International Fashion Brands In India Increase Local Sourcing To Reduce Costs Get Competitive.

NEW DELHI: Several international fashion brands such as Cadini, DKNY, Gant and Boggi Milano, which have been importing their entire merchandise for India, have started sourcing apparels locally to become more competitive and profitable in a booming market.

By shedding inhibitions towards sourcing from within the country, these brands can significantly cut down tax outgo and reduce production costs by about 20%, helping them to reduce prices and reach the market faster, say analysts.

Local sourcing will help companies do away with import duties, which are as high as 40% on apparels, and save on longer supply cycles, says Harminder Sahni, managing director of consultancy firm Wazir Advisors. “Besides, they can either bring down prices or make extra margins equal to the amount of customs duty,” he adds.

Donna Karan New York, or DKNY, already source about 6% of its merchandise from the country, says Ashesh Amin, president – apparel and retail at S Kumar’s Nationwide, which has the global franchise for DKNY menswear in all geographies except Japan.

The US-based clothier Hartmarx Corp, which S Kumar’s acquired in 2009, sources merchandise worth about Rs 40 crore from India. The company, which shot into fame for designing a suit for US president Barack Obama, plans to increase its sourcing base in India further in next two years.

“Local sourcing is beneficial to us; it offers higher margin and better time-to-market,” says Mr Amin. “We are expecting additional business of over Rs 800 crore this fiscal on the back of local sourcing.”

Arvind Brands, a subsidiary of textile firm Arvind Mills, is in talks with the UK-based premium lifestyle brand Gant to start sourcing its merchandise in India. Gant currently imports the entire collection for sale here.
The firm is also set to launch Italian menswear label Energie in India, which will have 75% of its merchandise sourced locally, says J Suresh, CEO of the Rs 230-crore Arvind Brands.

The company already has a local sourcing model in place for its other international brands such as Arrow, Izod, USPA and Cherokee that are buying merchandise from suppliers in Bangalore, Chennai, Delhi and Ludhiana.

However, the international brands are playing safe while choosing suppliers in India after UK retailer Marks & Spencer severed ties with one of its local suppliers following allegations of unfair practices.

Anand Nair, brand head of Boggi Milano, says, “We are carrying out intense screening procedures to ensure that our Indian suppliers match our quality standards and working conditions.”

DLF Brands, the retail arm of top real estate firm DLF, retails the Italian premium menswear brand in India.
Marks & Spencer Reliance India, the joint venture between Mukesh Ambani-run Reliance Industries and the UK retailer, had recently announced plans to increase sourcing from India to more than 70% from about 40% now.

One of the earlier entrants to the domestic market, United Colors of Benetton sources its entire range locally.

Other than the tax savings, another factor driving fashion brands to India is the rising labour costs in China, say analysts. Recent labour unrest in places like Indonesia, Cambodia and Vietnam too may work in favour of India.

Most these brands have no immediate plans to source merchandise for their global operations from India, but will integrate their India supply chain with their global distribution network in the long term.

Blues Clothing, which has licence to retail Italian fashion labels Versace, Corneliani and Cadini in India, plans to leverage its source base is India for global operations soon. The company is currently sampling few export-oriented factories to source merchandise for premium menswear brand Cadini, according to its MD Abhay Gupta.

Brands such as Boggi Milano and Cadini, which import 100% of their merchandise, feel that local sourcing will help them expand faster.

“Local sourcing will certainly improve our logistic and supply chain, and the pace of expansion will improve,” says Mr Nair of Boggi Milano.

International brands are estimated to account for nearly 20% of the Rs 32,000-crore Indian organised branded apparel market, which is growing at 15-20% a year.

Source:29 SEP, 2010, 12.00AM IST, DURBA GHOSH & PRAMUGDHA MAMGAIN,ET BUREAU 


Tags:Abhay Gupta, Anand Nair, Asesh Amin, Blues Clothing, Boggi Milano, Cadini, DKNY, DLF Brands, energie, Gant, Hartmarx Corp, J Suresh, UCB