March 26th, 2010
Major sourcing hubs/geographies for apparel, home textile and home furniture in India
Home Furniture –
- Jaipur – big factories, timely deliveries, good quality, combination furniture as well, negotiable prices
- Jodhpur – good quality with higher price
- Saharanpur – lower price, working in half hazard manner, regular follow ups required, lack of planning in exporters here
Home Textiles –
- New Delhi, Noida – Cotton textiles, Made-up & Home furnishings
- Calcutta – Silk
- Mumbai & South India – Raw Fabrics, Hosiery, cotton shirts, cotton t-shirts
- Jaipur – Cotton Bed cover, cotton pillows
- New Delhi – cotton & leather apparel
- South India – knitted garments Cotton/polyester/lycra/viscose like t-shirts, shirts, polo shirts, pajama sets, sweat shirts
- Mumbai – Denim
March 25th, 2010
What are the key sourcing models (ways of sourcing goods) employed by international retailers in India. there are three ways, either to have a direct sourcing office in India or to have tie-ups with buying houses or both of these together (like Wal-Mart).
- Which is the most prevalent model?
- In case of the third model, how do you decide that you should source a certain category directly and not through any buying house or sourcing agent
Case study of Wal-Mart –
they want to buy from Indian market for its foreign stores & sell to Indian Market as well for the upcoming stores they are opening in Indian Market in partnership with Bharti with a plan to handle the frontend of the retailing business by Bharti while Wal-Mart would take care of the supply chain, that is the reason they have their direct sourcing office in India and tie-up with factories also,
For Midsized companies ‘Tie-up with a Buying House’ is better due to cost heads in maintaining the company office, whereas a buying house cost on the buyer is only on the dispatches, a certain amount of commission on each invoice,
Risk factor is less in hiring a buying house coz buying house gets paid only if the merchandise received at the other end successfully with no errors or if incase of a faulty merchandise replacements and compensations are issued, this results in a higher responsibility of the buying house individuals so to dispatch the merchandise as per desired results,
Another benefit of a buying house over company owned office is the advantage of goods inspected by a 3rd party individual/company which is always preferable,
In case of the third model, how do you decide that you should source a certain category directly and not through any buying house or sourcing agent
In case of consistent orders where demand is more than supply a certain source can be imported directly by a buyer but again a risk of not getting a regular good quality is involved, to err is human for which regular checking is required either by the buyer or by its agents, in this case buyer may negotiate on commissions and agent will again be happy on dispatch of higher quantities to get higher commissions,
March 25th, 2010
How much sourcing is done by retailers from Sri Lanka and Bangladesh?
- Which are the key commodities sourced from these countries?
- Are there any specific sourcing hubs in these countries?
- What are the benefits or in which aspects do these countries have a competitive edge over India?
Big retailers are procuring woven garments & knitwear from Bangladesh due to cost as fabric is cheap, the other important factor is labor which is very cheap and together it effects the overall cost of production, more than 60% of the export market of Bangladesh constitutes garments and knitwear,
Exports from Bangladesh: Approx 30% to U.S., 40% to European countries like UK, Germany, France, Italy etc. and 30% to rest of the world including India,
Apparel exports contributes around 8% of India’s overall exports and approx. 45% to textile exports
- Women cotton trouser US$430 million from Bangladesh & US$260 million from India
- Men cotton trouser US$750 million from Bangladesh & US$210 million from India
- Women shirts India’s growing 3.4% but Bangladesh by 11.50%
- Men knitted shirts India decline by 10% whereas Bangladesh increased by 20%
What are the benefits or in which aspects do these countries have a competitive edge over India?
Or to be more precise why India is losing here?
- India’s cost breakdown is $1.90 whereas Bangladesh is $1.85, in specialty wear (high value items) it is $6.49 as Bangladesh is $5.85, higher fabric cost is due to higher credit rates, higher make cost is due to higher labor and duties
- Moreover Bangladesh is duty free for EU & Canada, this way landed cost is much cheaper and for high end fabrics Bangladesh uses Chinese knit fabric which is cheaper than our vertical setup’s
- Govt. support to countries:
- China has increased refund of VAT from 11 to 17% on exports and addition of 2% of duty drawback
- Pakistan has introduced 6% of R&D assistance
- Bangladesh has export benefits:
- Income tax exemption
- Subsidy on electricity, water, gas
- Export loan – 90% amount with letter of credit
- Exemption from insurance premium
- Refund of VAT on services like C&F, service, telephone, telex, electricity, shipping agent commission.
- Duty free import of machinery
- 80% exports of production considered as export orient industry for availing all export benefits.
- Labor Cost- approx. 225% higher in India (70 US Cents) than Bangladesh (25 US Cents)
- Power Cost- India’s power cost is 250% higher than other countries like 10 US Cents/Kilo Watt in India, whereas Bangladesh 6.5 US Cents/Kilo Watt, Egypt 4, Pakistan 6 & china 8.5,
- Export Promotion Zones – (EPZ’S) - Most Indian factories are not EPZ’S and domestic goods like threads, zippers, trimmings are purchased with domestic taxes like (service tax, vat, excise) etc.
Also in comparison to Bangladesh, India is lacking in the procedures like:
Shipment time less 3 day (India – 10 days)
Easy access to bank credit (India – access and procedural time a problem)
Excellent infrastructure support in Export processing zone
Sourcing hub: International Fabrics and Accessories Sourcing Fair – Dhaka, Jan 13 – Jan 16 2010, http://www.asktradex.com/FABRIC/index.html