Lessons from 2025: Why Diversification Mattered—and What 2026 Demands

As Western demand and trade politics turned volatile in 2025, apparel exporters that had quietly built positions in Asia, the Gulf, Latin America and Africa fared noticeably better. The next 12 months will decide who turns that diversification into a durable advantage.

 1. 2025 rewrote the old sourcing playbook

By late 2025, one conclusion was hard to ignore: relying on the US and European Union as the twin anchors of export growth had become a structural risk for apparel and ready-made garment (RMG) manufacturers.

Several overlapping shocks converged:

• Global trade grew, but textiles lagged. UNCTAD’s Global Trade Update shows that while global trade in goods and services expanded in 2024 and continued to rise into 2025, trade in textiles saw no net growth in 2024 and even fell by 4% in Q3 2024.
• Regional growth was uneven. WTO data for the first half of 2025 shows merchandise export volumes from Asia up 10.4%, Africa up 6.3%, and South & Central America and the Caribbean up 7.4%, while Europe was essentially flat (-0.3%) and North America grew only 3.0%.
• US and EU apparel imports were choppy. US apparel imports swung from double-digit surges in early 2024 to much slower growth in 2025 as retailers shifted to “wait-and-see” mode.
• The EU’s textiles and apparel trade also declined in 2023 and the first half of 2024 amid inflationary pressure.

In parallel, trade frictions and new tariffs changed the map:

• The US raised tariffs on a range of Chinese textile and apparel products, prompting Chinese exporters to reroute significant volumes to Europe; China’s textile exports to the EU jumped 20% in value and volume in the first half of 2025, adding around €2 billion of additional low-priced imports and intensifying competition for other suppliers.
• The EU’s own textile industry has been lobbying for faster action against ultra-fast-fashion platforms such as Shein and Temu, which now account for the overwhelming majority of daily parcel imports into the bloc.

In short, global trade was growing, but traditional Western markets were volatile, slower-growing, and more politically exposed. Exporters who had cultivated “non-traditional” destinations were better positioned to keep factories running and margins intact.

2. The diversification dividend – what the numbers say

2.1 Bangladesh: non-traditional markets quietly pass the 16-18% threshold

Bangladesh provides one of the clearest data-rich examples.

• Non-traditional markets (everything except the US, Canada, and the EU) include Japan, Australia, India, China, Brazil, Mexico, Turkey, South Africa, Russia, and others.
• According to BGMEA, the share of clothing exports to non-traditional markets rose from 16.52% in 2018 to 18.72% in 2023.
• Export Promotion Bureau data compiled by BGMEA shows that in 2024, RMG exports to non-traditional destinations reached US$6.33 billion, accounting for 16.46% of total RMG exports of US$38.48 billion.
• In FY 2024-25, non-traditional markets delivered US$6.44 billion, a 5.61% year-on-year increase, representing 16.36% of Bangladesh’s total RMG exports.
• For the first 10 months (July-April) of FY 2024-25 alone, non-traditional markets generated US$5.48 billion, with their share climbing further to 16.79%.

Figure 1 (above) summarizes this trajectory: despite year-to-year fluctuations, the share of non-traditional markets has been consistently in the mid-teens and trending upward over the last decade.

Behind that aggregate:

Japan, Australia, and India stand out. In the recent period reported by BGMEA, exports to India grew 17-18%, while Japan grew around 9-10%, even as some other non-traditional markets such as Russia, Korea and the UAE softened.

2.2 When US/EU slow, diversification cushions the blow

The protective effect became visible as the US and EU slowed:

• In the first seven months of 2024, Bangladesh’s RMG exports to the US fell by 10.28% year-on-year, and exports to the EU declined 4.84%.
• Yet overall RMG export earnings in 2024 still reached around US$38.5 billion, supported by growth in non-traditional markets and a record monthly export of US$4.97 billion in January 2024.

Without the non-traditional contribution, the contraction in Western markets would have translated into sharper factory underutilization, more layoffs, and greater pressure on pricing. Instead, Bangladesh’s diversified order book helped maintain output and foreign-exchange inflows.

2.3 Vietnam: multi-market spread + “China+1” advantage

Vietnam’s numbers tell a related but distinct story:

• Vietnam’s textile and garment exports reached US$44 billion in 2024, up about 11% from 2023, securing its place as the world’s second-largest textile and garment exporter after China.
• The sector returned to growth after a difficult 2023, riding rebounding demand and buyer diversification. In the first four months of 2024, Vietnam’s textile, and garment exports (excluding yarn and fiber) rose 6.7% year-on-year to US$10.4 billion.
• According to VITAS, Vietnam’s textile and apparel industry was supplying 132 markets in 2025, up from 104 markets in 2024 – a remarkable widening of its market footprint in just one year.

