Nearshoring Boom Isn’t Just a Mirage, Western Hemisphere Suppliers Say
Kate Nishimura
11 min read
The nearshoring boom is not a myth or a mirage, according to players from across the Western Hemisphere.
While the concept is often spoken of in the abstract, the concrete evolution of the sourcing landscape is never more evident than in conversations with manufacturers.
Brands are indeed expanding their sourcing portfolios to include new locales in Central America, South America, Mexico and the U.S., they told Sourcing Journal—and they’re doing so at a more rapid rate than they have in recent years. Quality, speed to market and the desire to diversify away from China are weighing heavy on the minds of buyers and sourcing executives, they reported.
“I think that some of them want something closer to home; that’s what they explained,” said Jorge Carvajal Arabian, CEO and managing partner at Mexico’s Premium Knits. At the Sourcing at Magic trade show in Las Vegas, attendees buzzed about a Nearshoring pavilion featuring dozens of suppliers. “They want shorter lead times, and some of them have expressed concerns about the political situation and the issues that could arise working with Asia.”
According to Arabian, there was a “boom in interest in nearshoring” post-pandemic that has seemed to ebb in recent years. “About three, four months ago, it started again.”
The full-service manufacturer, which specializes in garment-dyed T-shirts and screenprinting, has been exporting for more than 30 years. “That’s the core of our business,” he added.
Premium Knits has about 20 clients across the U.S., with a heavy concentration in New York and Los Angeles. “Strong, long-term” relationships are the backbone of the venture, though Arabian said the company is looking to make a bigger mark on the American market using advantages unique to Mexico.
The group’s mostly cotton offering is U.S.-Mexico-Canada Agreement (USMCA) compliant, produced with U.S. cotton at the group’s Puebla-based facilities. Lead times are as low as three weeks, and MOQs as low as 300 pieces—criteria that’s become increasingly important as the U.S.-China trade tension deepens and tariffs remain high.
Basics by Premium Knits.
Arabian said the group’s propensity for quick turns and flexibility around purchasing have made it an attractive prospect for small brands and licensors selling into major retailers like Walmart. “We do custom blanks for our customers, and we can hold inventory—specifically custom-made inventory—without the commitment of color,” he explained. Once a brand has a read on what’s selling through at retail, it can chase sales with a quick reorder, dyed or printed to demand. “There’s a level of commitment, but with a lot of flexibility. I think that’s what has been interesting for some brands,” he added.
But while much has been made of Mexico’s rise to prominence on the sourcing stage, there are some not-insignificant inhibitors to continued growth.
“Price is definitely a challenge for us,” he said. “It’s always cheaper there, more cost effective,” he said of Asia. “But there’s other advantages that I think we can offer, and for some customers, not everything is about price. There’s also hidden costs on inventory, on planning so far ahead,” he added. “With this model that I explained, if they have something on trend, they can react faster, and the commitment is not as big as ordering a full container way in advance, so there’s less risk.”
The CEO also said Mexican suppliers, along with their customers, have been frustrated by what they perceive as a lack of support from the Mexican government for the growth of the apparel manufacturing sector. Exporters are supposed to be exempt from certain VAT taxes when they ship goods to clients in the U.S., but according to Arabian, the government has been coming down on them as a way to rake in some revenue. It’s a short-sighted strategy that he believes will hurt, not help, the country’s economy.
“That’s one thing, and of course, security is another thing,” he added, noting that the thoroughfares used for trucking goods can be precarious for drivers and their cargo due to the activity of criminal enterprises. “It’s also been three or four years in a row that labor costs have increased, and all of those things put us at a disadvantage to Central America,” he added.
To give its industry the leading edge, it would take lawmakers “supporting and understanding there’s an opportunity for nearshoring to get a bigger market share, and supporting factories and people that are experienced in this business,” he said.
Meanwhile, Colombia-based Aritex is ready to take on the U.S. for the first time, according to sales representative Isabella Aristizabal.
“We’re interested in getting in the United States market because we see a lot of opportunity. And given the political issues between the United States and China, we see that we’re able to enter,” she said.
The three-decade-old firm located close to the country’s Western coast is “totally vertically integrated,” featuring capabilities for knitting, dyeing, cutting, sewing and printing. The factory is also located in an expanse of coastal wetlands, which it leverages to help remove sediment and pollutants resulting from production. “It regenerates the water, so we can reuse it in the process of dyeing,” she added—a plus for sustainability-minded brands.
Aritex’s chiefly cotton staples like hoodies, T-shirts, sweatshirts and the like are made with fibers from India. It also offers an “ecological option,” made from 50-percent PET and 50-percent recycled cotton. Aristizabal believes the firm’s heritage in the business and commitment to quality give it a competitive edge, along with an expansive capacity for services like printing, sublimation and embroidery.
Cotton and poly-blended products from Aritex.
A 500-piece minimum order and 45- to 65-day lead time has also been attractive to entrepreneurs and small businesses interested in testing colors and fit, and most of the manufacturer’s exports enter the U.S. duty free under the U.S.-Colombia Trade Promotion Agreement (USCTPA).
“We have gotten a good response from U.S. businesses, really good opportunities,” she said of the firm’s time in Las Vegas in August. “They want to get away from China and find new alternatives. They see that we have good quality and have competitive prices, so they are looking to us.”
