Noida on the outskirts of Delhi is the home to many exporters who specialize in manufacturing high-fashion ladies garments with some type of surface ornamentation like hand embroidery, sequencing, beading, printing, etc. Team Apparel Online talks to exporters with turnovers between Rs. 5-15 crore on their survival mantra in these times when buyers are very cautious in their sourcing strategy…
After both the major garment shows – prêt a porter in Paris and Fashion Week in Hong Kong – saw slow footfalls with most buyers more interested to review collections than place orders, exporters are very sceptical of how business will move over the next few months, as these shows have always set the pace for buying for the next seasons. Companies are reworking their strategies and becoming more flexible to grab whatever orders come their way. “Earlier we used to work on orders not less than 2-3 thousand pieces per style but now we even take orders as low as 100 pieces,” says Yogesh Kumar, Director, Fashion Sphere. He adds “we have seen small companies with turnovers of Rs. 1-2 crore perishing, even companies with turnovers of Rs. 5-7 crore are finding it difficult to survive; and now even the Rs. 20-25 crore turnover bracket companies are also fearing closure if the state of the export market doesn’t improve.”
With the middle luxury market being the worst hit, business in the mass high-value segment has gone down by 30 per cent in the last one year. “Due to recession people are not ready to shell out that much money right now, hence decreasing the sales and affecting the export market hugely,” says Arminder Channa, Director, Zephyr Apparels. Further, hand work has become very expensive and buyers are not willing to pay the increased overheads hence increasing the pressure on exporter and lowering their margins. In this situation, traditional markets are not as lucrative and exporters have aggressively turned to newer markets including the domestic market. For many it has become important to keep the factory running and new markets is the most obvious way to widen opportunity for business.
Domestic ventures…
Many exporters are approaching domestic brands and e-commerce portals, as alternates for the export market. “For the past 35 years we have concentrated completely on the export market, but now it has become important to look at the huge Indian population for business. As it is not easy to initiate an independent brand as it requires huge resources, we are in negotiation with bigger brands that have quantities and can pay for quality to diversify our capacities,” says Sambhav Jain, MD, Seer Global.
Among the successful players to have made it big in retail is Mariko, “We are one of the leading suppliers to Westside from the last 16 years for home textile section. Now with our own brand ‘Tarini’, sales have picked up and we conduct regular collection review meets for our domestic buyers, so they can see and choose products according to their store concepts,” says Uday Sehgal, MD, Mariko.
However, not all the exporters who have entered the retail segment have found growth and according to many manufacturers who have tried their hands at local sales, dealing with domestic market is not a cake walk. Yogesh’s experience was not very good as payments are not made in advance and many times the money is released only after the goods are sold at the stores. Also rising labour cost and land rentals are adding the pressure for the exporters who have their own in-house brand. Even Mariko was compelled to shut down their already existing exclusive store for their in-house home linen brand ‘Tarini’ because of the high rentals. “We took that step as a cost cutting method and now are planning to take this well known brand online and sell it through e-commerce,” reasons Uday.
Zephyr Apparels has recently launched its own domestic brand called ‘Mona Singh’. The USP of the brand is hand embroidered garments with a promise to provide ‘made to measure’ clothing for Indian women. How different this concept would be from a regular boutique is critical, as a factory cannot run on few individual pieces. A few years back Sai Creations ventured into the retail business by opening franchise outlets of a well known brand. But they have pulled out as mounting rental cost and running expenses have made it difficult to sustain profitability and are now concentrating only on the export business. “After working with the export market it is very difficult to work in the domestic setup as the functioning is very different and also we are basically manufacturers handling front desk which requires a completely different skill setup,” says Rahul Anand, MD, Sai Creations.
New export markets…
The companies who have ventured into new export markets in Asian and South American countries are reworking on their product profile to suit preferences of those markets.
In fact, Sai Creations got the confidence to get back to exports as it entered new markets which have given them good growth. They are also busy with orders even during a slow-down because they diversified into new products like scarves, fashion jewellery and kids wear to cater these markets, which also brought in orders from their traditional market the US.
“The investment to expand into these new categories was very little as scarves do not need much sewing and all the fashion jewellery is handmade to give an Indian effect to the product,” avers Rahul.
Mariko also adopted a similar strategy and diversified into bikinis. They even launched organic bikini collection keeping the new trend in mind. “Our new product range generated a lot of interest from my buyers,” says Uday. Fashion Sphere is now only focusing on less explored countries in Europe rather changing their market completely. Avin International is doing well even in the recession period, as they have spread their market over all the major markets. “We have got European, American and South East Asian buyers, this helps us to balance the demand as some markets work even as some others may slow down,” reasons Avnish Puri, MD, Avin International. The company has recently diversified into men’s wear apparel to offer more to its customer.
Working in new markets and with new buyers does have its set of problems, the biggest being the reliability of the new buyer. In fact, many exporters have already had bad experiences in terms of payments leading to big losses. In the enthusiasm to get business, flexible payment terms were agreed upon, but now having seen the consequences, as a safety measure, most of the exporters have decided that no shipment will go directly to the buyer and all business will be done via bank and that goods will be consigned to the banker based only on LC.
