Devangshu Dutta, Chief Executive of Third Eyesight, a retail and fashion services firm, said. “Retailing in India is set for the next big leap – what began as forward integration for manufacturers such as Bombay Dyeing and Raymond in the 1960s, has almost suddenly reached a stage where even smaller companies, individual entrepreneurs and real estate owners are willing to build organisation and structure into their businesses.

“The availability of quality real estate in the form of shopping malls is probably the biggest enabler of the organisation of retail business. From small 300-400 sq. ft. outlets in disorganised high streets, one now has the option of opening a well-furnished store in the well-equipped environment of a mall.

Highlighting the challenges ahead, he pointed out that, “The biggest challenge for the mall owners is going to be to find enough different brands to fill the space, so that the differentiation between the malls is maintained. Otherwise the 35-40 million sq. ft. that is coming up will end up looking the same all over, and one can foresee a bloodbath in the mall business. The challenge for retailers, on the other hand is to develop people at all levels, from frontline sales staff to middle-rung and senior managers to run the retail business. Their skills need to be of global-best standards, to allow indigenous retailers to not only compete with foreign retailers in India, but also to enter markets outside the country.

“Indians have a long history of being merchants of fashion, and moreover, of being able to build powerful brands informally – we need to combine these capabilities to create a truly vibrant fashion and retail industry where innovative and uniquely Indian brands are created, that are world-class and globally accepted. Outsiders have long appreciated the Indian industry’s strengths – the industry now needs to realise these itself.

Speaking about malls presenting competition to high street retailing, he commented, “High streets need to reinvent themselves quickly. Unlike European high streets which had a lot of protection from urban planners, and some lead time to develop a competitive strategy against out-of-town shopping, Indian high streets are faced with the prospect of sudden demise with the entry of huge malls in their own vicinity. Local market associations must rush to making sure their members work together and recreate a vibrant and different shopping environment to retain their customers – otherwise independent shop-owners will fall prey to Indian organised retailers much before foreign retailers even hit Indian shores!”

Written By Devangshu Dutta

Over a decade ago, when the first structured concept notes were addressed to European and American companies about the opportunities in the Indian consumer market, the pitch was new, the opportunity was bubbling and path looked fresh.

Now, the pitch is well-practiced and heard from not just consultants but entrepreneurs themselves, several firms have tried to tap the opportunity and the path is littered with half- dead business plans!

During the late-1980’s and early-1990s, when the first foreign consumer brands started coming into the market, what drew them in was the image of hundreds of millions of Indians eagerly waiting to burst upon rows of shelves filled with their products.

Several years on, the image seems to have evaporated – so have millions of dollars in expenses for some companies. And there don’t seem to be too many more foreign brands and retailers in India than there were ten years ago.

Well, the reality is that, despite the hype the foreign brands’ boom in India never really happened. While a number of companies showed interest, not many actually entered.

You could blame it on policy barriers raised by senior government officials who proclaimed that there was no need for India to learn retailing from foreigners. You could blame it on domestic, regional or global politico-economic uncertainty.

Or just blame it on the investment magnet of the world, China, which has simply sucked up a large portion of the investments made in Asia. Even now, through bilateral frictions, health scares etc., China remains red-hot. Inward investments have remained consistent. Despite manufacturing job-loss protests, imports from China into the western markets march steadily upwards.

Even a comparison of country-specific investment funds shows that while India funds are trading at a discount to their value, The China Fund is trading 25% above the value of the fund’s holdings.

But, at the beginning of 2004, the India-buzz seems to be back. It’s a confluence of factors – each taking its own time – collectively growing into critical mass for change. India seems to be back; still tentative, but definitely back on the agenda.

