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Hennes & Mauritz AB (H&M), a Swedish clothing retail company is looking to buy as many as one million garments a month from Ethiopia, according to H&M spokeswoman Camilla Emilsson-Falk.
“As a growing global company we have to look at how we guarantee that we have the capacity to deliver products to all our stores where we have a rapid pace of expansion. We are doing that by increasing production in our existing production areas and also by looking at new ones,” she said.
The company that has 2,900 stores worldwide relies heavily on Bangladesh for clothes production, and a move to Africa would expand its sourcing footprint.
The spokeswoman also said that the fashion company has placed test orders with Ethiopian suppliers and that large-scale production could begin as early as September.
The Swedish retailer might source as many as one million garments a month from Ethiopia. H&M is looking for alternatives to areas such as southern China, where costs are rising. Latest data shows that costs per unit manufactured in Ethiopia were more than half the cost in China as of 2011, according to the company. On the other hand it is stated that Ethiopia’s cost per unit is expected to exceed China’s by 2019.
Still, the retail company sees advantages in getting a more diverse footprint, and is looking to source closer to the markets it sells in because of a need for reduced shipping costs and lead times.
Emilsson-Falk has said that the retailer’s test orders in Ethiopia aren’t related to media reports earlier this year that the company was looking for store space in South Africa, and there are no concrete plans for a store in South Africa. She also reiterated the company’s long-term commitment to Bangladesh and said the retailer is growing and increasing sourcing in all the markets where it is active.
H&M says low production costs aren’t the only thing it looks at as it makes deals with new suppliers. The company says it strives to work with suppliers over the long term that can offer the capacity and quality that H&M needs and that can meet its conduct rules.
“Ethiopia not only gives infrastructure support but financial support,” said Rajeev Arora, executive director of the African Cotton and Textiles Industries Federation. He cited put interest rates, cheap land and labor, and tax breaks from the government as key incentives leading to extraordinary rates of foreign investment over the past five years.
H&M established its office in Ethiopia’s capital of Addis Ababa about a year ago, and has been buying clothing from a number of manufacturers.
(Wall Street Journal)