The US remains Vietnam’s single largest export destination for textiles and garments. But the rapid increase in the number of markets being served – including Canada, Japan, Korea, Australia, and a growing list of emerging economies – means Vietnam is far less exposed to demand swings or policy shocks in any one region.

2.4 Global context: Asia, Africa and smaller markets led export growth

Figure 2 (above) uses WTO export-volume data to compare regional trajectories in the first half of 2025. Asia’s 10.4% export growth, alongside solid gains in Africa (6.3%) and South/Central America (7.4%), contrasts sharply with stagnant Europe (-0.3%).

For apparel exporters, this means:

• New demand is increasingly outside the traditional trans-Atlantic corridor.
• Countries in Asia, the Gulf, Africa and Latin America are becoming both manufacturing bases and consumer markets.
• Trade deals – such as the 2025 India-Oman CEPA and the upcoming India–New Zealand FTA – are opening fresh duty-free opportunities for textiles and garments in high-income but previously overlooked markets.

3. Case studies: What worked in 2025

3.1 Bangladesh: building a second pillar in Asia-Pacific

Strategy:

Bangladesh’s leading conglomerates and mid-tier factories spent much of the last decade slowly building business in markets such as Japan, Australia, India and Turkey. Their diversification playbook in 2025 had four main elements:

1. Product repositioning for high-income Asia.
   Japanese and Australian buyers tended to demand smaller runs, higher quality control, and stronger sustainability credentials than traditional volume-driven US big-box retailers. Bangladeshi factories invested in:

• lean manufacturing and smaller batch capabilities.
• compliance upgrades for social and environmental audits.

2. more fashion-forward, value-added categories (outerwear, performance knit, man-made fibers).
3. Leveraging proximity and cultural ties in India.
   Export growth in India – nearly 18% in the latest reported period – has been driven by:

• regional brands outsourcing to Bangladesh for mid-priced segments.
• duty concessions under SAARC preferences and other bilateral arrangements.

4. the rise of Indian e-commerce platforms sourcing from Bangladesh for private labels.
5. Portfolio balancing by buyer type.
   Many manufacturers deliberately reduced their share of business with a single US or EU mega-retailer to no more than 20–25% of their order book, replacing the difference with a mix of:

• mid-sized Asian retailers,
• online-only brands,
• regional wholesalers.

6. FX and working-capital benefits.
   Earnings in yen, Australian dollars, rupees, and other currencies helped smooth volatility against the US dollar and euro, while diversified shipment calendars, aligned with different seasonal peaks, improved factory utilization across the year.

Outcome in 2025:

When US and EU orders slowed sharply in early 2024 and remained uneven through 2025, growth in non-traditional markets – still modest in absolute terms but significant at the margin – absorbed part of the shock. Factories with diversified customer portfolios reported:

• fewer sudden order cancellations,
• better ability to negotiate prices,
• and more predictable cash flow, particularly where payment terms with Asian buyers were shorter than those of Western big-box retailers.

3.2 Vietnam: turning “China+1” into “China + Many”

Vietnam’s success rested on a different starting point: it was already a core node in most global brands’ sourcing strategies, particularly as a “China+1” alternative. The diversification beyond US/EU manifested in three ways:

1. Extending into new markets alongside existing brands.
   As US and European brands expanded their store networks in Southeast Asia and the Middle East, they increasingly used their Vietnamese supply chains not only for Western stores but also for regional outlets. This effectively multiplied end-markets without changing the manufacturing location.
2. Serving regional champions.
   Vietnam has become a sourcing hub for regional retailers in ASEAN, North Asia and the Pacific. These buyers:

• often have different seasonal calendars,
• accept shorter lead times,
• can move faster into trend-driven categories.

3. Upgrading to higher value segments.
   In 2024-25, Vietnam saw notable growth in technical sportswear, outerwear and high-performance fabrics for Asian and Middle Eastern markets, segments less sensitive to discount cycles in Western fast fashion.

Outcome in 2025:

The combination of 11% export growth in 2024 and a jump from 104 to 132 export markets by 2025 demonstrates that Vietnam’s apparel sector is not just growing but broadening its customer base.

That breadth gave Vietnamese manufacturers bargaining power and resilience as tariff risks and retail slowdowns continued in the US and EU.

