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June 29, 2023
Dia Rekhi & Faizan Haidar, Economic Times
New Delhi, June 29, 2023
Fast Retailing, the parent company of Uniqlo, is looking to set up a significant manufacturing presence in India through about 20 ‘production partners’, multiple people aware of the development told ET.
One of the world’s most valuable clothing retailers, Uniqlo already has a cluster of production partners in India and is looking to expand this network through a significantly large investment, they said without sharing any estimated amount.
“The investment amount will be significant because Uniqlo is serious about India and views it as an important market,” one of the persons said. “Unlike the existing facilities in India, which cater more towards exports, the production partners that Uniqlo will bring to India will be specifically meant for the domestic market.”
One of the company’s production partners that ET spoke to confirmed that their current mandate is to produce only for exports.
Uniqlo, which is Asia’s biggest clothing brand, had said India is one of the top priority markets for them where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear.
The company’s ambitions for India are considerable with its CEO Tadashi Yanai indicating that he wants Uniqlo to become the “best-selling retailer in India”.
The Japanese brand opened its first door in September 2019, but stringent lockdown measures announced to contain the outbreak of the pandemic in March 2020 delayed the expansion plan.
The brand is now planning to enter Mumbai and Bangalore. It has already opened stores in Lucknow and Chandigarh after Delhi.
Uniqlo does not own any factories. Instead, it outsources production of almost all its products to factories outside Japan.
As per a report titled ‘The Uniqlo case: fast retailing recipe for attaining market leadership position in casual clothing’, this model allows Uniqlo to keep its breakeven point low and improve return on investment.
“As we expand our global sales, we continue to grow our partner factory network in countries like Vietnam, Bangladesh, Indonesia, and India,” the company has stated on its website.
As per its list of garment factories, as on March 1, 2023, Uniqlo has 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia, and 16 factories in India and Japan among several other locations.
As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.
Over the past decade, global brands Zara and H&M became market leaders in the fast fashion segment in India.
“For global brands, India should be one of the most logical sourcing hubs given its large vertically integrated manufacturing sector on the one hand and the large, growing domestic market driving demand on the other hand,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, told ET. “However, its weight in the sourcing baskets has historically been low due to several reasons, in spite of China being visible for decades to the management teams of brands and retailers as a concentrated sourcing risk,” he said.
Uniqlo’s existing production partners in the country include Shahi Exports, Brandix Lanka, Tangerine Design, Maral Overseas, Shingora Textiles, Silver Spark Apparel, SM Lulla Industries Worldwide and Penguin Apparels.
As per Fast Retailing’s first-half results, the company said its revenue was 1.4672 trillion yen, or around $10.2 billion, and that its operating profit had risen to 220.2 billion yen ($1.53 billion), bolstered by strong performances from operations in several regions, including India where it said it generated significant increases in both revenue and profit.
With regard to Uniqlo International, in particular, it said revenue stood at 755.2 billion yen ($5.25 billion), while operating profit was 122.6 billion yen ($852.93 million).
The company said regions like India “reported significant revenue and profit gains as they enter a full-fledged growth phase”.
(Published in Economic Times)
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December 3, 2020
Written By Dheeraj Tagra
At a time when India is seeing a growing number of young entrepreneurs eager to innovate and take risk in the shape of ‘start-ups’, it is sad to note that the apparel manufacturing sector has not attracted these youngsters. If we do see some intervention in the textile value chain, it is mostly on the retail side and little bit on the tech side. Over the years, there are very few professionals who have taken the plunge to be entrepreneurs and run a factory successfully.
While entrepreneurship is being encouraged greatly these days, the definition of MSME is enhanced and many Government schemes are inviting investments in apparel manufacturing, why has the apparel industry been left behind in getting new ‘entrepreneurs’ is a question many are asking. The fact remains that the Indian apparel professionals lack entrepreneurial skills and feel safe working with established companies rather than using their experience to upgrade the industry.
It is also pertinent to mention here that the second generation of established players are not much enthusiastic to continue in the apparel or textile manufacturing sector; so having a fresh entrepreneur, for whom understanding the functions of the industry is difficult, is indeed a cause of worry for many.
