11/29/1993

Alabama's Apparel Industry Can Benefit from NAFTA

AUBURN, Ala. - The North American Free Trade Agreement (NAFTA) may have opened the door to trade with Mexico, but success in that market will hinge on meeting the demands of Mexican consumers, according to an Auburn University researcher.

Sandra Forsythe, Wrangler professor in Auburn's Department of Consumer Affairs, has been studying the Mexican market for almost two years in anticipation of NAFTA's approval. Results of her research, which is being conducted through the Alabama Agricultural Experiment Station at Auburn, offer insight into the opportunities and demands of that market.

"When NAFTA goes into effect Jan. 1, 1994, it will eliminate or reduce tariff's on consumer goods traded between the United States and Mexico," she explained. "This will open trade between the two countries and will open markets in Mexico because it will make the price of U.S. goods less expensive for Mexican consumers."

According to Forsythe, U.S. consumer goods are in big demand in Mexico, and Mexico is the fastest growing customer for U.S. goods. "We anticipate a tremendous market opportunity for U.S. apparel products in Mexico over the next few years," she said.

"Apparel manufacturing is very important to Alabama's economic stability," continued Forsythe. She noted that the textile industry is the second largest industry in the state, employing more than 100,000 people with an annual payroll of $2.6 billion.

"It has become increasingly important for textile and apparel manufacturers throughout the U.S. to develop ways to be more globally competitive," she said.

According to Forsythe, when NAFTA was first proposed, many people viewed Mexico as an economical source of labor for manufacturing, but few considered it as a market for U.S. goods. That attitude has changed significantly.

"In recent years there have been a number of political, economic, and social changes in Mexico that have made the Mexican economy much more favorable to U.S. goods," she said.

"I've personally talked to many of Alabama's leading apparel executives," she said. "They are not planning to move their manufacturing out of Alabama to Mexico, but they are planning to sell their products there."

However, knowing what Mexican consumers want is as important as having access to the market, so Forsythe's research has focused on clearly identifying the market and developing consumer profiles of Mexican consumers. A recent study included surveying and interviewing retail buyers and business executives involved in Mexico's apparel industry to gather information about the Mexican consumer.

"Mexican consumers have very favorable opinions about U.S. apparel products," Forsythe said. "They prefer U.S. apparel products over products manufactured in Mexico or Asia. Because our products have very favorable reputations in Mexico, Alabama's textile industry stands to gain a lot in trying to market our goods to the Mexican population."

The study also found that Mexican consumers approach clothes buying differently from U.S. consumers. "We found that quality, brand names, style and aesthetic values are all extremely important to consumers in Mexico."

"In the U.S., we are always looking for sales and bargains. In Mexico, consumers consider reduced prices to be an indicator of poor quality and therefore tend to buy more often at regular price. They also will spend a larger proportion of their budget per garment than U.S. consumers. Of course they don't buy as many garments per year, in fact the average Mexican consumer will buy an average of only 11 garments per year.

"They are really looking at quality rather than quantity. Brand names also are extremely important in Mexico and Mexican consumers prefer U.S."

"Based on this study," she continued, "we have come to the conclusion that what sells in the U.S. may not sell in Mexico, and what sells in Mexico City may not sell in Monterey or Guadalajara. So we need to take that into consideration as we look at the markets," she continued.

According to Forsythe further research will help them refine the consumer profiles of Mexican consumers and also allow them to develop a consumer model that can be used for future studies. "We will use this information to help U.S. apparel firms identify product marketing strategies that are most likely to be successful in the Mexican market," she added.

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Auburn, AL 36849
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Contact Jamie Creamer, 334-844-2783 or jcreamer@auburn.edu
Contact Katie Jackson, 334-844-5886 or smithcl@auburn.edu

11/29/93