Currency fluctuations remain a concern in exports
To offset the losses arising from the economic slowdown in the US and Europe, apparel exporters took their first gingerly steps into the Indian domestic market on an experimental basis in the last couple of years. With rupee fluctuation continuing to be a concern, the experiment has turned into a logical extension with some of them launching their own retail brands and others supplying to domestic brands.Bangalore-based Indian Designs whose international clientele include H&M and Old Navy is one such company. A few years after launching its brand Identiti, a western casual wear brand, it is now looking to expand its retail operations. It will set up around 30 stores in the next two years in Kerala, Andhra Pradesh and some in Northern India. The company has around 12 stores at the moment in cities like Kochi, Mysore, Mangalore and Bangalore.
“Brand building is not an easy exercise. However, based on the growth in domestic consumption, we are planning to build our brand in the market,” said Naseer Humayun, MD of Indian Designs. At the moment around 5 per cent of the company’s revenues are from the domestic market.
Forbes Brands, a division of the Shapoorji Pallonji (SP) group’s Gokak Textiles, launched Facit, a youth-focused innerwear brand recently. “Two years ago, apparel exporters were not really looking at the Indian market. However, yarn rates have risen as much as 40 per cent in some cases in the last 6-8 months and Indian exporters have become less competitive in the international market. Therefore the idea to look at the domestic market makes sense as our manufacturing is already established,” said Nischal Puri, CEO of Forbes Brands. The company’s products are available in 15 cities at present and it is now planning to set up its first exclusive outlet by September.
What has driven apparel exporters to the domestic market is that revenues are not affected by currency fluctuations. In some garments, profitability is almost similar to that of what they get from international buyers. For instance, a leading apparel maker and exporter clocks a profit of $3 per casual wear garment (like t-shirts) from its export market and around $2.5 from the domestic market. For some formal garments, the margin is even closer. Moreover, exporters also say that unlike their counterparts abroad, consumers in India have been able to absorb a 10-15 per cent hike in prices of garments in the last few months.
“The crisis faced by exporters due to the currency fluctuations where we had to face more than a 10 per cent deviation, gave us the platform to look at domestic strategy,” said Ashish Kumar, vice president of Integra Apparels and Textiles, the apparel division of the Ashok Piramal Group and supplies to brands like Dockers, Levi’s and Benetton. In 2006, around 10-15 per cent of the company’s revenues came from the domestic market which has now gone up to 40 per cent. The company supplies garments in the domestic market to players like Madura Garments, Reid & Taylor and Arrow.
India’s biggest garment exporter, Gokaldas Exports which used to have around 4 per cent of its sales from the domestic market saw it increase to 7-8 per cent in 2010. Go Go International, which supplies to brands like VF Corporation, Lee and Marks & Spencer is learnt to be exploring an entry into the domestic market. An official of Prem Knitwear, which launched T-Mart apparel retail chain, couple of years ago, said that marketing was the most crucial factor for any company wanting to establish a brand in India. “We launched the brand on a trial basis and will see how to take it forward based on how our exports pan out,” he said.
