Vietnam are close to $43.5 billion which is a 7.4% increase from the previous year. These statistics show a positive trend of about $4 billion in garment exports every year and indicate that Vietnam is emerging as one of the leading garment manufacturers and exporters in the world.
The flexible policies of the Government of Vietnam have helped the garment industry of Vietnam to survive and grow massively. There are not many restrictions and efforts are conducted to promote the industry on an international level. There is a 0% import tax which means that the raw material for the manufacturers is quite cheap. There are several Free Trade Agreements that Vietnam has with other countries which are forecasted to bring in a revenue of $39 billion . The EU-Vietnam Free Trade Agreement EVFTA makes it easier for Vietnam to export and import from other countries making it easier for the garment manufacturing industry of Vietnam.
Challenges in the Garment Industry of Vietnam
While the garment industry of Vietnam is quite strong, there are several challenges that have been faced in recent times.
One of the most important ones is the fact that the country does not have sufficient cotton production in order to fulfill the demand for clothes manufactured in Vietnam. As a result of this, Vietnam has become an importer of cotton with the US being the biggest supplier of cotton for Vietnam. As a result of this, the raw cotton material becomes quite expensive. This can add up to the price of garments produced in Vietnam. The country is facing the challenge of going out of competition due to an increased cost of production of garments. The imported raw material also brings down the balance of payments and balance of trade for the country.
For this reason, the production of raw cotton is essential in Vietnam. The government has also been prioritizing the production of cotton in Vietnam to stay competitive, fulfill local demand, and pursue more export orders for a better position in the Gross Domestic Product of the country. A major challenge in the garment industry of Vietnam is that it is heavily dependent on exports while the local demand isn’t much. In case Vietnam does not get major foreign orders, it will struggle to sell in the local market. For this reason, there is constant pressure on the government to promote and uplift the standards of the country with the help of increased incomes.
Vietnam is emerging as one of the top garment-producing countries in the world. As the country progresses, it is going to give a tough time to China in terms of pricing. However, there are several challenges as highlighted above that need to be taken care of. One important area of concern is that the local demand isn’t that much for the garment industry. The government and other relative authorities need to take quick action to fix this issue.