Where Qual­ity is truly the King!

Delv­ing deep into the 'ex­port qual­ity' phe­nom­e­non

Apparel - - Contents December 2014 -

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.”

STRIN­GENT CON­DI­TIONS

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.

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