How Relocating Manufacturing Benefits Fashion Brands

The apparel industry is massive, with a very high level of competition. About a thousand new clothing brands compete every year, each aimed to get a fraction of the market share.

As more and more players in the fashion industry, customers have more choices. Such diverse business models have made the fashion industry more competitive. Undoubtedly, innovation and international presence is needed to thrive in this rapidly changing industry.

Fashion market current trends, challenges and perspectives

From 2020 to 2024, total fashion e-commerce sales in the U.S. will grow by over $80 billion, a 60 percent increase and an average annual growth rate of 11.68 percent.

Despite this, there is still a vast list of issues within the fashion industry that need to be addressed for progress to be made. Including:

• Sustainability – Research shows that 88% of consumers want brands to help them be more environmentally friendly;
• Production challenges;
• Manufacturing capabilities;
• Consumption problems and opportunities;
• Poor working conditions; 
• Rise of Labor costs;
• Technological problems;
• Trusted management partners or outsourcing company.

Most fashion brands’ analytics and marketing efforts are focused on developing and solving them.

Thanks to social media apps, retail stores, and augmented reality, technology is changing how people shop. Brands are adapting to the changes to bring their products to the customer. Creating a new and unusual experience can set a retailer apart in an over-conscious fashion world.

How fashion brands can stand up to and beat the competition

Digital technology is changing fashion retailers’ strategies: they’re using data to predict trends and customer behavior, and online shopping is reducing physical store load. Fashion brands are adopting innovative technology such as AR and VR to enable customers to virtually “try on” clothes from the convenience of their homes. This means that AI can now assist in organizing virtual fitting rooms, and brands are becoming less reliant on physical location, eliminating boundaries. Additionally, logistic centers worldwide are providing seamless delivery services and help build global presence.

Hence experts mention some key competitive advantage factors for fashion brands that can be achieved from radical business decisions to win in traditional retail competition : 

• Competitors limit access to natural resources
• A highly skilled workforce
• Unique geographic location
• Access to new or patented technologies. Like all assets, intangible assets and others
• Ability to produce at lower cost
• Brand image recognition.

Some of them or even all they can be gained from geographical manufacturing relocation. One of the most popular destination is Armenia and Azerbaijan.

Cost-saving success stories about production relocation and offshoring for fashion brands

That makes offshoring apparel manufacturing to Armenia and Azerbaijan an ideal strategy for winning the competition! The relocation business strategy that already works for industry giants, like:

• Adidas
• Nike
• Levi Strauss & Co.
• Gap Inc.
• PVH Corp (Calvin Klein, Tommy Hilfiger)
• Ralph Lauren Corporation
• Inditex (Zara, Pull&Bear, Massimo Dutti)
• H&M Group (H&M, & Other Stories, COS)
• Fast Retailing (Uniqlo)
• Under Armour

As you may see, despite the ongoing global crisis, Adidas, H&M, and Zara continue to be popular leading brands known for their competitive prices, high-quality products, and loyal customer base. But continue paying a lot of attention to the production optimization options, and manufacturing location as well as its profitability.

Sarah Thompson, CEO of Ted and Stitch comments it like:

“As the fashion industry becomes more competitive, it’s essential to identify new manufacturing hubs. Armenia and Azerbaijan offer a unique blend of skilled craftsmanship, lower production costs, and strategic proximity to Eastern and Western markets. With their rich textile heritage and a growing pool of talented artisans, these countries can potentially become hotspots for fashion manufacturing.”

For example, the other apparel brand Fashion House Inc. relocated its manufacturing operations to Azerbaijan to take advantage of the locally sourced raw materials. The company anticipated reducing the sourcing cost of materials such as silk and cotton by 25%, as these materials are readily available in Azerbaijan. The cost advantage enabled Fashion House Inc. to offer its customers more competitive pricing, leading to a 10% increase in sales volume.

Moreover, ABC Fashion Company achieved substantial cost savings by moving its manufacturing operations to Azerbaijan. As a result, the company anticipated a 30% decrease in labor costs, as wages in Azerbaijan are lower than in its previous manufacturing location. This cost reduction enabled ABC Fashion Company to reduce its production expenses, leading to a 15% increase in profit margins.

Another example. To benefit from Azerbaijan’s strategic location, XYZ Apparel Corporation moved its manufacturing there. This move allowed the company to reduce transportation costs and delivery times by being closer to major markets. Consequently, the company experienced a 20% reduction in logistics expenses and improved customer satisfaction due to faster order fulfillment.

So that, many companies have established their production facilities or invested in Armenia and Azerbaijan to benefit from these countries’ advantages and tap into their growing markets. While the specifics of their presence may vary, the goal remains the same.

How Armenia and Azerbaijan became the world’s leading fashion relocation destination

In 2023 Armenia and Azerbaijan are prime locations for businesses to relocate their industries, especially in the fashion, food, and beverage sectors. Combining cultural heritage, strategic location, and emerging markets creates an attractive opportunity for industry leaders. By taking advantage of these countries’ benefits, businesses can expand their consumer base, acquire skilled labor, and promote regional economic development, leading to long-term success in a constantly changing global market.

Considering the business needs, Armenia and Azerbaijan governments understand the importance of infrastructure development in attracting foreign investment and supporting industrial relocation. It means they’re investing in transport networks, logistics facilities, and industrial parks to create a favorable business environment and a strong foundation for companies looking to establish or expand their operations.

For example, in 2020, Armenia initiated an e-residency program that enables foreign entrepreneurs and investors to establish and manage their businesses remotely. This program offers an easy process for setting up companies and accessing digital services, making Armenia an alluring destination for international business ventures.

How Front Desk Helpers can help fashion brands with turnkey production relocation?

Our company offers special packages for turnkey industrial outsourcing to Armenia and Azerbaijan. The conditions were explicitly designed for US and EU companies of any size. Our experienced managers can assist with industrial relocation. Our team will create a cost-efficient and beneficial plan for placing your industrial production facilities in Armenia and Azerbaijan with following support. As a business owner, you don’t need to visit the country or spend hours organizing processes personally. Our reliable team will handle all issues related to the business foundation.

Infrastructure projects not only improve the business environment and reputation, but also promote economic integration and sustainable growth in the region for further growth.