The Market from Outside

For once, there is a realisation among the foreign brands that, once you do proper research, the market size looks a lot smaller than estimated earlier, but is still big enough. Consumer products companies and fashion brands are now looking at potential market sizes of a few tens of thousands (for premium brands) up to possibly 50 million, as a realistic starting base. Further, it presents the promise of significant growth with all-round growth in prosperity.
Within this market, the economic fundamentals are sounder than earlier. GDP growth is looking better than projected, a smart case of underselling and over-delivering. Foreign exchange reserves stand close to US$ 100 billion, of which US$ 30 billion grew in 2003 alone.
Industrial growth is diversified, with new competitiveness in sectors as diverse as health & pharmaceuticals, information technology, the automobile industry, business process outsourcing, telecommunications, housing & construction, bio-technology and, not the least, in textiles. This is obviously an engine for economic prosperity all round, which means more individuals and families with money to spend.

In the early to mid-1990s, western companies looked at the Asian economies for additional growth. Compared to India, countries such as South Korea, Taiwan and even Thailand proved to be more attractive due to higher incomes and better infrastructure.

While some of these are still attractive first choices for many brands and retailers, from some India at this stage presents a better opportunity – early entry into the market, and a chance to shape the competitive landscape.

In terms of sheer numbers, India’s potential has always been clearly visible in the long term, but now the economics are beginning to make sense for initial exploration and early entry activities.

Negative Perception as Supply Base

Prior to the 1990s, India has been associated with all the third-world images that you can conjure up. Fact and imagination have blended to create an unpalatable business reality.

You might wonder why it would matter to a retailer or brand looking to source from or sell into a country. It does, simply because the retail business is made up of individual people who are prompted not only by rationality but by emotion.

The designers and buyers who create product ranges like to visit places that are exciting and appealing – think New York, London, Paris, Mauritius, Kuala Lumpur, Colombo, even Hong Kong and Bangkok. Travelling is easy and relatively hassle-free. “Fast-paced, exciting, flamboyant, exotic” are some adjectives that come to mind. Doing business here is a pleasure, even in this mind-boggling complexity of the fashion business.

Other centres that are not as appealing don’t attract the buyers – they are used as manufacturing outposts, and monitored by a lower-profile technical team from a buying office, or an agent. They lose out in terms of new products, in terms of value-addition, and in terms of share of mind.

Of course, practical constraints such as production capacity, quota, and costs matter – that is why these unglamorous centres do have business. But you can bet that, given a choice, the buyer would like to buy from somewhere else, to where he or she can travel.

Similarly, retail managers are generally risk averse, and like to move in packs – where there are some brands, more come in and create a mutually reinforcing business environment.

They create an environment of opportunity for their suppliers, too – not just for quality finished goods, but raw materials, trims and accessories, even logistics and other service providers.

This virtuous cycle has already begun for the Indian fashion and retail industry, but is not very visible to most foreign retail brands and their suppliers. In their mind, they carry a picture of a certain level of capability, which has not been updated.

In fact, I remember visiting a store in Delhi along with a senior European retail executive when he kept asking if the fabric, buttons, labels and bar-coded hang-tags were produced in India. When the usual visits are limited to carrying specification packs to factories and getting quotations only on those, there isn’t much chance of developing a fresh picture.

Then, again, several buyers have been attracted to India’s wide ranging capabilities but have been badly burned in their business transactions.

Some time ago, I met with the head of apparel buying for a large European retailer – he tossed and turned products from several factories, obviously not interested in looking at anything seriously. About 20 minutes later, he gave up and said, “I don’t really want to buy anything from India – Indian suppliers can do a very limited product range, quality isn’t always good and the shipments are always late.”

I inquired about his previous buying experience with India, and discovered that his last deal was in 1992, and he has never set foot

in India again. Much as we might present statistics and facts about the developments in the Indian textile and apparel industry, a personal injury early in his career has left a deep scar that obviously influences this gentleman’s buying decisions which are worth over €300 million in global apparel sourcing.

Another instance that comes to mind is a series of sessions with a US$ 3 billion retailer, to analyse 40 countries as global sourcing options for them. On factual evaluation of several short-term and long-term factors, India appeared high on the list for a number of products for this company. However, five years later, their total sourcing from India remains under US$ 10 million.

Among other comments, one which sticks in my mind is: “I’ve always had very poor experiences with India – in an order of 10,000 pieces, maybe a few hundred will match the specifications.” And another: ”I don’t know why the garments always smell! Even when I am in our stores, I can tell which garments have come from India, just by their smell.” Exaggeration? Maybe, but certainly based on reality. And I don’t believe we even got around to talking about any infrastructure or macro-economic issues.

