Home Fashion products Companies rush to move manufacturing out of Covid-crushed Vietnam for the holidays

Companies rush to move manufacturing out of Covid-crushed Vietnam for the holidays

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A woman walks into Ben Thanh Market in Ho Chi Minh City on June 27, 2020.

Manan Vatsyayana | AFP via Getty Images

Vietnam has “completely collapsed” due to strict Covid mitigation policies, according to Ankiti Bose, co-founder and CEO of Zilingo, a fashion supplier to top brands that sell their products on Amazon and Shopify.

A growing number of Covid infections and low vaccination rates have prompted the Vietnamese government to shut down a number of factories that make clothing and shoes.

“This is a really bad time for Vietnam. Holiday season expeditions need to happen right away,” Bose told CNBC.

She said customers are looking to increase their manufacturing footprint in countries beyond Vietnam.

“Bangladesh, India, Sri Lanka and Indonesia are all good options,” she said. They “are functional at the moment in terms of factory capacity … so Vietnam could lose a lot in the very short term.”

Joyce Chang, global head of research at JPMorgan, said: “Despite a draconian quarantine policy, new cases of Covid-19 in Vietnam remain high and macroeconomic stress is spreading to the manufacturing sector. “

BTIG analyst Camilo Lyon said factory closures have been more severe in the south of the country in cities such as Ho Chi Minh City, where a number of shoe and clothing companies manufacture. their products.

Citing serious production issues for Nike since the last release of its results, BTIG lowered shares of the US sneaker and sportswear giant last week. Supply chain challenges are expected to be at the center of attention when Nike releases its latest quarterly results after market close on Thursday.

Several data points illustrate a deterioration of the economic situation in Vietnam.

Customs exports, industrial production and manufacturing purchases all fell sharply in August, prompting JPMorgan to cut its third-quarter GDP forecast for Vietnam to 3% from 4.1%.

Singapore-based Zilingo, for its part, is scrambling to help its customers move production to other manufacturing centers. “Bangladesh and India suffered major lockdowns,” Bose said, “but almost everything was back to normal in terms of production within a few weeks,” which minimized the effect on brands that manufacture in these country.

Less than 10% of Zilingo’s suppliers are in Vietnam. However, the country specializes in one type of material that is difficult to find elsewhere, making it an important base. “Vietnam specializes in synthetic fibers and China is the quick alternative for many brands,” Bose said. “We make it easy for most buyers very quickly through our digital channels. “

Backed by Sequoia and Temasek, Zilingo has grown its portfolio of fashion brands as companies seek to diversify their manufacturing capabilities across Asia. Zilingo also provides technology used by companies in factories to increase transparency and help companies better track finished products.

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