H&M is going to produce a part of its collection in Ethiopia “to guarantee that we have capacity to deliver products to all stores in our expansive markets”, says H&M spokeswoman Camilla Emilsson-Falk. The Swedish company says a move to Africa would expand its sourcing footprint, but not replace the commitments it has made in Asia. A large part of low-cost production is currently done in Bangladesh.
Test orders placed
“We are an expansive company and are constantly looking at new potential purchasing markets to guarantee that we have capacity to deliver products to all stores in our expansive markets", Camilla Emilsson-Falk said to The Wall Street Journal. "We do that by increasing the productivity on the existing production markets as well as looking at new markets."
That is why the Swedish chain has started placing test orders at Ethiopian suppliers. According to a supplier H&M is planning on having one million pieces of clothing made in Ethiopia each month.
Half the cost of China
The move to Ethiopia obviously is for financial reasons: the cost per unit would be half as high as in China, according to the latest available numbers of Sanford C. Bernstein from 2011. The difference is shrinking fast though: in China prices are going up by 7.7 % each year, while in Ethiopia this is 18%. - at this rate Ethiopia will be more expensive than China by 2019 already.
The Ethiopian government has said that the textile industry has to become one of the growth pillars for the economy of the country. Ethiopia wants to export one billion dollar in textile by 2016. Between July 2011 and June 2012 that number was as low as 84.6 million dollar, still 26% more than in the previous year.
British chains Tesco, George and Irish Primark had already decided on moving a part of their production to Ethiopia.