Buyers are human beings – they want to buy from a supply base that is pleasant and reliable, from a centre that is fun to travel to. Given a chance, they will work with such a supply base again and again. And depending on the skills, they will place their better and more value-added products there, too.

Without creating too much of a controversy, dare I say that Delhi’s US$ 2+ billion apparel exports result from the combination of sheer selling entrepreneurial zeal, manually-skilled labour, and weekend trips for the buyer to the Taj Mahal and Rajasthan.

Imagine, then, even without any major change in macro conditions (given the already improved highways to Jaipur and Agra!), if a set of Delhi-based companies can match their internal performance against the best suppliers that their buyer has, what the results might be.

Poor quality practices are certainly deep- rooted, too, and need to be tackled systematically. A quality consultant working with a mid-sized exporter recently remarked in despair, “The company needs to rip out their current way of working, and maybe even provide VRS to several of its executives, if it wants to survive beyond the quota phase-out.”

Even buyers who express confidence in the Indian supply base (such as Gap which reportedly is sourcing over US$ 500 million from this region, or a little under 10% of their total sourcing), have anywhere between 40- 70% of their people here focussed on in-line and post-production quality issues.

Until this ratio shifts towards more people being allocated to product development (which can only happen if the inherent confidence in quality improves), the growth rate of the industry will remain below the true potential.

Small production capacities are the other major problem, especially for larger customers. As a result, despite all the talk about compliance norms, people at some of the largest buying offices acknowledge that their orders could occasionally be produced on subcontract in sheds that would fail every test of health and safety that these offices claim to impose.

Compare this with what a senior professional from one of Hong Kong’s largest apparel companies said: “Indian industry looks like a formidable competitor, the day it decides to wake up.”

Another comment, this time from a Singapore entrepreneur: “The Indian garment industry can go far, but for some reason, people here don’t really want to work in partnership with others.”

Can the industry make that change?

Brighter Side: Better Image and Cultural Infusion

he picture is not completely bleak – and much of it has to do with “image”, sometimes completely unrelated. And the image right now is a lot more positive than it has been for a long while.

For one, since the late-1990s, “Indian” has begun to equal “Intellectual”, mainly credited to the software professionals. While the Indian doctors, the professors, the management consultants and the investments bankers have lived overseas much longer, they have largely had to fit into the local (western) form and customs.

On the other hand, the techno-geeks have travelled to the west for relatively short stays and have not had time (or the need) to fit-in. They’ve been “Indian” and yet delivered superlative results.

Thus, the ultimate accolade from popular culture is the presence of super-engineer Asok in the hugely popular cartoon strip Dilbert, compared to the grocery store owners Apu and Sanjay in the older early-90s cartoon, The Simpsons.

The next wave of re-programming of “image” is happening through entertainment and culture.

The mystical east has always appealed through films like the Merchant-Ivory’s productions, but recent years have drawn further attention to Indian creative talents or influences in the mainstream – whether Shekhar’s Kapur’s Bandit Queen and Elizabeth, or the Australian Baz Luhrman creating Moulin Rouge as an Indian-style musical with Hollywood superstars. Mira Nair’s Monsoon Wedding and Gurinder Chadda’s Bend It Like Beckham have become surprise hits, not mainstream yet reaching a broader audience than earlier Indian or Indian-themed films.

The next wave of re-programming of “image” is happening through entertainment and culture.

The mystical east has always appealed through films like the Merchant-Ivory’s productions, but recent years have drawn further attention to Indian creative talents or influences in the mainstream – whether Shekhar’s Kapur’s Bandit Queen and Elizabeth, or the Australian Baz Luhrman creating Moulin Rouge as an Indian-style musical with Hollywood superstars. Mira Nair’s Monsoon Wedding and Gurinder Chadda’s Bend It Like Beckham have become surprise hits, not mainstream yet reaching a broader audience than earlier Indian or Indian-themed films.

