H&M looks to start sourcing from Ethiopia

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Fashion retailer H&M is looking to source clothing from Ethiopia to have its fashions made as it seeks to keep the shelves of its growing number of stores stocked.

The Swedish company relies heavily on Bangladesh for clothes production, and a move to Africa would expand its sourcing footprint but not replace its commitment to production in Asia. One supplier says, H&M is looking to source one million garments a month from Ethiopia.

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A spokesperson for the retailer has confirmed that it has placed test orders in the country, and may begin to source from a supplier based there this autumn.

H&M, which sources approximately 80% of its products in Asia, and the remainder primarily in Europe, emphasised the move was part of its efforts to look at how it can ensure it has the capacity to supply products to all of its stores where it has expanded rapidly, rather than a strategic sourcing shift.

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But rising costs in Ethiopia could be a problem in the future. Bernstein analyst Anthony Sleeman said costs rose 18% in Ethiopia in 2011 versus 2010, compared with a 7.7% spike in China. At that rate, Sleeman expects Ethiopia's costs per unit to exceed China's by 2019.

Still, retailers see advantages in getting a more diverse footprint, and are looking to source closer to the markets they sell in because of a need for reduced shipping costs and lead times. Depending on how H&M's retail network expands, the proximity of production could help offset production cost disparities.

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