Where Quality is truly the King!
Delving deep into the 'export quality' phenomenon
There have been innumerable jokes of how well meaning friends and relatives, on a trip abroad, cart precious apparel back home only to realise it is ‘Made in India.’ Despite the ribbing, usually, such gifts score over several similarly priced apparel available in the country in terms of design, finish and feel of the cloth and the general quality of the product. Export quality apparel scores tremendously over what is available locally at the same price point. If this were not true, why would there be takers for export surpluses, export rejects and the like in well known markets. Such markets for fabrics in Delhi include Nehru Place, Shanti Mohalla and for apparel or street wear, Kamala Nagar, Janpath and Sarojini Nagar.
India’s exports are expected to grow at 13 to 15 per cent in the current year over the previous year as per indications. Given the FTA with EU, Indian garment exporters will get duty free access to these markets at par with exporters from Bangladesh. The major countries where apparel exports are high include the USA, Canada, UK and EU. Other countries account for a lesser share in the export turnover. The Indian exporter is active in the Spring/Summer wear and not in the Autumn/Winter line. With such a prominent presence in the export market, it is, at times, ironical that similar clothing for the domestic Indian consumer is rarely available. The million dollar question is that why is it that given the surging demand for affordable apparel in the country with more youth being attuned to western wear and being equally fashion conscious, are such garments not available in the country? As far as the price points go, the same price can be paid by the Indian consumer, as can be seen from the various foreign brands which have established their presence in the country and are doing very well. Whether it is Zara, Mark & Spencer, United Colors of Benetton or sportswear giants, most have tasted a fair bit of success in India.
OVERSEAS BUYERS ARE VERY DEMANDING AND DO NOT ALLOW MARGINS TO CUT CORNERS. IT IS THIS STRINGENCY WHICH IS REFLECTED IN THE EXCELLENT QUALITY ONE GETS ABROAD.
Thus, the question is, what sets apart this export quality apparel and is the Indian market or the Indian consumer not ready for it? Why is it that similar clothes are not freely available in the Indian market?
The clothes supplied by Indian exporters are not always top notch brand products but are, in many cases, prêt lines and mass production pieces.
Way back in 2005, a study by the Indian Institute of Management, Ahmedabad, on the Textile and Apparel Supply Chain, by Pankaj Chandra says, “The Textile and Apparel Supply Chain comprises diverse raw material sectors, ginning facilities, spinning and extrusion processes, processing sectors, weaving and knitting factories and garment (and other stitched and non-stitched) manufacturing that supply an extensive distribution channel. This supply chain is perhaps one of the most diverse in terms of the raw materials used, technologies deployed and products produced. This supply chain contributes about 70 per cent, by value of its production, to the domestic market. The distribution channel comprises wholesalers, distributors and a large number of small retailers selling garments and textiles. It is only recently that large retail formats are emerging thereby increasing the variety as well as the volumes on display at a single location. Another feature of the distribution channel is the strong presence of ‘agents’ who secure and consolidate orders for producers. Exports are traditionally executed through export houses or procurement/commissioning offices of large global apparel retailers.”
One reason given by many is that the stringent terms and conditions of the buyer (importing client) make a difference. Overseas buyers are very demanding and do not allow margins to cut corners or do ‘ chalu kaam.’ It is this stringency which is reflected in the excellent quality one gets abroad. Most importing clients come with strict instructions on the fabrics, tags, washing instructions, care instructions, packaging materials and of course, the stitching and
designs. Also, there is great compliance to sizes. Any manufacturing which does not adhere to these specifications is rejected immediately and since the cost of a rejected shipment is huge, most exporters pay heed to stringent quality conditions. Also abroad, when one buys apparel, the option to alter it, as is regularly done in India by the humble masterji, is not there. The laws of the country allow buyers to return the garment if they are unsatisfied with it. So, brands are extra careful about the quality of the garments that they retail. There is no room for errors or mistakes.
THE CASE OF FABRICS
Speciality fabrics are a major draw for the export market. Many exporters are provided the fabric by the brand and then converted into garments here. The entire operation right from the design, the colours and the finish is overseen by the buyers themselves. Most have buying houses, where the merchandisers and coordinators work overtime to ensure that the shipment takes place with all quality checks and is, of course, on time.
FACTS THAT WORK IN FAVOUR OF EXPORTERS
Such stringency in local market operations is missing. Another factor which works in the favour of exporters is the homogeneity of the market and the sizes abroad. Sizes are pre-determined for consignments to USA and UK. These are standardised and do not change from buyer to buyer, making it easier to manufacture. The quantities worked with are huge, five thousand pieces to a design in three colours. This makes it very easy to standardise production. Also, the buyer is always at hand to iron out problems. Further incentives from the Government work to the advantage of the exporter. Export units are located in export hubs which give them economies of scale; logistics are taken care of, as also factors like uninterrupted power supply, water and other regulatory conditions. Finance is more accessible for export units, with banks and financial bodies offering credit against orders and letters of credit. Over and above, there is insurance provided by ECGC which works to guarantee the exporter against any loss.
DISADVANTAGES FACED BY DOMESTIC MANUFACTURERS
The domestic market, on the other hand, is anything but homogeneous. Sizes vary as do colours, designs and patterns. Requirements vary as per regions; even in one city, different pockets have different choices. Local brands like W say that what does well in New Delhi South Extension or Greater Kailash in Delhi does not necessarily do well in the Punjabi Bagh or Rajouri Garden markets of Delhi. There are too many cultural and religious variations. A domestic manufacturer has to battle several problems single handedly. There are several levels of excise and sales taxes which have to be paid. Getting hold of manufacturing space which has easy availability of labour is a problem.
THE DOMESTIC MARKET, ON THE OTHER HAND, IS ANYTHING BUT HOMOGENEOUS. SIZES VARY AS DO COLOURS, DESIGNS AND PATTERNS.
CREDIT RECOVERY FROM THE MARKET IS VERY DIFFICULT; WHEREAS IN EXPORT, IT IS THE ADVANCES AND THE LETTER OF CREDIT SYSTEM WHICH WORKS.
Finance for the SME and MSME sector is difficult with banks seeking collaterals and involves plenty of running around. The infrastructure is also a problematic feature. Since the market is not too organised, the domestic manufacturer battles plenty of problems. Another big worry is credit which has to be extended to the retailer and recovery of the payment.
Credit recovery from the market is very difficult; whereas in export, it is the advances and the letter of credit system which works. Pricing and commissions are transparent in the export industry. An exporter can easily work backwards and find out the sourcing price for the apparel. For the domestic market, it is the clout of the retailer which determines the margins. There are thumb rules but it is a fragmented and disorganised industry as a whole. The bigger players are able to attract modern ways of funding and look at the larger scale of operations. Many manufacturers have scaled up operations but in terms of size, if a small exporter is compared to a similar sized small manufacturer for the domestic markets, there are more problems which the latter faces as compared to the former.
Also, the starting of a business in India is tedious with many clearances and a lot of paperwork. It is not the easiest of things to do. With a lot of problems on the ground, it is sometimes a wonder that businesses manage to deliver on time. However, with the industry getting competitive and the market maturing, it is the right time for the same quality and finish at comparable price points to enter the domestic market.