3.3 India and the Gulf: trade agreements as diversification accelerators

India’s textile and apparel sector, targeting exports of US$100 billion over five years, is explicitly betting on “smaller, high-income markets” and new-age fibers (e.g., milkweed, ramie, flax) to drive growth.

The India-Oman CEPA, signed in December 2025, offers near-total duty-free entry for Indian exports to Oman and is expected to boost exports by about US$2 billion in the next 2-3 years, with textiles named as a key beneficiary.

Alongside negotiations with New Zealand and others, India is using trade diplomacy to unlock smaller but high-margin apparel markets – a strategy other exporting nations can replicate through bilateral and regional deals.

4. Why diversification beyond US/EU mattered in 2025

Looking across these case studies, three themes stand out.

4.1 Risk management in an era of tariff uncertainty

With new and threatened tariffs reshaping flows – from US sanctions on Chinese goods to EU debates on fast-fashion parcel thresholds – exporters overly concentrated on the US/EU found themselves:

• racing to re-price contracts mid-season,
• dealing with rerouted logistics and longer lead times,
• exposed to unilateral buyer decisions to consolidating suppliers.

By contrast, manufacturers with a multi-market footprint could offset margin pressure in one region with better pricing in others and were more attractive partners to global brands seeking flexible, resilient sourcing networks.

4.2 Capturing growth where the consumer is

Growth in the global middle class is increasingly Asian and African. WTO’s data showing stronger export growth in these regions in 2025 is a proxy for rising demand and intra-regional trade.

Brands that invested early in GCC, ASEAN and African retail ecosystems – either through franchises, e-commerce, or wholesale – are now using their manufacturing bases to serve these markets directly. The result: shorter transport distances, lower freight emissions, and products tuned to local climate and taste.

4.3 Moving up the value chain

Non-traditional markets often require more specialized, higher value products:

• Japan and Korea emphasize technical performance and meticulous fit.
• Gulf markets buy premium modest fashion, abayas, and occasion wear alongside casualwear.
• Latin America has strong demand for denim, athleisure, and colorful prints.
• African markets increasingly favor durable basics and school wear with specific fabric standards.

Serving such diverse preferences forces manufacturers to upgrade design, sampling, and fabric innovation capabilities, which in turn strengthens their overall competitiveness.

5. How the industry must adjust in 2026

Looking ahead to 2026, the WTO has downgraded global merchandise trade growth for the year to 0.5%, from an earlier 1.8% forecast, citing delayed effects of tariff hikes and weaker demand. UNCTAD still expects global trade to exceed US$35 trillion in 2025 but warns of persistent fragility.

For apparel and RMG players, growth will not come from rising Western demand alone. It will come from out-competing rivals in a more fragmented, multipolar marketplace. Five strategic adjustments stand out.

5.1 Re-balance the order book – with clear numeric targets

Executives should treat market mix as a portfolio question, with explicit targets by 2026. For example:

• Cap any single market (say, the US) at 30-35% of annual revenue.
• Lift non-traditional markets from, say, 15-17% of exports to 22-25% over a 2-3-year horizon.
• Set minimum thresholds for at least five sizeable markets (e.g., no major market below 5% of exports).

This discipline discourages over-reliance on a few mega-buyers and forces proactive business development in smaller but promising destinations.

5.2 Build “clusters” of adjacent markets

Rather than chasing dozens of unrelated markets, manufacturers can create regional clusters that share logistics routes, product needs, and seasons:

• North Asia cluster: Japan, Korea, Taiwan, Hong Kong.
• Gulf cluster: UAE, Saudi Arabia, Oman, Qatar, Bahrain, Kuwait.
• Emerging Africa cluster: South Africa, Nigeria, Kenya, Ghana, Morocco.
• Pacific & Latin cluster: Australia, New Zealand, Chile, Peru, Mexico.

For each cluster in 2026, management teams should define:

1. A lead flagship buyer (or 2-3 anchor brands).
2. A common product “platform” (e.g., mid-weight knit basics, modest wear capsules).
3. Shared logistics solutions (regional distribution centers, consolidation hubs).

This approach keeps complexity manageable while still expanding reach.

5.3 Invest in market intelligence and on-the-ground presence

One clear lesson from 2025: exports follow relationships, not only tariffs.

• In Japan and Australia, factories that opened small liaison offices or appointed local agents reported faster scaling of orders than those relying solely on email and occasional trade fairs.
• In the Gulf, relationships with franchise groups and local retail conglomerates often determined which factories got access to pan-regional rollouts.

