Tesco to ramp up India sourcing to $165 mn

Even as India is dillydallying to open up the retail sector to foreign direct investment (FDI), global retailers like Tesco are increasingly using it as a sourcing base.

One of UK's leading retailers and a Fortune 500 company with sales in excess of £37 billion, Tesco, is planning to ramp up its sourcing from India to £95 ($165 mn) million next year and in tandem, its service centre in Bangalore which already employs 800 people.

A company spokesman said, Tesco sourced goods worth £65 million this year and planned to increase it to £95 million next year.

Tesco's sourcing from India was focused on apparel with 90 per cent of Tesco's offering in the segment being outsourced from India. Currently, South Indian apparel hubs, Bangalore and Tirupur account for a large proportion of the sourcing.

Over four million vests and T-shirts sold in Tesco stores each year were made in Tirupur and Tirupur's knitwear alone accounts for 40 per cent of Tesco's Indian imports. The company also imports shorts from Bangalore, about four million pieces a year.

The principal activity of the group is food retailing with over 2,000 stores worldwide, however, Tesco has a long-term strategy for growth was to be as strong in non-food as in food.

Tesco's non-food business includes electricals, home entertainment, clothing, health and beauty, stationery, cookshop and soft furnishings, seasonal goods such as barbecues and garden furniture in the summer.

The company's market share of the non-food sector was less than seven per cent generating sales in excess of £6 billion each year in the UK alone.The UK's like-for-like non-food sales growth was currently at around twice the rate of food.

To cater to the growing non-food sector, the company planned to widen its sourcing portfolio in India, beyond apparel. The company was looking at growing the hardlines side of sourcing from India, said the spokesman.

Hardlines would include health, beauty and homeware products.

To supplement the company's growth plans, Tesco would strengthen its service centre in Bangalore, branded Hindustan Service Centre.

"The centre currently employs 800 people and we plan to continue to grow the centre to meet the growing needs of our businesses around the world" he said. The shared service centre provides information technology (IT) services and business services processing.