Selfridges held a Bollywood festival for 23½ days, complete with Indian street-side food and street fashion. Andrew Lloyd Webber’s London stage production, Bombay Dreams has now spread across the Atlantic, too.

processes and people in their organisation. Secondly, the growth of organised retailing is helping to create unparalleled visibility – large retailers, carrying a wide range of merchandise produced in India are the best showroom India’s manufacturers can have locally.

On the spiritual front, Time has done a cover story on meditation and yoga – it’s not that the phenomenon is new, but the size and spread of it is suddenly visible and high profile.

Does all of this have any impact on the Indian fashion industry? I believe a major one, though indirectly – India, and things Indian, are becoming part of the mainstream everyday consciousness. So long as these positively reinforce each other, and are supported by tangible business performance, it presents a clear business opportunity to attract western companies into India for sourcing or for marketing partnerships.

How is the fashion industry reacting? Well, for one practically every business person worth their salt is busy upgrading systems,
I agree – India, the Indian market and Indian industry will need to get beyond being a fashion statement that slips out of people’s minds once the fashion peak is over. And the good news is, I think, that it’s beginning to grow into something more than last year’s fashion statement. I believe that even when the so-called “India look” dies down, the Indian fashion industry’s chances of growth and influence are strongly sustainable.

Source: Images Business of Fashion

In the throes of two wars – Conflict in Iraq and the fight against SARS – Interstoff Asia went without a hitch although, understandably, attendance was affected , with a 25 per cent drop against last spring’s show.

Interstoff Asia welcomed 7000 visitors to the spring event, held from 25-27 march, and they weren’t disappointed because of the 266 exhibitors promised, only seven from Thailand and one from Taiwan decided not to take the risk of attending. An extensive programme of seminars, product presentations plus trend forum all added up to a strong show, which attracted buyers from international brands such as Burberry, Marks and Spencer, Adidas, Victoria’s Secret, Skechers and, of course, US designer labels Calvin Klein, Donna Karen and Ralph Lauren, who where out in full force.

Two of the 12 seminars looked at sourcing worldwide. As one of the largest and fastest growing economies in the world, India’s consumer market offers lots of sales potential for international consumer brands. Devangshu Dutta made a presentation on ‘India’s Textile and Clothing Industry Today and Opportunities to Partner’. The seminar highlighted the advantages of buying from India, from the lower labour costs in the world, to a long textile history and the convenience of English as its main business language. The figure for exports from India in 2000-2001 reached US$ 12.10bn. The government target is US$ 20.70bn by 2005. The US and EU account for 70 per cent of exports. However there are also disadvantages, such as a fragmented industry structure, inefficient infrastructure and lack of trade pacts. Devangshu Dutta’s advice to companies interested in India was to develop a well researched and solid stratergy.

‘ Global Sourcing and International competitiveness in the Textile and Apparel Industry’ by Dr. Gary Gereffi of Duke University, predicted that China would replace Hong Kong as a main product source for the US. However, Japan remains the most advanced of the Asian countries with regard to production of clothing, textiles, fibres and machinery. Mexico and Turkey are also keen to get in on the action. Without quota restriction, small exporting countries without an integrated manufacturing set up will lose out against the big integrated exporters.

Environmentally friendly, natural products will become more important in the future and Cargill Dow took to the Interstoff platform for the Asia launch of its PLA corn based product Ingeo. Tim Eynon and Dr.Jim Lunt of Cargill Dow described the advantages of the recyclable and biodegradable product and envisage a large amount of oil based PET will be replaced by PLA in the future. Cargill Dow recently signed an agreement with Far Eastern of Taiwan to supply Ingeo chips to make yarns and fabrics. India and China will also be involved in marketing development in the future. In Japan, Cargill Dow has been woirking with Unitika, Kuraray, Kamebo and Toray for quite some time, and in Hong Kong with Fountain Set since last year.

