Indian Apparel Retailers Stepping Up Sourcing from Bangladesh
Bangladesh’s apparel exports to India could soon exceed US$ 1 billion. Retailers like Reliance, Future Group, Aditya Birla Retail, Arvind Retail, Woodland are aggressively increasing their sourcing from Bangladesh and many others are seeking right partners to work with. According to data released by the EPB, Bangladesh’s apparel exports to India stood at US $ 279.19 million in FY’18, up by 115 per cent compared to US $ 129.81 million in FY’17. The figure is around US$ 403 million now and is expected to cross US$ 1 billion in the next 2 years.
According to Deepak Mohindra, Founder, Apparel Sourcing Week, Bangladesh’s exports of garments to India could exceed US$ 1 billion in two years. While ready-made-garments constitutes around eighty percent of Bangladesh’s exports, in India the sector contributes only four percent. “There is a thrust by the country (Bangladesh) to be in this industry because of its significant contribution to GDP,” adds Deepak Mohindra. He was speaking at the first edition of Apparel Sourcing Week (15–16th March 2019), which was held in Bangalore, India. Around thirty manufacturers from Bangladesh (90%), China and Vietnam are participating in the event to connect with brands and retailers operating in the Indian fashion retail segment.
The withdrawal of 12 per cent countervailing duty (CVD) on textiles after the introduction of GST in July 2017 has helped increase the exports of ready-made garments from Bangladesh to India. The hiking of import duty on 328 textile products, which is not applicable to Bangladesh, has further helped increase garment exports from Bangladesh to India. The two-way trade between the countries increased to $9.3 billion in 2017–18 from $7.52 billion in the previous fiscal. The trade deficit is in India’s favour, with only a tenth of this figure constituting Bangladesh’s exports to India.
As of today, the Indian clothing retail market worth US $ 45 billion is fed by mostly Indian manufacturing, besides US $ 700 million worth of apparels from China and US $ 300 million worth of apparels from Bangladesh. But with the market slated to reach US $ 115 billion by 2026, the Indian market would require larger number of vendors to fulfil the retail shelves. While clothing sales is growing at 6.7 per cent in the US, it is an impressive 9.7 per cent in India.
Among the most active in Bangladesh today, is Reliance Retail, which has an office in the country for the last four years, but has only recently expanded its office with its Country Head — Mohit Batra, akin to what one will find in the traditional sourcing offices of brands like H&M, GAP, Inditex Walmart etc. In fact, Mohit now claims that companies like Reliance are the new H&Ms of the world offering Bangladesh the same growth opportunities in the Indian retail market. The retailer boasts of having sold 33,000 pieces every hour in 2017.
Sourcing 60 lakh pieces of garments from Bangladesh last year, the target for Reliance Retail is to increase the same to one crore pieces this year. Taking the target seriously, the sourcing office recently held its first Vendor Meet to talk to the exporters and introduce the company and its future plans. “We are offering huge quantities and are looking for manufacturers that can offer 20 per cent of their capacity with over 600 machines,” shares Mohit. With only 15 per cent of current sourcing — mainly in shirts, bottoms and fashion knits coming from Bangladesh, the scope for expanding the product basket is immense.
“We are doing 80% sourcing out of India and 20% from China and Bangladesh. We opened an office there in July. We source bottom wear etc,” said Neetu Jotwani, VP, Sourcing and PD at Myntra fashion brands, Myntra Jabong India pvt Ltd. To deal with the minimum order quantities that are required by the large quantity runs and long lines, Myntra tries to standardize fabrics and enter into strategic partnerships with certain mills.
“Today we have introduced Indian ethnic wear on Walmart.ca. Now we are going to the offline space in Canada as well. We made the vendors here go modular so that quality checks could be a easy. Earlier one person used to do the whole garment,” said Neetu Jotwani.
“The obvious synergy between the growing retail in India and the search for new markets in Bangladesh, makes the country an obvious choice to be the partner nation in the inaugural event. The common borders, close cultural ties, language compatibility and operational ease and comfort, only add to the synergy,” says Renu Mohindra, Managing Director, Apparel Resources, the organiser of the event
Bangladesh sourcing is not new to Indian retailers, and many new retailers have already started buying operations. But the effort is still very limited and confined to few product areas. The wide opportunities that Bangladesh presents to Indian retailers are largely under-utilised. For some retailers, the key product is bottom-wear, however, shirts, jackets, knits, suits and lingerie are potential products which too can be sourced very competitively from Bangladesh.
Today, Bangladesh is second only to China in the global apparel sourcing business matrix. Its exports have inched up 5.81 percent to US$ 36.67 billion in the 2017–18 fiscal, according to the Export Promotion Bureau (EPB). While knitwear garment export grew by 10.40 percent to US $ 15.19 billion, woven garments rose by 7.18 percent to US $ 15.43 billion in the 2017–18 fiscal year, compared to that of the same period in the previous fiscal.
The country today is manufacturing for most of the international brands like H&M, C&A, M&S, Walmart, GAP, Kmart, ZARA among the biggest buyers. After capturing the markets of the West, the country is looking at developing new markets, amongst which India is the most important.
According to data released by the EPB for the growth of garment exports in fiscal 2017–18, Bangladesh’s apparel exports to India stood at US $ 279.19 million, up by 115 per cent compared to US $ 129.81 million in FY’17. Of the total amount, knitwear products earned US $ 71.05 million, which is 89.75 per cent higher than US $ 37.44 million achieved in the same period a year ago. Woven products earned US $ 207.62 million, up by 124.79 percent, compared to $ 92.35 million a year ago. This increase in exports from Bangladesh is not only due to rise in sourcing by Indian retailers/brands, but also due to international retailers having stores in India. For some companies, the sourcing for India is happening directly through their international brands with POs made for specific countries.
Backed by an expanding economy and consumption boom, the Indian fashion retail market — estimated at US $ 45 billion and expected to touch US $ 115 billion by 2026 — is considered the most dynamic retail growth market surpassing even China (As per 2017 Global Retail Development Index report by AT Kearney)!
“India is a market that everyone in Bangladesh is eyeing, when to enter and with what product and at what price point is the debate,” says Imranur Rahman, Managing Director, Bando Design Ltd.
For the average pair of jeans, it takes 250 litres of water to wash 1kg. ”Bangladesh has fabulous knowhow on the laundry aspect. They could get the washes done,” says Mohit Dhanjal, Director -Retail, Raymonds Ltd. Speaking about the opportunity for this industry to modernize he said that it is still one of the last industries that exists, which is hugely capital intensive in terms of people. “The buzz word today is all about near sourcing. It’s about being agile and nimble. Fast fashion is being disrupted. From six to five drops we are talking about twenty five drops a year. Decreasing full price sell through and fickle consumer demand have lowered profit margins,” he says.
