Changes of country heads to meet new sourcing challenges were seen in many leading liaison offices throughout the year including Walmart, Kappahl, All Saints, Target, Itochu India, IC Companys, Sears, NKD Germany, Monsoon, Fat Face, Ikea and Charming Shoppe to name the prominent ones. Two very old hands of the trade – Jasjeet Bhatia of Fat Face and Abha Kalsi of Taffles decided to take a well deserved break. Many of the bigger buying operations were unhappy as small players were undercutting their margins and offering services to their clients resulting in some shifts of clients from one agency to another.
This year has been a year of ‘change’ and ‘introspection’, and every link in the supply chain including the buying offices has witnessed a churning process. At the buying offices, which are generally the last to feel the impact of slowdown, there have been many upheavals. While on one hand many country heads shuffled around, on the other cost cutting by retailers saw downsizing of buying operations. Interestingly, some new buying offices also opened doors preparing in advance for what could be a landslide in business, as China slowly but surely reduces its hold on the global garment trade. Another dimension to competition is added as buying offices begin to look at regions not countries…
But the real shocker of the year was the sacking of Adil Raza, Regional Director JCPenney and nine others from the JCP India office. Though the official reason given was cost cutting, the grapevine suggested corruption charges. Already struggling to get business, many buying offices are now facing credibility issues, not only the bigger offices, which have long-term relations with their buyers, but even the smaller ones are answering a lot of questions.
Many of the buying offices that had cropped up over the last decade in Tirupur have closed down, most of them on corruption charges and others because it was difficult to survive. Even small regional offices of many bigger buyers have shut down as the parent company found it difficult to monitor the local operations effectively.
In the meanwhile budget of liaison offices was slashed, and they are finding it difficult to work within the new budget, which is nearly 15% less than 2011, more so as inflation is on the rise even as their role and responsibilities over the years have expanded requiring more manpower. Cutting cost is no longer an option but a solution, and though there is no confirmation, there are strong whispers that suggest that many of the long existing buying offices are finding it difficult to survive with margins taking a dip and orders shrinking. Yet three new buying operations made their entry into the Indian sourcing arena this year – Amida 9 Global Sourcing; Edinburgh Woollen Mills (UK); and Precision Design and Sourcing, all being led by very experienced industry professionals. According to industry sources Esprit is also set to open their own liaison office in 2013.
The established buying offices are looking for solutions beyond cutting cost and they are working at top gear to add new categories, search for new buyers in emerging countries and bring in buyers who left long ago due to poor service, offer PD facilities as additional services and even offer their services to domestic retailers. However, the biggest effort today by most of the buying offices is to get a share of the business which is being diverted from China.
“Now it’s not only India for buyers, as they are stretching boundaries to include Bangladesh, Sri Lanka and Pakistan in their sourcing net.” – Deepika Rana, Executive Vice-President and Country Director, Li & Fung India
Yet, even as Bangladesh takes a proactive approach and is now offering garments which earlier only China, Sri Lanka or India could handle like lingerie, structured garments, critical outwear and even high fashion ladieswear with buyers like H&M, Zara, Sainsbury and the likes doubling their sourcing from Bangladesh in last one year, no such positive statements are coming from any liaison office or buying agency in India.
Richard James, Country Head, Axstores India liaison office, a Swedish retail company shared with Apparel Online that polyester based ladies garments which have been traditionally sourced from China by the global buyers are now being diverted to India. He said that his company was flooded with orders for ladies garments in polyesters based fabrics, however the dichotomy is that in India only Surat is the place from where one can source these fabrics; though very few players in Surat are catering to the international market.
The established buying offices are looking for solutions beyond cutting cost, adding new categories, searching for new buyers in emerging countries and bring in buyers who left long ago due to poor service, offering PD facilities as additional services and even offering services to domestic retailers. However, the biggest effort today is to get a share of the business which is being diverted from China.
On the contrary Bangladesh manufacturers are already prepared to take on the diverted orders from China, not just the basic and voluminous business but also the high fashion and critical garments. They have not stopped here; they are now all set to cater to Chinese market which is going to be one of the biggest buyers in coming five years. Recently, a high level Chinese delegation visited Bangladesh to source garments from this low-cost manufacturing destination. As per Padam Vaish, Country Manager Bangladesh for Dimensions, a UK based company sourcing corporate wear/workwear for leading global companies; things have changed dramatically over the years. It is not just the hike in the wage structure in China that has made Bangladesh a probable choice to source garments from. A more important fact that has played a vital role in the shaping of such a choice is the improved capacities Bangladesh exporters are now capable of. Besides the thought of relocation of production units, retailers in the Chinese domestic market are also considering it worthwhile to procure clothing from other competitive manufacturing destinations for their growing domestic market.
According to Deepika Rana, Executive Vice-President and Country Director, Li & Fung India, now it’s not only India for buyers, as they are stretching boundaries to include Bangladesh, Sri Lanka and Pakistan in their sourcing net. Customers worldwide are no longer looking at sourcing in compartments as trade becomes seamless and without boundaries. Today, the four countries in the Indian subcontinent – India, Bangladesh, Sri Lanka and Pakistan – are considered by most buyers as one identity and together they are the fastest growing sourcing hub in the world.
For buyers the subcontinent can be one but for individual countries the garment export revenues are adding to their individual country’s GDP and undoubtedly the most serious players amongst the all is Bangladesh. Many can debate on the same old theory that Bangladesh’s economy is dependent on garmenting so it is more important for them to be proactive, but buyers argue that exporters in India are less inclined to take the extra step to grab business and they are compelled to place the orders in other countries. As the trend moves from individual country specific sourcing to regional sourcing, things are going to get really competitive for Indian garment industry.