In 2026, boards should be willing to fund:

• Country managers or key account managers in 3-4 strategic non-traditional markets.
• Local design input to adapt fits, colors and fabrics.
• Participation in regional trade shows, not just European ones.

5.4 Upgrade product and fiber mix for differentiated demand

Consumer and regulatory pressure are shifting demand away from basic cotton T-shirts toward blends, man-made fibers and performance fabrics with better durability and lower environmental footprints.

• Bangladesh, for example, still has relatively low global market shares in higher-value women’s trousers (4.7%) and dresses (1.1%), signaling room for upgrade.
• India is explicitly promoting “new-age fibers” such as ramie, flax and milkweed to boost export competitiveness.

In 2026, winning manufacturers will:

• Expand MMF (man-made fiber) and performance fabric capacity, with dyeing and finishing lines capable of meeting stricter EU and Asian chemical regulations.
• Invest in R&D partnerships with fiber innovators and mills.
• Offer modular product platforms (e.g., one base legging block with multiple performance finishes for different markets) to manage complexity.

5.5 Embed ESG and traceability as export enablers, not compliance overheads

As EU due-diligence rules and US forced-labor bans tighten, access to Western markets increasingly depends on robust ESG and traceability systems. Rather than treating these as pure costs, manufacturers can:

• Leverage traceability data as a selling point for high-income Asian, Gulf and Oceania markets, where consumers increasingly value credible sustainability claims.
• Use ESG performance to win orders from premium and luxury brands refocusing their supply chains in response to ultra-fast-fashion competition.

The same digital traceability platforms and factory-level improvements that satisfy Brussels and Washington can thus unlock margin and market access in Tokyo, Sydney or Dubai.

6. Action checklist for 2026 boardrooms

For boards and C-suites in apparel and RMG companies, 2026 should be the year diversification moves from talking point to measurable strategy. A practical checklist:

1. Quantify concentration risk.

• Map revenue and margin by market and buyer.
• Stress-test against scenarios: 10-15% drop in US/EU orders, new tariffs, currency swings.

2. Set diversification KPIs.

• Non-traditional market share target (e.g., +5-7 percentage points over three years).
• Minimum number of markets above US$200–300 million in annual sales (depending on company size).

3. Prioritize 3-4 target clusters.

• Choose based on trade-growth data, trade agreements, and existing relationships.
• Assign senior executives’ clear accountability for each cluster.

4. Re-tool operations.

• Build flexibility for multi-market calendars (e.g., different holiday seasons).
• Adjust MOQs, lead times and sampling processes for smaller high-value orders.
• Develop at least one “hero” product platform for each cluster.

5. Align financing and risk management.

• Work with banks and ECAs to secure export-credit lines tailored to new markets.
• Use hedging selectively where FX exposure becomes multi-currency.

6. Use data and analytics, not intuition, to pick markets.

• Combine tools like ITC Trade Map, World Bank WITS and national customs data to identify markets where imports in your key HS codes are growing, and where your country’s current share is under 10%.

7. From “nice to have” to strategic imperative

The events of 2025 confirmed that diversification beyond the US and EU is no longer optional insurance; it is central to the growth model of apparel and RMG exporters.

• Countries and companies that had invested in non-traditional markets – from Bangladesh’s steady expansion in Asia-Pacific to Vietnam’s leap from 104 to 132 export destinations – used that breadth to soften the impact of Western slowdowns and trade tensions.
• Those still heavily tied to a few Western buyers faced squeezed margins, excess inventory, and greater vulnerability to regulatory change.

With global trade growth set to slow sharply in 2026 and political risk remaining elevated, the winning formula is clear:

A diversified customer portfolio across regions, a more sophisticated product mix, and robust ESG and traceability – all underpinned by disciplined, data-driven management.

For the apparel industry, the lesson from 2025 is simple but urgent: the future growth story lies in treating the world beyond the US and EU not as peripheral “alternative markets”, but as the new center of gravity.

---

About the Author

Sk. Mamun Ferdoush is a seasoned textile and apparel professional, currently serving as General Manager at Masco Group, one of Bangladesh’s leading knit composite conglomerates. With over two decades of experience across marketing, merchandising, and production, he has played a pivotal role in strengthening Masco’s global presence. An alumnus of the Bangladesh University of Textiles and Primeasia University, he combines deep technical expertise with strategic leadership. Beyond his corporate role, he also contributes to academia as a Guest Speaker at the Institute of Business Administration (IBA), University of Dhaka)  and the Bangladesh University of Textiles , sharing his industry insights with future leaders.