June 2020: In Mysuru, Karnataka, one of the factories of Gokaldas Exports Limited which was working mainly for H&M fired 1,200 workers. After a lot of buzz at the national and international level in this regard, in February 2021, the company agreed to again hire these workers. H&M, Gokaldas’ biggest buyer, said it was ‘positive that an agreement has finally been reached’. Gokaldas said that in June, H&M’s order cancellations led to the factory’s closure yet the brand denied this and stated that it had paid for all the products as agreed, according to the union, and criticised the export house for ‘union-busting’.
November 2020: H&M officially accepted that as a result of restructuring in the organisation within its India sourcing entity, around 60 of its colleagues will not continue their journey with H&M. And they were laid off.
January 2021: A Dalit female checker who was employed at one of H&M’s leading supplier’ factory Natchi Apparels in Kaithian Kottai (Tamil Nadu) was allegedly murdered by her colleague. H&M said it is launching an independent investigation into the killing of this lady. International labour groups are of the strong opinion that H&M must use its power as a foreign buyer to ensure that any gender-based violence is eradicated from across all its supply chains.
In less than one year, these three unfortunate incidents have created a negative image of H&M in India.
H&M, the world’s second-biggest fashion retailer, has around 174 vendors in India.
In discussion with Apparel Resources, various vendors shared that currently H&M’s orders are almost 25 per cent less and some of them believe that in the future, H&M apparel sourcing will reduce from India. And this less sourcing is not temporary though in mid-March, the company’s 1,050 stores have been temporarily closed. This constitutes 20 per cent of its total stores.
“The two sad incidents of various factories are part of the business and have nothing to do with the retailer’s strategy or even can’t impact the sourcing strategy but laying off staff is something the company has done as a strategical decision. This is why I am worried regarding the volume of orders by H&M as it can further be reduced,” said one of the leading suppliers of the company on the request of anonymity.
However, H&M in its reply to Apparel Resources, said,“India is, and will continue to be, an important production market for us and we have no plans to change our sourcing strategy.”
There are few exporters who think that every negative experience or incident has its impact, though temporary. But as things are taking place like in a series, it is a cause of worry for all stakeholders in the supply chain associated with H&M.
It is also pertinent to mention here that as per the website of the company, China and Bangladesh are the largest production markets for clothing. And during the recent layoff, there was a buzz amongst its Indian suppliers that now Bangladesh will grab the major share.
In an earlier reply to Apparel Resources, H&M had said that it is restructuring the organisation to be more agile and efficient in its ways of working and to secure future growth in the market. It went on to clarify that its offices in India will continue to contribute and add value to global sourcing and market growth in India. It had even stated that the brand is taking transformative steps in order to strengthen customer centricity so that it is able to secure the best offers for its customers. Despite the geographical location of teams, digitalisation and customer-centric set-ups will enable market growth in the future.
One of the senior officials of a leading buying house who works with top brands and buyers shared with Apparel Resources that H&M is now focusing a lot on IT in its apparel sourcing rather than the traditional practices.
There are some changes in its sourcing system like the previous working style of Mirror organisation (one exact counterpart also in export house for every professional in H&M who is coordinating with the export house) is now no more preferred. The vendor skill matrix is also focused now.
It is worth mentioning here that H&M set up global technology centres in Bengaluru recently and the plan is to hire a large number of IT professionals.
One of the exporters commented, “Indian factories have to be tech-savvy as is H&M. This is not rocket science but the majority of Indian factories even working on a large scale are not too aggressively investing in such IT-driven solutions.”
Another Gurgaon-based exporter added, “I see this in a different view. How many of the Indian suppliers of H&M are doing an annual business of US $ 50 million or near about that of H&M? Hardly any! While on the other hand, there are many exporters in Bangladesh and China, doing more than this business with H&M. So, when India’s top factories having capacity or strength to manage such bulk business, are not getting bulk orders, how medium-size factories can expect good business from the retailer? I am firm on this stand irrespective of whatever India’s strong product categories are, or its focus being more on value-added products or India’s strength in handling small orders, etc.”