Bangalore: As overseas buyers of textiles continue to insist on lower prices, large export firms have started using cheaper materials for international markets so they can stay profitable.
Bangalore-based Gokaldas Images, for instance, which counts Armani Exchange, Calvin Klein Inc., VF Corp. and Oxford Industries Inc. as clients, has replaced acetate or viscose fabric with cheaper polyester to line the inner side of a garment.
Economy move:A traditional power loom in Solapur, Maharashtra. It’s tough for Indian exporters because at least 70-80% of the overseas demand is for basic, value fabrics, produced cheaper by Bangladesh and China. Manoj Patel / Hindustan Times
Economy move:A traditional power loom in Solapur, Maharashtra. It’s tough for Indian exporters because at least 70-80% of the overseas demand is for basic, value fabrics, produced cheaper by Bangladesh and China. Manoj Patel / Hindustan Times
That way, it maintains quality and texture of its garments while saving 15-20% on lining material, substantial when done in large volumes.
And with demand for premium wool suits drying up in foreign markets, Gokaldas is producing more polyester viscose suits at nearly half the price of woollen suits.
“The demand trend from European and US markets have changed from premium to value and they now want cheap stuff that also look good. So, we have to find various ways of meeting this demand,” said Jagdish Hinduja, chairman, Gokaldas Images.
This using of cheaper material, lower thread counts, or a more cost-effective design, has allowed several textile exporters to fill up their order books ahead of the key holiday season in the West.
But it’s still a challenge to make a shirt that cost $69 (Rs3,257) earlier for $39 and make it look and feel the same, said Sudhir Dhingra, chairman and managing director of Orient Craft Ltd, a textile exporter.
To reduce input costs, Orient Craft is switching to fabrics that costs Rs80 a metre, down by Rs20, and opting for cheaper machine embroidery of Rs35 a metre from Rs50 earlier.
“Inbuilt input efficiencies is critical now and we are trying new things like metallic-finish fabric or African prints for clients who want value-added products,” said Dhingra.
An analyst said the exporters are also removing non-profit clients that demand high-value products in small volumes. “The problem with mid-market demand internationally is that they want aspirational products at half the price,” said Harminder Sahni, managing director, Wazir Advisors Pvt. Ltd, a management consultancy.
In September, the Confederation of Indian Textile Industry said the global economic crisis would continue to hurt exporters and predicted that exports would go down by 5% in 2009-10. Between January and April, sales to the US, which accounts for one-third of India’s textile exports, declined by 14% over a year ago to about Rs8,700 crore, according to the industry lobby group.
Mumbai-based Morarjee Textiles Ltd, part of the Ashok Piramal Group, says the way ahead is through value engineering of products, price reduction and product innovation.
Morarjee, one of the largest suppliers of material for the Arab headgear guthra—a headscarf worn over a skull cap—has modified the design to make it cheaper.
“We have removed a design accessory in the guthra and it has reduced the price by 10-15%,” said Pramod Gothi, managing director, Morarjee Textiles, which also supplies to retailers such as Robert Talbott and Hugo Boss AG.
The conditions are tougher for Indian exporters because at least 70-80% of the overseas demand is for basic, value fabrics, which are produced cheaper by Bangladesh and China.
Ashok Rajani, vice-chairman, western region, Apparel Export Promotion Council, said many Indian exporters are now trying to include value-added features at a lower cost to push sales.
Rajani’s firm, Midas Touch Export Ltd, has introduced a woven component as value-addition to t-shirts, which are typically made in jersey or knitted fabric.
And like in domestic retail, exporters, too, are producing more garments at lower prices. Alok Industries Ltd, which supplies to clients such as Walmart Stores Inc., Nautica Apparel Inc. and Zara, has modified its value-premium supply ratio to 90:10 from 70:30 earlier.
Earlier, Alok would supply more expensive, finer bed linen with a thread count of 500 per square inch, which has now shrunk to 200-300 making the linen cheaper by 25%.
“Margins are not hit because input costs have also reduced. We can use cheaper quality of yarn to cut cost,” said Alok’s chief financial officer Sunil Khandelwal.
Source : livemint.com