A few days ago, Tirupur Exporters’ Association (TEA) requested its members to ask their buyers to increase the garment prices by 10 per cent as overall costing is increasing. TEA felt that the continuation of the same prices would certainly lead to a more difficult situation making it less viable for exporters to sustain in business. Top sourcing professionals are of the opinion that such initiatives will not solve any problem and might make them more worse. Orders will drift away from India if buyers feel prices are increasing. Suppliers must, therefore, work towards streamlining and eliminating losses in the supply chain.
Being a stakeholder of the industry, how do you see this issue? What can be the plausible solution…?
Vijay Jindal, SPL Limited, Faridabad
We are in a market which is facing global competition, so asking to increase the price can make business slip. So, rather than increasing the price, we need more support from Government to increase RoSL and duty-drawback rates to 5% which industry is demanding.
Vikram Jit Singh, Director, Fiori Creations, Faridabad
It is oft-repeated and absurd demand. Let me begin with two simple questions. When was the last time you worried that your mobile plan from your telecom company could be making loss for the company? Would you pay more than other available plans to ensure your service provider makes a fair profit? Your answers will be ‘Never' and ‘No’, respectively.
In theory, our customers should pay a fair price considering their requirements whether it is design, compliance, quality, or environmental standards. Those who want us to hold to certain behaviour must be willing to pay for the privilege of assuring their customers that their entire supply chain operates in a certain way. However, as we all know, in reality, it is simply ‘might is right’. Orders get placed based on ‘cents and not standards’. Sufficient paperwork is generated on file to show adherence. Any deviation can simply be blamed on the factory later. We are competing in a globalised, fiercely competitive open market. The ways to approach it is to work on speed, cut waste and develop niches. That will pay off, either in savings or higher prices. The other sensible option is to leave those orders where there is no profit. Try that for a change.
CEO, Apparel Global Consulting, Cossmo Tex, Tirupur
I would certainly not say that the request by TEA will make a negative impact on export sales. However, 10% is not a wise thing. More importantly, we dearly need to address the internal costing factors seriously as there is no mechanism to control these. Yes, it is high time to look at our supply chain and manufacturing efficiency. The unseen margin is to be found by us and not by customers since their economy is not doing better than us to absorb higher prices. More chances are that they will look for new avenues to source their demand.
SP Mundra, MD, Rajat Collections, Bangalore
I perfectly agree with the view that any increase in the selling price will completely jeopardise the already dwindling exports. The prices from our emerging competitors are lower. please take a survey of prices in Cambodia, Vietnam etc., and one will see what we are staring at. In addition, the overseas buyers nowadays are extremely smart. They keep a tab on our falling rupee and immediately pounce on us to reduce the prices! Where is the question of an increase? With several overseas buyers having their buying agents in India, these buying agents are also guilty of keeping the buyers educated on the exchange rate scenario.
M. Ganesh Babu, Proprietor, Sudarsan Clothing Co., Tirupur
This move is undoubtedly a good one. Tirupur garment exporters are providing such quality and services to command that 10% premium from the buyers. And now that the price increase is an index, we exporters will be able to pocket it. Fashion is variety. I have never seen two people in the same kind of outfit. So as long as this remains true, Tirupur's garment production will remain indispensable in the world of textiles. For our strengths lie in small quantity runs, short deliveries, multiple tires of sampling and coping with last minute changes. All this, however, means spiralling fixed overhead costs to run our factories.
The Government too needs to develop a consistent policy towards garment exports. Most part of this regime was spent neglecting exports, saving on its sops and pleasing the WTO. After the failed FDI attempts, the Government is knocking at our doors once again.
The duty-drawback needs to be increased to at least 5% overall. Otherwise we garment manufacturers will be left with no other choice but to look at Ethiopia or Vietnam to build additional capacities.