Another new natural product introduced at Interstoff Asia was Luobuma , a fibre with a 5000 year history, collected from the wilds of the Xinjiang Province. The plant has medicinal and health boosting qualities, such as breathability, anti-bacterial, UV protection, moisture absorbency, as well as stimulating circulation and far-infrared benefits for cell repair and arthritis relief. Luobuma also stands up to frequent washing very well, in fact, tests prove that the qualities of the fibre actually improve. The product is being promoted by the Xinjiang Green Health Luobuma Co. The company currently produces 30 tons a year, which makes up to 130 tons of product when mixed with other man-made and natural fibres. At the moment, the plant can only be harvested from November to March each year.

Bodywear Pavilion

In addition to the various international sections, the product pavilion featured the relatively new bodywear fabrics area. The programme was introduced a few years ago, but has grown considerably in size. This year the section boasted 30 exhibitors and its own trends display area. Hyosung of Korea – producer of elastane Creora – held court, exhibiting with seven of its customers and holding fashin shows throughout the days. The company used the show to promote its chlorine resistant Creora H-250, antibacterial Creora C100B, heat resistant Creora C-300 and fluorescent H-100F. As leading supplier of elastane in Korea, Hyosung holds more than 50 percent of the market share at home and is now the second largest supplier in the world. Due to high demand in China, the Shangai factory is expanding. Meanwhile, outside the ‘Hyosung zone’, 19 companies exhibited under the auspics of The Taiwan Textile Federation. Chifa Leather’s busy stand proved that despite a significant drop in the export of man-made leather from Taiwan, it has managed to survive by going upmarket, thus avoiding price competition with Chinese exhibitors. The company has also diversified into functional performance fabrics. Lower visitor figures were not an issue for another Taiwanese exhibitor, Ruentex, as it had already presented its new collection to main customers at Premiere Visionand Textworls last February; although the company did manage to find new business at the show. The collection incorporates UV protection, stain resistance, quick dry and antibacterial functions into fashion apparel fabrics, such as cotton, Tencel, rayon, ramie and linen.

Thai exhibitor figures diminished from 19 down to 12, due to fear of the SARS virus, but Nan Yang was undeterred, promoting its Dry-Tech Comfort System, in addition to stretch fabrics with a cotton hand feel for sports, body and underwear. The double layer Dry-Tech transmits, disperses and absorbs moisture, resulting in a 50 per cent quicker dry time than cotton. The Thai cottage industry is alive and well, in the form of Neoteric Life Ltd. Specializing in handwoven cotton and silk fabrics produced by villagers, the company offers advice and handles the sales and marketing side. As the Japanese are always looking for specialized, handcrafted items, it is the company’s main market at the moment.

It was only a decade ago that India and Taiwan were the largest exhibiting groups, but this season it was the 100 plus companies from China, which dominated the show. Technology, brought about through joint venture projects with foreign companies, especially those from Japan and Taiwan, have improved the quality of Chinese produced fabric and Chinese producers now attract buyers on the lookout for value-for-money items. Although most of the items were quite standard, there are some interesting products to be found. Meisheng Cloth & Garments of Shaoxing showed prints, bonding, embroidery and embossing on micro-suede fabrics and Zhejiang Youlong Enterprises offered woven materials with spandex. The company’s dye cut moleskin was very popular with European clients. Also from Zhejiang, Yong Tong Dyeing and Weaving Co., exhibited a large variety of fabrics from denim and flock to corduroy and embroidery. Japanese companies are known for their strength in new product development. Kuraray Trading carried a variety of new functional items, including Airmint. Introduced last year, it is 40 per cent lighter than polyester and is used particularly in sports, intimate and jeanswear. Cool touch Sophista is excellent for innerwear as the quick dry feature keeps the body cool; Space Master blocks harmful rays and Panapak is anti-pilling, quick drying and is blended with cotton in sportswear. Of the dozen or so European exhibitors, Miroglio was busy right up until closing time, although Hans Borrmann, area sales manager for Asia commented that it is usually even busier. Eurojersey of Italy was hoping to catch the European and American buyers, but not many came this time. Denim manufacturer – Gap Guneydogu Tekstil – the sole manufacturer from Turkey, returned again, as it found Interstoff Asia the best fair to make contact with Asian Buyers. In general, exhibitors who relied heavily on foreign buyers where affected, but many companies were still able to meet old, new and potential clients.

The next edition will be held 7-9 Oct 2003.