Where is the way out for brands like Nike?

According to the tariff list released by the Trump administration on April 2nd, the United States will impose more than 30% "reciprocal tariffs" on multiple countries including China, Cambodia, Vietnam, and Indonesia. These countries are the main sources of clothing, shoes, and hats imports for the United States and even the world.

As soon as the words were spoken, the stock prices of sports companies including Nike, Adidas, lululemon, and Skechers tumbled. Luxury companies collectively hit rock bottom. The United States is the world's largest fashion and luxury consumption market, consuming $80 billion worth of textiles globally each year. It is also the lifeblood of global fast - fashion and sports brands.

As of the time of publication, only a few countries and regions have implemented zero tariffs on all US imports in exchange for "lenient punishment" from the Trump administration. This statement does not help the above - mentioned companies repair their stock prices and only worries consumers. Will those cheap T - shirts on the shelves become history? For enterprises, will new rules of the game emerge?

Complex Supply Chains and Diversified Procurement Models to Be Developed

"When textile factories in Dongguan start installing automatic cutting beds, workers in Vietnam are learning to operate Brother brand sewing machines - it's like a relay race, but no one knows where the finish line is." A textile industry consultant with 20 years of experience once described the current industrial migration to 36Kr.

From the cotton mills in Manchester, UK in the 18th century to the industrial zones in Ho Chi Minh City, Vietnam in the 21st century, the production lines of the textile industry are constantly looking for new footholds like migratory birds. After the 2008 financial crisis, textile factory owners in China's coastal cities sensed a change. "Back then, workers' wages increased by 20% every year. We were like racing against time." A Taiwanese businessman in Suzhou once recalled to us. His factory finally moved to Vietnam in 2015.

The turning point came in 2016. The "13th Five - Year Plan" issued by Beijing clearly required industrial upgrading, which was like pushing the first domino. Local governments began to reject land use applications from low - end manufacturing industries, and environmental protection standards suddenly tightened. For land use applications without high - tech and brand value, "none will be approved."

The COVID - 19 pandemic in 2020 accelerated this migration. When Shanghai Port came to a standstill due to epidemic prevention measures, international fashion brands woke up to the fact that they shouldn't put all their eggs in one basket. After the pandemic, a large number of textile factories that had previously moved from Taiwan to the Chinese mainland accelerated their "move south." Textile enterprises without the ability to relocate had to shut down.

Today, every player has found its place on the global textile map: Bangladesh and Cambodia have become the hubs of fast fashion, Vietnam accounts for half of the world's sports shoes, factories in South Asia and North Africa are good at silk products, and Chinese factories are responsible for handling high - difficulty orders. The fashion industry has long reached a so - called "China + 1" consensus, which means maintaining production capacity in China while additionally choosing one or more other countries or regions (such as Vietnam, India, Mexico, etc.) as backup or supplementary production bases.

Meanwhile, more and more enterprises are also seeking "near - sourcing," that is, producing in neighboring countries geographically, and the products are mainly for the neighboring consumer markets.

For European luxury groups, "near - sourcing" is a well - established concept because the premium space of products is sufficient to make up for labor costs, and some special origin labels can in turn enhance brand image.

To consolidate its position, the Hermès Group has been accelerating the construction of leather goods workshops in France since last year to ensure that its core product, the Birkin bag, can be made in Europe. Louis Vuitton, whose main market is in North America, has simply moved its factories to the United States. Its parent company, LVMH, currently has three factories in California and Texas. Group President Bernard Arnault said in January this year that it will continue to expand production in the United States.

However, is it possible for fashion retail, which has insufficient product premium, requires fast inventory turnover, and has high marketing costs, to achieve "near - manufacturing"?

The Feasibility of "Near - Manufacturing"

Adidas and Zara offer two completely different but enlightening solutions.

After correcting the mistake of his predecessor's "over - reliance on the trendy market," Bjørn Gulden, the current CEO of Adidas, focuses on building a "regionally autonomous" multinational company. One of his famous quotes is, "I believe in global brands, but there are no global consumers."

Bjørn Gulden once clearly stated in an interview with 36Kr Future Consumption that "the proportion of locally - made products sold in the Chinese market will continue to increase." Currently, the proportion of Adidas products made in China is 80%.

Now it seems that this statement is not only to adapt to a more mature market and consumer tastes but also to consider potential supply chain risks.

Under such a strategy, Adidas is gradually managing different markets on a case - by - case basis.

The strategy of "in China, for China" can perfectly avoid all tariff risks. For the US market, which cannot be emulated for the time being, Gulden takes a comprehensive approach - to make the best - selling products in the North American market "tariff - insensitive," that is, to reduce tariff risks from aspects such as cost controllability, ease of origin transfer, and final price sensitivity.

He cited that the two most promising shoe models in the US market currently are Superstar and Campus (different from the popular Samba in Europe and Asia). The origins of Superstar and Campus are mostly from non - sensitive regions. Before the Trump administration introduced "reciprocal tariffs," these regions might refer to countries such as Mexico, Vietnam, and Cambodia.

Gulden further explained that due to the "lag" of tariffs to a certain extent, the company has updated its orders with supply chain partners on a monthly or even weekly basis, which gives Adidas some reaction time in the face of the Trump administration's sudden and drastic tariff policies.

It can be seen that Adidas' "near - manufacturing" is not completely geographically close but rather "market - oriented supply chain regionalization," seeking a balance between cost and tariffs. Of course, fast - fashion companies that are more sensitive to tariffs in general can refer to Zara, which has implemented "near - manufacturing" more thoroughly.

According to a report in the Harvard Business Review, the production capacity of the self - built factories of Inditex, the parent company of Zara, is about 50%. Most of these factories are located in Europe. The key cutting and design processes are completed by more than a dozen factories at the Spanish headquarters. Only the sewing process is outsourced to suppliers, which also ensures Zara's speed in responding to demand.

In recent years, Inditex has continuously relocated its production capacity to Turkey, Eastern Europe, etc., to further shorten the supply chain radius for its largest market, Europe. You can refer to our previous report: How Did Zara Escape the Price War?

Now, 85% of Zara's products can be sold at full price, while the industry average is only 60% to 70%. Therefore, Zara's net sales profit margin is much higher than its competitors, which also means that when facing cost pressure caused by tariffs, Zara has much more room to adjust prices flexibly than its competitors.

RBC analyst Richard Chamberlain revealed in a report that after comparing the prices of 40 Zara clothing items, he found that the prices of the same products in the United States and Mexico are at least 60% higher than those in Spain, and the prices in Gulf countries are 71% to 91% higher than those in Spain.

Although the two models of Adidas and Zara have different paths, they both reflect the strategic shift of the fashion retail industry from pursuing "absolute low cost" to building "supply chain resilience." Adidas' regionalized supply chain focuses more on tariff avoidance and market adaptation, while Zara's Europe - centered production pursues rapid response and inventory optimization.

Of course, it should be clear that whether it is "tariff - insensitivity" or "near - sourcing," it is just a response to the current tariff war. Since last year, we have seen a trend of risk - avoidance in the actions of many fashion brands to reduce SKUs. When consumer spending power restricts production costs, it is still unknown how consumers will accept the final form of "locally - made" products.

The essence of this supply chain transformation is that after the decline of globalization dividends, the fashion industry must find a new balance point among cost, speed, and risk, and the winner in this adjustment period is still unknown.