Southbound in Lima, Peru, two-year-old Atlas Textile Company is trying to make a name for itself with American brands on the back of its Pima cotton staples.
The family-owned group has a 40-year-plus legacy in the textile and apparel business, a representative told Sourcing Journal. The recently launched venture specializes in premium garment production and small runs using sustainable fibers like organic cotton and recycled polyester, which have been in high demand with Western brands across Canada, Australia and Europe.
High traffic at its booth indicated a growing interest in nearshoring, the spokesperson said, noting that buyers have cited political concerns and the desire for shorter supply chains as the chief reasons for exploring new sourcing options. “A lot of American clients in particular are wanting to move because they think Trump is going to be the president, so they have the idea of Trump closing China business,” he added.
Pima cotton and recycled polyester shirts from Atlas Textile Co.
“A lot of people also talk about quality,” he added, noting the reputation of the country’s cotton, which features long fibers that produce a silky hand-feel. Shorter lead times and a duty-free relationship with the U.S. are an enticing antidote to the long leads and high duties on China-made goods.
“We see that people are more interested in of getting out of Asia and going more to South America again,” he added.
But divesting from the World’s Factory comes with concessions that many aren’t yet willing to make, the group has learned. “They are used to really low prices,” the rep said. “People need to adapt a little bit more; if they want quality, they need to change the way they think about how much they’re going to pay.”
Despite what might be initial sticker shock, suppliers across the region are hoping that proving the quality of their offerings will give them a leg up on Asian production in the long term—though the shift will likely begin with higher-end brands.
“I think one aspect of our offer and our value proposition is that we do things that nobody does, at a premium level,” said Thiago Martini Guerini, international business director for Brazil-based technical fabric mill, Rosset. The group produces luxe, warp knit and circular knit nylon stretch-knit fabrics for swimwear, activewear and intimates.
“We have different groups of machines which allow us to come up with a collection of 200 articles, including textures with different trendy elements we incorporate into the fabric itself,” he said. “So you can create an aesthetic for your brand and to your consumer and deliver on that. For the brands that need differentiation on a product level, those fabrics work really well for them.”
According to Guerini, the group’s clients have found it’s “worth the effort of supplying the fabrics in Brazil and sending to Asia, although there’s a large number of companies that are looking for alternatives nearshore to have their garments made in Latin America.” But rules of origin often preclude these products, which are made with fibers sourced largely from Asia, from entering the U.S. duty-free. “This leads to a competitive disadvantage to nearshoring initiatives,” he said.
Stretch fabrications from Rosset.
The business director said brands have been much more bullish in their pursuit of production in other parts of the world in recent months, citing the need “to have a Plan B, to have risk mitigation plans in place in case they need to make changes.”
“Until some point after the pandemic, people were still having a reactive approach to the market. There was still a lot of turbulence with demand, the consumer, inflation, retail performance,” he added. “Now, I think they are getting to a point where they realize they have to proactively look ahead and decide where they want to go. They’re trying to come up with a vision for the future.”
For some American brands, that vision includes establishing a value chain in their own backyard.
“USA-made is more sought after. It was very big like 20 years ago, and it’s something that’s coming back,” said Tyler Benson, project manager for Los Angeles Apparel. Asked about the appeal of Made-in-the-USA, Benson said brands are “seeing it can be done in the States and the quality is better, and that’s what people are liking right now.”
The manufacturer, which was launched by American Apparel founder Dov Charney in 2016, has made a name for itself supplying brands with the base products for streetwear and casual wear. “The founder of our company has been in this industry for 30-plus years now. I think that’s what they like too—it’s experience, we know what we’re doing, we’re not brand new to this,” Benson said.
According to the project manager, the company’s T-shirts are a jumping off point for many customers, specifically the 1801 silhouette, a 100-percent U.S.-cotton silhouette with a high crew neck and generous fit that can be dyed using garment dye colors, neutral pigment dyes, neon pigment dyes, and new mineral washes.
Women’s styles from LA Apparel.
“Heavy fleece would be the next—and then if people want to branch out and do more than just T-Shirts and hoodies, they move into women’s and accessories,” Benson added. “We have such a wide variety of styles that we probably have anything that you want already established here.”
Benson said Charney has been vocal about the benefits of making products in the U.S. for U.S. customers, including quality, transparency, and super short lead times. “We can get an order for 10,000 to 20,000 pieces on a Friday and have it shipped by Monday or Tuesday, depending on our inventory. As long as we have the stock, it’s shipped,” he said.
And in the spirit of entrepreneurialism that America is known for, many of LA Apparel’s clients are ambitious upstarts. That’s because the manufacturer boasts the lowest MOQ possible: just one piece.
“They could essentially buy one piece, test it out, see the colors, see the fits, before they come in with a full order, because it makes them more comfortable going into that purchase,” Benson said. “They might not be super established brands like Supreme—these might be people that have a store in Arizona or a store in Utah, mom-and-pop shops that like to have quality garments. I think that’s why they flock to us.”
There’s also a tangible cachet to the manufacturer’s SoCal roots. “It’s USA-made, but it’s also Los Angeles-made,” he added. “LA Apparel is a brand, we’re a culture, and people want to be a part of that.”