At a time when India is seeing a growing number of young entrepreneurs eager to innovate and take risk in the shape of ‘start-ups’, it is sad to note that the apparel manufacturing sector has not attracted these youngsters. If we do see some intervention in the textile value chain, it is mostly on the retail side and little bit on the tech side. Over the years, there are very few professionals who have taken the plunge to be entrepreneurs and run a factory successfully.
Often, Indian apparel factories claim that a particular department/unit of their company is a separate profit centre for them and their teams runs its business as entrepreneurs, rather than just doing their stated job, but is that enough? What more can be done to encourage fresh entrepreneurs to be a part of the apparel industry, needs serious debate.
Many at small scale but none at the large level To its credit, the industry in the last few years has seen a few players that have started their own business and are surviving well. Majority of such entrepreneurs are those that have decades of experience in a particular department of an apparel unit, developed strong network as well as resources. And now they are utilising their strengths as a business promoter. In most cases these units are very small and operations are very much under the control of the promotor, so they are surviving, and a few of them have even grown reasonably well. There also there are few who are still struggling to create a place of their own.
Major obstructions
This is a hard fact, but the reality is that over the last 5 years, Indian apparel export is facing negative growth and it is very hard to grow for most of the established players. Very few companies have expanded in recent years while majority of the companies have seen standard growth. So, it’s natural that no one would like to invest in such an industry which does not promise growth on the base of past performance.
New players prefer to invest in other industries like retail, e-commerce as the variables are more manageable. One of the biggest constraints in apparel manufacturing or even in textile industry is managing a large labour base, besides being deadline driven and seasonal in nature (in export mainly).
Government push
It is heartening to note that the Government in the last few years has announced various initiatives to promote entrepreneurship across the manufacturing industry, that too at state as well as centre level like incubation centre, one district one product (ODOP), Mudra loan, Start-up India, Make in India, Single Window Clearance and various other kinds of subsidies.
The overall industry can expect to see more inflow of investment with initiatives likes proposal for creation of National Technical Textiles Mission for a period of 4 years (2020-21 to 2023-24) with an outlay of Rs. 1,480 crore and approval to introduce the Production-Linked Incentives (PLI) Scheme with the financial outlay of Rs. 10,683 crore for over a 5-year period.
Yet, experts believe that Government is not much concerned regarding new entrepreneurs in the apparel business as fresh investment by old players also serves the purpose of the Government – large-scale employment generation. According to information shared by Apparel Export Promotion Council (AEPC), there are 493 members who have established their companies from 2017 to date, but how many of them are actually new entrepreneurs, even AEPC is not sure about this.
Giving the obvious reasons for lack of fresh talent in the industry, Rahul Mehta, Chief Mentor, CMAI and MD, Creative Garments, Mumbai, argues, “The simple reason is the meagre profitability of the apparel sector. Garment manufacturing is a labour-intensive activity, involving largely hands-on working and day-to-day operations. Although the investment tends to be lower than most other industries, the returns do not justify the effort. Hence, whilst existing companies continue to operate, very little incentive is there for new entrepreneurs coming in.” He further adds that apparel industry is considered a traditional industry, and does not have the appeal of a ‘New Age’ industry – which most people of the younger generation would be interested in.
Regarding Government schemes, he is of the view that most of the Government schemes are for refund of taxes, and not really for making the business more profitable. Hence, these would not incentivise fresh investments and that too from new entrants.
What could be the solution!
To bring fresh approach to a stagnant industry, new entrepreneurs are a must and to encourage this, Government schemes have to be devised accordingly. At the same time, proper guidance and hand holding by existing players is also required rather than looking at these new players as just a competition.
Akhilesh Anand, MD, Carnation Creations, Coimbatore who is among the successful entrepreneurs to have grown in last few years, is of the view that first of all, any professional planning to start their own business should have clarity regarding what they wish to do and why. After this they should build partnership with like-minded people so that both the sides have a common vision and their team should also align with the same vision. He further adds that along with positive aspects, budding entrepreneurs have to think and plan for negative aspects also. “Whatever age a professional has, his/her thought process should be young, should have a knack for rapidly accepting the changes and be innovative at all levels,” he reasons.
