For over twenty years, the global retail industry has relied on China as an important part of its supply chain for producing everything from apparel to electronics. However, geopolitical concerns, including tariffs implemented in 2018 and the threat of higher tariffs in 2025, have prompted retailers to rethink their overreliance on the country. A 2024 survey by Bain & Company found that 69% of chief executives and operating officers plan to reduce their company’s dependence on China, up from 55% in 2022.
More retailers, manufacturers, and other businesses are embracing a "China Plus One" strategy—an approach where businesses maintain a presence in China while shifting part of their operations to other countries. This strategic shift aims to mitigate risks, increase supply chain resilience, and capitalize on emerging opportunities elsewhere.
“China will never be replaced,” Joe Jurken, the founder and managing director of the ABC Group told the Wall Street Journal. “Other markets are an alternative.”
A 2023 Boston Consulting report found that more than 90% of North American manufacturing companies have moved at least some of their production or supply chain from China in the past five years. Of those, half reported that they had shifted more than 20% of their manufacturing and supply chain spending. In addition, due to ongoing geopolitical uncertainties and high US tariffs, more than 90% of survey respondents said that they plan to make similar moves over the next five years.
Southeast Asia, India, and Mexico have emerged as a popular destination for these sourcing diversification strategies.
Before retailers jump in and simply move away from China without doing due diligence, they will need to first assess the availability of skilled labor, develop relationships with new suppliers, and navigate varying regulatory environments. Some countries lack the scale and specialization that China offers, leading to potential inefficiencies and higher costs in the short term. Furthermore, infrastructure gaps in countries like India and Indonesia can complicate logistics, delaying the benefits of diversification.
Despite these challenges, many retailers view the China Plus One approach as a long-term investment in resilience. Moreover, spreading manufacturing operations across multiple countries allows retailers to cater to regional markets more effectively, reducing lead times and logistical complexities.
Recent retailer comments on sourcing diversification:
Resilience and adaptability are requirements for businesses. To provide such requirements, businesses will need to embrace technology tools even more to monitor their supply chains and be able to quickly pivot through this geopolitical uncertainty. As such, businesses will need to invest and leverage supply chain management tools such as transportation, rate and trade management systems, and AI and data analytics tools to optimize their operations in multiple countries. These tools will help companies mitigate costs, identify the best locations for sourcing, manage inventory efficiently, and streamline logistics.
As businesses embrace "China Plus One" strategies, technology will provide the adaptability and resilience that businesses will need to compete effectively in a global market that will be one of uncertainty, increased risks, and associated higher costs.
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