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Friday, Apr 21, 2006

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Industry & Economy - Outsourcing

Big retailers double sourcing of garments from India

K. Giriprakash

"While Chinese players have reduced their prices in an attempt to capture a larger share of the market, Indian garment makers have tried to focus more on quality."

Bangalore , April 20

Big-ticket US retail chains Wal Mart, JC Penney, Target and Gap have doubled their sourcing of garments from India over the last two years to around $2.5 billion last fiscal (2005-06).

What is also significant about the outsourcing boom is that while Chinese garment makers have gone about reducing their prices by as much as 10-13 per cent, their counterparts in India have largely refrained from doing so. "While Chinese players have reduced their prices in an attempt to capture a larger share of the market, Indian garment makers have tried to focus more on quality," an assistant director with consultancy firm, Technopack Advisers, Mr Prashant Agarwal, told Business Line.

Of the $2.5 billion, Wal-Mart's share is as high as $1.2 billion, while that of JC Penney and Target put together is around $800 million and the rest is that of Gap. According to industry analysts, Wal-Mart plans to source as much as $11 billion worth of textile merchandise from India, while JC Penney plans to increase sourcing to $2 billion. Mr Agarwal said export of textile and garments from India during 2005-06 was around $17 billion, an increase of around 25 per cent. Out of that, the share of garment export was $9 billion. Exports to the US market rose 27 per cent, while for Europe it grew 18 per cent during 2005-06.

One of the main reasons for increased outsourcing is the fact that retailers such as Wal-Mart, JC Penney and others are moving away from third-party buying offices to set up their own wholly-owned sourcing and buying offices.

Mr Agarwal said investment in textile industry has also been trying to keep pace with the demand. For example, investment in the textile industry during 2005-06 was $4.1 billion, which was 71 per cent higher than the previous year. Globally, India's share in exports is a mere 4 per cent, while China's is around 25 per cent. India expects to cross the $40 billion mark by 2010 and even then its share globally will increase to 7 per cent.

More Stories on : Retailing | Outsourcing | Readymade Garments

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