September 7, 2011

Now that direct investment into India is on the verge of opening up, the country could hold increased opportunities for clothing companies who want to source and sell fashion there. Rebecca Danton reports from a recent conference on ‘Sourcing And Selling Fashion In India,’ where speakers discussed the advantages and disadvantages of setting up and trading within India.

In terms of its fashion and clothing opportunities, India is generally seen as a poor relation to China.

While the great red dragon of the Republic of China embraced the end of global clothing and textile quotas and furthered its domination of the world market, the Bengal tiger of India appeared to stumble and, as a consequence, lost ground in the race between these two developing economies.

Foreign investors certainly have India in their sights. At a recent conference on ‘Sourcing And Selling Fashion In India,’ organised by UK fashion business magazine Drapers, Devangshu Dutta, chief executive of advisory and business services firm Third Eyesight, noted that software and services companies have been already talking about what their ‘India strategy’ is.

Meanwhile, US retail giant Wal-Mart has admitted that it missed the China boat, but said it would not miss India. And this is seeping into the consciousness of some fashion companies.

But despite these predictions of growth, development has not occurred at a fast enough pace for many foreign players, from retailers to sourcers.

Indeed, India continues to be dogged by its reputation for its poor infrastructure, unreliability and outdated factories.

As Dutta pointed out, India not only lacks trading-bloc partnerships and has a relatively lengthy transit lead-time, but laws applying to the industry are erratic, energy is unreliable, and a lack of government support and high cost issues continue to put off potential investors.

Recruitment can also pose a problem. There is a general lack of expertise in the country’s fashion industry and a shortage of skilled workers. It is a problem retailers are working towards combating with schemes such as mini universities.

Risk and uncertainty
On top of all this, foreign companies may be put off by what, to them, may seem an alien work ethic and way of conducting business.

Andrew Levermore, chief operating officer of retail venture Hypercity Retail, cites a low tolerance of risk and uncertainty, a lack of direct communication, and avoidance of conflict as typically Indian business traits.

And yet, India is a market that many are beginning to view with genuine enthusiasm. Dutta cites the supply chain manager of an international brand who says: “We’ve been blind-sided and ignored India as a supply base, and need to take quick corrective action now.”

Another to be converted is a buying director of a multi-billion dollar European fashion retailer – also cited by Dutta – who remarks: “We can see India going from 2% of our sourcing to 10% in the next three years.”

The jewel in India’s crown is its sizeable and rapidly expanding consumer class. The country’s economy is one of the fastest growing globally and is expected to double by 2010.

“With growing urbanisation, we see a sustained growth in the consumer market,” Dutta says. “Credit and debit spending is rising by 30%-40% a year.”

As for Indian consumers, there is a definite predilection for better-end clothing, Levermore says. “We’re not talking about a Wal-Mart level. People are value conscious but also quality aware. It’s not purely about value.”

With increasing consolidation of the industry and up to 300 shopping centres planned for the next few years, Dutta says that there is “huge growth” for modern retail in India, which is perhaps demonstrated by the levels of foreign investment heading in that direction recently.

Improving outlook
But, it is not just India’s economic outlook that is improving for those looking to do business in this market; the country’s legal and structural lay of the land has shifted positively too.

As of now, international companies can only sell their branded goods through franchise stores, or through wholesale operations. But this may change if the Indian cabinet accepts recent recommendations by a Group of Ministers that foreign investment of up to 51% should be allowed in operations that produce and sell a single brand.

Under this proposal, companies such as Tommy Hilfiger, Louis Vuitton and Mango could take control of their own stores in India – a significant step forward for global companies looking to strengthen their standing in the market.

In addition, existing factories are working to improve themselves. Technological upgrades and a newly found focus on ethical issues both go in India’s favour in the fight against its more developed competitors. Dutta says that more engineered planning, more compliance audits and expansion plans will all combine to help India’s factories come up to par with those in Eastern Europe, for example.

India is already the number two or three supplier to Europe in a handful of categories such as skirts, men’s nightwear and woven blouses. In addition, the production of basics is improving, helping shake off the country’s image of only being worthwhile for more detailed garments.

On top of this, India is strategically located, and could be viewed as the south Asian market’s hub – not just as a single country. The likes of Bangladesh, Sri Lanka, Pakistan and Dubai all offer prospects for apparel companies.

Mike Flanagan and Liz Leffman, co-founders of sourcing intelligence company Clothesource, agree and say companies should consider the whole of the south east Asian subcontinent as a sourcing destination.

Although India and its surrounding countries may not be the easiest place to do business, it should be considered a real alternative.

“There are phenomenal prospects if the product is right,” says Dutta, who concludes that companies should look at India in its own right instead of making comparisons with China.

(The Drapers Conference on “Sourcing and Selling Fashion in India” was held in London on January 31, 2006. This article was published in, February 24, 2006.)