A proper ecosystem having equal focus on export as well as domestic market should also exist to promote new players in this industry. With the recent labour reforms and strong focus on skill development, one can expect that managing labour, one of the most difficult aspects of the apparel manufacturing industry, will be easy in coming years. And it will help to attract entrepreneurs in the trade.
Dr. Biswajit Acharjya, Assistant Professor, Entrepreneurship Development Institute of India (Ahmedabad) agrees that Indian apparel manufacturing industry has been missing new entrepreneurs in the last couple of years in India. “The need is to strengthen and properly execute the labour law on a national level. Major textile and apparel units run on electricity which costs more compared to other mediums, especially CNG gas. At the same time, India is having limited water facilities in specific areas. We need to create sufficient water preservation through rainwater or recycling seawater. Infrastructure also needs to improve,” he says. He further adds that there is always a mismatch between the State and Central Government policies in India, which is again a concern. “Existing entrepreneurs should play an active role in mentorship for the new, like job training, grooming and assurance for future responsibility,” he argues.
Apart from Entrepreneurship Development Institute of India (EDII), there are other institutes in the country also dedicated to entrepreneurship like Institute of Entrepreneurship Development (IED), The National Institute for Entrepreneurship and Small Business Development (NIESBUD).There is a strong need to push for entrepreneurship, with a focus on the apparel sector.
Devangshu Dutta, CEO, Third Eyesight, a leading consultancy company, is of the view that the textile value chain has not really been seen as a strategic area by the Indian Government for many years, regardless of the political composition of the Government at the centre.
“Textile and apparel exports have grown at a compounded rate of around 7 per cent annually, a rate almost half of overall exports, when some other major sectors have grown 12-15 per cent, or even as high as 22 per cent annualised in the case of the automotive sector which was virtually non-existent in the export basket 20 years ago,” he says and further adds that India has some critical disadvantages against other competing nations – it is logistically distant from most developed markets, and it is not part of any trade bloc that would give it duty-free access.
To fight against these disadvantages, its natural advantages of entrepreneurship, design and product-development capability and vertical value chain need a lot of support. The Government must also stop seeing the sector in terms of its individual components (fibre, yarns, fabrics, apparel), and must see it as a chain in which we should be focused on the end-point (finished products) to maximise the value captured by India.
“There is no dearth of entrepreneurs in India, and the apparel business has relatively low barriers to entry. If the overall operating environment is cleaned up and made less cumbersome, our firms will do much better. A strategic push is also needed to be funded by the Government for technological upgradation of Indian apparel businesses, not only in terms of manufacturing but also in terms of the improvement of business processes, human capital and digitisation – it will not be expensive in the larger scheme of things but will go a long way in making Indian entrepreneurs and their teams better equipped to deal with the rapidly changing business environment,” he says.
Closing the debate on a thoughtful note, Deepak Mohindra, Editor-in-chief, Apparel Resources opines, “New ventures require professionals at its realm, those having the foresight to see and adapt to new consumer needs and changes and well-honed skills to take calculated risk. The existing stalwarts are largely not willing to take up this challenge, neither have they trained the generation next to take up these kinds of challenges. And that forms the basic handicap in building entrepreneurs and entrepreneurship. Building entrepreneurs requires not only a basic understanding of the industry but also support that has to come in from all quarters – Government, industry stalwarts and the banking system, which has to believe in them and back them as they have backed them in IT sector.”
Source: apparelresources
Devangshu Dutta
April 7, 2020
Oil shocks, financial market crashes, localised wars and even medical emergencies like SARS pale when compared to the speed and the scale of the mayhem created by SARS-CoV-2. In recent decades the world has become far more interconnected through travel and trade, so the viral disease – medical and economic – now spreads faster than ever. Airlines carrying business and leisure-travellers have also quickly carried the virus. Businesses benefitting from lower costs and global scale are today infected deeply due to the concentration of manufacturing and trade.
A common defensive action worldwide is the lock-down of cities to slow community transmission (something that, ironically, the World Health Organization was denying as late as mid-January). The Indian government implemented a full-scale 3-week national lockdown from March 25. The suddenness of this decision took most businesses by surprise, but quick action to ensure physical distancing was critical.
