Clothing manufacturers in Vietnam

July 9, 2021

“I thought Vietnam was the next rising star! Minimum wage in Vietnam is $US 170/month. China’s minimum wage is $US 325 / month. How come the Vietnam price is 1.5x greater than my China price?”

This is the question our clients ask us about clothing manufacturers in Vietnam a lot. Our clients get their first costing from Vietnamese factories and they are surprised. There are three reasons: supply and demand, production experience and fabric cost.

New manufacturers are set up monthly. The supply and demand imbalance means that Vietnamese factories are not motivated to offer high quality at low prices. Why should they go the extra mile to offer a price cheaper than China when they have enough customers willing to pay their price?

The second reason your initial Vietnam price will be higher than your China price is that Vietnamese clothing factories are not as experienced as Chinese factories. They are not as experienced in the production processes or costing. Many factories in Vietnam started off as state owned enterprises and operate very conservatively. The motivation, discipline and training to maximize efficiency is not part of the legacy communist management systems. The same is true for China but the Chinese are 30 years ahead of Vietnam in their evolution away from communists’ management style.

The final reason that the initial Vietnam price you get will be higher than your China price is the higher cost of fabric. 70% of the garments produced in Vietnam are using fabric produced in China, Taiwan and Korea. When Chinese buy fabric from Chinese partners, they get the fabric super cheap compared to the price Vietnam can buy. The price difference gets even bigger when a clothing manufacturer in Vietnam buys small quantities through wholesalers. Then there is the added transportation cost to get the fabric from China to Vietnam. If imported fabric is not re-exported as a sewn garment within 280 days then 10% duty must be paid to the Vietnamese government. Finally, there is the hidden cost of handling defective fabric. If fabric from China is received and 20% defective, who pays for the cost of getting replacement fabric? Fabric sourcing is Vietnam’s Achilles’ heel.

We give our clients the following advice. If you have a supplier in China that is delivering then focus your energy on building that relationship and innovating together with them before investing time and money searching in a new country like Vietnam. It’s not realistic to just fly down to Vietnam, meet some new factories and place orders. Vietnam has its language and cultural barriers that take time to adjust to as it takes time to adjust to in any foreign country.

All things being said, there are opportunities in Vietnam and clothing manufacturers in Vietnam are improving every day. If you are dead set on sourcing production in Vietnam then we can introduce you to many factories and you can work with them directly to begin the courtship, start the discovery journey. One thing you can count on is good food, nice weather, friendly people and easy transportation.