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Who will grab the manufacturing advantage …?
In a fast growing retail scenario for apparel, organised retail accounts for approximately 30-35 per cent of the total market and in the past, to a large extent, organised retail in apparel had been confined to menswear and to a lesser extent kidswear, which was primarily more in the unorganised sector, while the womenswear readymade segment was practically non-existent. A recent survey still puts menswear as the hottest selling category in domestic retail.
Less than a decade ago, most exporters did not even consider the domestic market as an option for increasing business. The focus was on how to capture more markets abroad and if possible, add new product categories to get better responses from the buyer. The success stories were few and exporters found the effort not worth the‘ headache’. But times have changed … even the most accomplished exporter is looking at getting a footing in the domestic market, either working with leading Indian brands / retailers or creating his / her own brand that could compete with international brands that already exist in the market. Yet, it is not an easy marriage and challenges remain.
The vibrancy of the domestic market for apparel and lifestyle products is attracting not only garment exporters but also the manufacturers from the neighbouring country – Bangladesh. While the global conditions have resulted in slowdown of retail business worldwide, India has emerged as a lucrative market. Post policy upheavals like implementation of GST, the opportunities to explore the Indian market by Bangladesh has increased and according to Export Promotion Bureau of Bangladesh, India has imported US $ 87.4 million worth of readymade garments from the country during July-November 2017, registering a sharp rise of 56 per cent compared to US $ 55.92 million during the same period last year.
The free access of 61 items( 48 of them in apparel) from Bangladesh, recently introduced to balance the trade between India and Bangladesh,
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FACTS
• GAP is planning to open 50 more stores in the next 2 years.
• Ikea has opened its first store in Hyderabad and future stores are planned in Mumbai, Delhi-NCR, Bangalore, Pune, Surat, and Ahmedabad.
• The major Indian companies that account for a large chunk of Indian retail are – Future Group, Arvind Brands, Reliance Retail, Shoppers Stop, Trent, V2Retail, V-Mart and Tristar Retail.
• Arvind Lifestyle Brands is home to many international brands like Gap, The Children’ s Place, IZOD, Ed Hardy, Aéropostale, Gant, Hanes, Arrow, Flying Machine, Cherokee, US Polo, Elle, Excalibur, Nautica, Calvin Klein, Unlimited, Geoffery Beene and Ruggers.
• Reliance Retail operates some 419 stores across India for top foreign brands including M & S, Vision Express, Quiksilver, Diesel, and others.
• Mass market has two major players – V-Mart and V2 Retail.
• Shoppers Stop Ltd is India’ s prominent retail group and a pioneer in the organised retail industry with 74 stores in 33 cities.
• Future Retail Ltd. is present in 95 cities through 10 million sq. ft. of retail space and owns a portfolio of 24 leading brands.
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on one hand give an alternate lowcost sourcing option to retailers, but on the other hand increase the woes of the smaller manufacturer working for the domestic industry. On their part, the domestic retailers want to ensure that the product costing meets their budget while getting reliable supplies for the stores. Reliability can be measured in the form of meeting the product specification, on-time supply and compliance to required systems.
By 2020, if the industry were to grow three times and even if one out of the three parts were to be imported from Bangladesh, the one part – equivalent to US $ 15 billion – will need to be created within India only for the domestic market. The export growth will need additional capacities over the current ones. Eventually, the ideal factory will be one which works on modern manufacturing techniques, with reduced inventories and faster throughput – capable of delivering a quality product out of a compliant factory.
Sourcing for Indian market getting more professional …
Though exporters now understand the potential of the domestic market, still only a small portion of them deal in it and this is clearly due to a
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mismatch between the working style and the expectations of the brand / retailer and exporters. For one, the domestic retailers / brands provide samples to manufacturer due to which there is an ambiguity in domestic production, whereas international buyers provide them with details like catalogue, tech packs, per inch thread to be used and more; there is no scope for any ambiguity.“ There are many things that are very different; to start with, the domestic quantities aren’ t so big except for some brands. Say for 200 pieces and 400 styles, it is difficult for them to programme the machinery line-up for such quantities. Also, exporters fear to work with domestic brands because domestic brands have given payment problems to them in the past – they work on LC, we don’ t,” explains Haresh Mansharmani, Sourcing Head of the brand Mufti.
Most sourcing heads agree that the biggest challenge faced by maximum exporters entering into the domestic manufacturing scenario would have been regarding payment. All this happens because of the kind of payment systems / arrangement terms and conditions that they would have had. Generally, there are no payment guarantees as nobody does LC and rather work on credit
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