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fashion-features

Europe's Embargo Crisis Brings Balance

When millions of sweaters, bras, trousers and blouses were seized and held hostage in European customs warehouses last August, it hardly resembled the end...

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Since the end of the trade dispute, he said it was back to business as usual.

"We have been able to produce in China this year because the quotas haven't been utilized," he explained. "The value for money has been favorable to place orders in China."

Vinge noted that H&M sources roughly 60 percent of its merchandise in Asia, with 30 percent of that coming from China. Vinge said that, last year, when import quotas first were abolished, H&M improved its gross margins.

"Instead of lowering our prices even more [prices were lowered about 10 percent between 2002 and 2004], we added some details to the garments and used more expensive fabrics, giving our customers even more value for their money," he said. "When the quotas were reimposed, we did not increase our prices. But we have almost managed to keep our margins at the same level."

Vinge said that, while China has not always made the best in terms of quality, the country has made strides recently, a sentiment echoed by many firms.

Meanwhile, he added that H&M was working on improving its lead times — a leitmotif in sourcing — but even if China can produce higher fashion garments, often it remains more advantageous to have those garments made in Europe for proximity's sake.

"From Turkey, we can have garments trucked to Austria in a day," he said. "It's longer shipping to Europe from China. We can, or course, fly them, but that has an environmental aspect and is very costly."

Nonetheless, he noted the dynamic is changing as H&M expands internationally.

"It's not faster to ship from Turkey to the United States," he said. "And we are opening in China now, too. It puts things in a different perspective."

Risks always exist in sourcing, companies acknowledged. Limiting risk while courting the best price and quality is the key to a successful sourcing strategy today.

"Social and environmental problems can play a roll," said a spokeswoman for Adidas, the German sports giant that manufactures 96 percent of its shoes and 78 percent of its apparel in Asia. "Political unrest and illnesses such as SARS or bird flu must also be taken into account."

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