Clearly consumer businesses are hit hard. If we stay home, many “needs” disappear; among them entertainment, eating out, and buying products related to socializing. Even grocery shopping drops; when you’re not strolling through the supermarket, the attention is focussed on “needs”, not “wants”. A travel ban means no sales at airport and railway kiosks, but also no commute to the airport and station which, in turn means that the businesses that support taxi drivers’ daily needs are hit.
Responses vary, but cash is king! US retailers have wrangled aid and tax breaks of potentially hundreds of billions of dollars, as part of a US$2 trillion stimulus. A British retailer is filing for administration to avoid threats of legal action, and has asked landlords for a 5-month retail holiday. Several western apparel retailers are cancelling orders, even with plaintive appeals from supplier countries such as Bangladesh and India. In India, large corporate retailers are negotiating rental waivers for the lockdown period or longer. Many retailers are bloated with excess inventory and, with lost weeks of sales, have started cancelling orders with their suppliers citing “force majeure”. Marketing spends have been hit. (As an aside, will “viral marketing” ever be the same?)
On the upside are interesting collaborations and shifts emerging. In the USA, Jo-Ann Stores is supplying fabric and materials to be made up into masks and hospital gowns at retailer Nieman Marcus’ alteration facilities. LVMH is converting its French cosmetics factories into hand sanitizer production units for hospitals, and American distilleries are giving away their alcohol-based solutions. In India, hospitality groups are providing quarantine facilities at their empty hotels. Zomato and Swiggy are partnering to deliver orders booked by both online and offline retailers, who are also partnering between themselves, in an unprecedented wave of coopetition. Ecommerce and home delivery models are getting a totally unexpected boost due to quarantine conditions.
Life-after-lockdown won’t go back to “normal”. People will remain concerned about physical exposure and are unlikely to want to spend long periods of time in crowds, so entertainment venues and restaurants will suffer for several weeks or months even after restrictions are lifted, as will malls and large-format stores where families can spend long periods of time.
The second major concern will be income-insecurity for a large portion of the consuming population. The frequency and value of discretionary purchases – offline and online – will remain subdued for months including entertainment, eating-out and ordering-in, fashion, home and lifestyle products, electronics and durables.
The saving grace is that for a large portion of India, the Dusshera-Deepavali season and weddings provide a huge boost, and that could still float some boats in the second half of this year. Health and wellness related products and services would also benefit, at least in the short term. So 2020 may not be a complete washout.
So, what now?
Retailers and suppliers both need to start seriously questioning whether they are valuable to their customer or a replaceable commodity, and crystallise the value proposition: what is it that the customer values, and why? Business expansion, rationalised in 2009-10, had also started going haywire recently. It is again time to focus on product line viability and store productivity, and be clear-minded about the units to be retained.
Someone once said, never let a good crisis be wasted.
This is a historical turning point. It should be a time of reflection, reinvention, rejuvenation. It would be a shame if we fail to use it to create new life-patterns, social constructs, business models and economic paradigms.
(This article was published in the Financial Express under the headline “As Consumer businesses take a hard hit, time for retailers to reflect and reinvent”.
Devangshu Dutta
August 26, 2011
Indian Terrain Fashions’ plans to launch a ‘Made in America’ jeans brand using denim from a US mill made into jeans in Guatemala, is a move that bucks trends for brands sold in India. The move is an interesting twist in the growth story of a 10-year-old brand that was, until recently, a business division of the Chennai-based apparel manufacturer Celebrity Fashions. Celebrity’s notable customers include Gap, Nautica, Armani Jeans, Timberland, Dockers and Ann Taylor.
About five years ago, Celebrity had invested in growing its capacity by acquiring another exporter’s manufacturing facilities. However, Celebrity’s manufacturing and export business has been under pressure due to the difficult environment in its main markets, and last year Indian Terrain was demerged from its parent.
It now seems Indian Terrain is striking out on an independent path, with plans to launch a ‘Made in America’ jeans brand. Managing director Venkatesh Rajgopal says the company proposes to source the denim from an American mill and have the jeans manufactured Denimatrix in Guatemala, which also produces for brands such as Abercrombie & Fitch. According to him, Indian Terrain will use the same raw material as Abercrombie & Fitch, and “will be able to track every pair of jeans to the same cotton fields in Texas.”