Zahir SAIT, International Trading Company, Tirupur
The textile industry is the only industry which shifts its country according to cost. Increasing the selling price by 10% is not going to solve the issue of being competitive. Tirupur is known for its mass market clients who are very price-sensitive and is also not popular for valueadded products. I believe the
only way to be competitive is that the Government increases the incentive for industries that employ a large amount of manpower.
We have been talking about sustainability for the last couple of years but sustainability in the true sense is being able to manage cost through change without increasing selling prices for customers at this given point of time, else they will move away from India.
R Sabhari Girish,
CEO, Award Associates, Tirupur/Noida
With the increase in prices of yarns and other attributes, it is inevitable that the exporters get a better price from the buyer. This is the first time in the history that TEA has sent a circular like this. Looking at the prevailing retail climate, buyers have been aiming for cost price reduction since the earlier seasons. If we demand 10% increase in price, we will be helping our competitors to grab our orders. It’s high time that the exporters should be looking for the elimination of wastage, increase in productivity and for providing some value additions, like design input and sail through this situation.
1. Cut-to-Ship Ratio: Factories are planning for overall 107% ratio, cutting being 105% and shipping being 97% on an average. With the current situation, we don’t have a luxury of wasting 9% to 10% which is really huge. The rejections should be eliminated and the cut-toship ratio should drastically narrow down.
2. Strong Exchange Rates: Strong currencies are another boon, where on an average, there is an increase of approximately 5% on the major currencies, compared with the same season last year.
3. Good IE Practices: We are still way behind on efficiency. The current efficiency is less than 40% for most of the factories and this is a reason for higher concern. We are well below the global benchmark; only by following proper IE practices will we be able to improve the productivity. If the efficiency is brought to 60%, the turnaround will be made quicker and the same can improve by 33%, the profit too increases.
Virender Bakshi, Country Head, Sergent Major, Tirupur
In the present scenario the exporters have already been hit by many reasons like recession/ low demand in buying countries, funds blockage due to their GST refund delay, higher or increasing labour cost, increased or unstable cotton or yarn prices, reduction in these incentives or dutydrawback disadvantage or uncompetitiveness in front of other neighbouring textile exporting countries due to their low labour cost and also the FTA advantage which they have over India.
Definitely increasing price is not at all a good solution as no buyer will pay a higher price when they get the same item from our neighbouring countries at a lower price, that too with duty-free import into Europe. I am sure exporters must be doing their best to streamline and eliminate the losses in the supply chain, and some of them must have already done that. In the present scenario,
I do not see any alternate or a good solution, except to look for alternative and new markets; making presentations to the Government, and requesting them to provide export finance against orders at more competitive rates. Also rationing of raw cotton or even yarn exports can be made so that we stay competitive.
The Government can also be asked to increase the incentives against exports and put FTA into existence for textile alone in a cluster manner without waiting for total FTA implementation.
Meenu N Bhat, Tannvi Impex, Noida
My suggestion is to first prepare customers for this increase with sufficient reasoning and some proofs so that preparations can be made. The need is to divide this into two phases with some time period. In the first phase, let TEA examine if price increase proves beneficial to the manufacturer, and based on that introduce the next phase and move further with time and situation, else switch back to the old rates.
Rajendran, Adarsh Knitwear, Tirupur
This price rise is an international problem and wherever the buyers go, they will have the same problem. I am sure buyers can accommodate this price and increase the retail price accordingly.
Vivek Saxena, Director, Moissanite Apparels, Noida
Increasing prices is a wishful thought of ‘Indian exporters’, but during my personal visits and meetings with buyers in the months of May and June, in Madrid, New York, Shanghai and Hong Kong, no buyer was willing to increase any price. Buyers are rather ready to easily move the orders to Vietnam, Cambodia, Indonesia, Myanmar, and Bangladesh at the drop of a hat. There have been so many articles and lectures by eminent economists of our country, stating that ‘curbing imports alone will not help, it is only by increasing exports that we will be able to survive’. The news of the
US $ 17 billion deficit in trade in the month of June ’18, should be another warning signal for all. This can be a topic of endless discussion, but eventually the policymakers will have to find a way out!