Garment exporters join the retail rush

The entry of big players such as Bharti-Wal Mart and Reliance group into the retail business and penetration of organised retailing in non-metro cities in India is fueling the garment sector in the country like never before. With an exposure of hardly 5%, the traditional garment exporters from India are now eyeing a bigger pie in the growing organised retail sector in the country.

India’s biggest garment exporters, including Creative Garment, Kaytee Corp, Orient Craft and Gokaldas Exports, are all bullish on the potential of garment business in the retail sector in India. Most of these companies are now in the process of evolving a separate business model for the domestic market to increase presence from current levels of 4-5% to over 20% over next two years.

While Gokaldas Exports and Kaytee Corp have set up separate business divisions to cater to the growing domestic market another exporter, Creative Group have floated a separate company to tap the opportunities here.

“There is a lot of interest and we are talking to all the players for sourcing agreement on a long-term basis and if the volumes are good we may also set up separate manufacturing units dedicated to the domestic market,” says Gokaldas Exports’ executive director-finance, Rajendra J Hinduja. The Rs 884-crore company is already supplying to few of the organised retailers in India.

“We have recently set up a separate division, which will look into the opportunities of garment supplies in the domestic market,” Kaytee Corp chairman and managing director Premal Udani told ET. The company generates almost 96% of its revenue from the exports market, but hopes to increase its presence in the domestic market to 20% in the next two years.

At present, volumes are low while there is a pressure on the margin in the price-sensitive Indian market. “The volumes are bound to grow for the garment suppliers, as the organised retailers penetrate small towns and cities in India. We expect that the overall garment and fabric industry in India will double to $40 billion in next six to seven years.

This growth will largely come from the organised retailers and with the required systems of quality, technology and compliance in place, garment exports can benefit a lot in the emerging market here,” said Technopak’s chief operating officer Harminder Sahni.

Most of these players are supplying small volume garments to organised players such as Shopper’s Stop, Globus, Pantaloon and Lifestyle. “The Indian market is different and the suppliers will have to accept flexible payment mechanism.

In India, payments are normally made after 45-60 days of delivery, unlike the exports market, where the payments are immediate,” says Creative Garments chief Rahul Mehta, who is also the president of the Clothing Manufacturers’ Association of India. The Creative group has now floated a new company, Creative Casual Wear, which will handle the domestic business

Source : Economic Times