The company’s competitors, both domestic and international brands operating in India, mainly buy denim products from within the country.
Denim is currently a very small part of Indian Terrain’s casualwear product mix which is largely sourced from its parent, Celebrity Fashions. The company is looking at launching the “mid-premium” priced brand in September that will not be “just about quality, but about offering a lifestyle.” Rajgopal estimates that denim has the potential to grow to 30-35% of the company’s business in three years.
The demerger of Indian Terrain from its parent company was carried out in 2010 with a view to achieving better valuation for the branded business and to provide additional liquidity to its founders and private equity investors. The company is currently present at about 80 exclusive brand stores and through 400 multi-brand retail stores, in eight cities, as well as in Singapore’s Mustafa Mall. It closed the financial year ending 31 March 2011 with sales of INR1.21bn (US$27m), and expects to grow its top line by 25% this year.
Its retail customers wait to see whether Indian Terrain will be able to effectively integrate denim into its core brand philosophy and grow to a third of the product range. However, for investors the critical question is this: after the demerger from the manufacturing parent and with product being imported from the Americas, will the brand business be able to maintain gross margins at the current levels of about 40% to 45%? Only time will tell.
Chandni Jain
August 9, 2010
India’s traditional skills in textiles, intricate craftsmanship, and creativity in producing a range of design-intensive products have enticed buyers from all over the world. India retains a strong and sustainable position among the top five exporters of textiles and clothing in the world.
India’s textile exports are currently weighted in favour of raw materials and intermediate products leading to ‘value-leakage’, which is a major concern from the long-term competitiveness perspective.
Within India, Delhi holds a position of prominence and can play a significant role in capturing additional value within the country. As a sourcing destination and as a gateway to the rest of India’s textile and apparel sector, Delhi provides unique value in product development and design, and a tremendously flexible supply base.
This capability is especially critical in an unpredictable market where retailers and brands are looking to source ever-smaller quantities of product, increasingly closer to the season.
According to the Director (Merchandising) of one of the largest US retailers sourcing from India, “Delhi scores high on responsiveness, and is more enterprising. It has the capability to handle extraordinary fabrics and is strong in interpretations of artwork.”
The apparel cluster in Delhi-National Capital Region (Delhi NCR) includes locations across four states, and accounts for about twenty five percent share in the country’s current apparel exports. If Delhi’s apparel cluster were to be treated as a country, at US$ 2.6 billion (Rs. 12,000 crores) of apparel exports, it would fall within the Top-20 list, ahead of countries such as El Salvador, South Korea, Philippines, Peru and Egypt. Moreover, being a labour intensive industry, apparel cluster offers immense employment opportunities in NCR, already with current direct employment of over 1 million as per Third Eyesight’s estimate.
A study carried out by Third Eyesight has identified an additional growth opportunity of over US$ 5.5 billion (Rs. 25,000 crores) both in its current markets and products, as well as new product opportunities.
For many buyers, sourcing from Delhi NCR cluster is still restricted to beaded, sequined, and tie-dyed blouses, dresses and skirts. While Delhi remains strong in these products, it now also sells funky denim and jersey wear to young fashion brands, men’s tailored suits to American brands, and women’s undergarments to Europe.
Delhi now offers a base both to international buyers looking at buying finished products, and to Asian, European and American manufacturers looking at setting up alternative manufacturing locations that can tap international as well as the Indian market.
Going forward, the key stakeholders of the Delhi NCR apparel export cluster – individual companies, industry associations and the government need to urgently undertake adequate action steps as the competition is gearing up and the perceived strength of Delhi NCR cluster at the moment may not remain a USP of this cluster in the future.
The Delhi NCR apparel export cluster strategy report along with action steps and key implementation areas was presented at an industry seminar ‘Discovering Growth’ in New Delhi. The seminar was hosted by GTZ in partnership with Small Industries Development Bank of India (SIDBI) and Apparel Export Promotion Council (AEPC). The seminar was attended by the key stakeholders of the Delhi NCR apparel cluster including leading apparel exporters, buying agencies and retailers.
