The ambitious target of apparel and textile export continues with favourable policy announcement by the Government, good Q2 results of textile and apparel companies, increased retail demand in US retail market etc. These are a few of the signs showing that market, as well as overall sentiments, have improved now and the situation of most of the stakeholders have also improved. But as usual, challenges are also there as cotton and yarn price are skyrocketing. In this scenario, small exporters as well as small buying agents, are suffering the most. It is therefore important to see how the buying agents are managing this situation as they are an important bridge between buyers and exporters, especially for the smaller ones. The issue becomes significant as buying agents were already working on thin margins, lesser buyers and small size orders and there was less scope of further cost reduction for them as well as for their buyers and exporters.
Difficult times continue…
There are buying agents for whom tough time is continuing and they are forced to adopt various measures which are not at all beneficial. Few of the agents shared that they are even catering to orders without any profit and they don’t wish to continue working. In fact, the buying agents are a disheartened lot and though Apparel Resources (AR) talked to over 10 buying agents, only a few were ready to be quoted, which clearly reflects the current mindset.
One of the Delhi-based buying agents with massive experience in the apparel sourcing business told on the request of not disclosing identity that he is closing his business as one of his buyers is no more sourcing from India while another one has started direct sourcing. “It is right that there are huge orders, but these orders are with big factories and mid-size factories which have a good system in place and strong relations with their overseas clients. There is hardly any business with buying agents like me as business has stopped during the Covid time.” One of the clients of this buying agent has a good presence with around 70 stores in Canada but now this retailer is not sourcing from India as its overall business has reduced.
A major chunk of buying agents are of the opinion that as far as current order booking is concerned, overall there is a negative impact of 20-30 per cent as orders are shifting to Bangladesh.
“Though Bangladesh has the problem of high yarn price, they have the benefit of the Generalized System of Preferences (GSP) while in Tirupur, along with high yarn price we are also facing the major challenge of high dyeing cost, increased price of other raw material so the overall situation is very challenging,” says Elangovan Viswanathan, SNQS International, Tirupur (a leading apparel sourcing agent). He also adds that there are a few buyers who have increased the price little as they understand that raw material price hike is a global phenomenon and at least as of now there is no way out.
Not everyone is disheartened…
As usual, there are also a set of people who have a different opinion than the majority and there are buying agents who don’t agree that they are facing a negative impact on their business due to the increase in yarn prices. In fact, they are of the opinion that their overall profit has increased indeed.
“Challenges were always there in business and will be there in future too but I don’t agree that raw material price hike is a major challenge for even very small buying agents and that they are forced to consolidate their business,” says Lokesh Parashar, President, Federation of Buying Agents (FBA). He further adds that a significant problem for buying agents is the market shifting to Bangladesh and there are multiple reasons behind this shifting.
Lokesh also says that as the overall price has increased, accordingly the service fees of buying agents have also grown and at the same time their increased working efficiency and reducing operational costing (which they learned especially during Covid) has also increased.
He even highlights that a segment of buying agents are focusing more on high-end garments and home furnishing segments as they are more comfortable doing this.
“Small buying agents work with the small buyers and currently such buyers are not getting supply easily from Bangladesh, so they are continuously working in India with the help of buying agents,” said Lokesh.
“Look at the Bangladesh Garment Manufacturers Exporters Association (BGMEA), how aggressively they are marketing and especially targeting the potential buyers. If we don’t see any serious efforts to regulate the cotton and yarn export from India, the ambitious target of export will be highly difficult to achieve,” Elangovan Viswanathan, SNQS International, Tirupur
