Europe’s fashion retailers face a winter of discontent
The emergence of online fashion retailers have put pressure on traditional, store-based rivals around the world. Asos Plc’s market value surpassed British bellwether Marks & Spencer Group for the first time last month, symbolic of a structural change that has been sweeping through the retail industry for two decades. The growth of discount rivals such as Associated British Foods Primark has only added to the competitive landscape.
Zara owner have fallen 4.5 per cent in 2017, putting them on course for their worst year since 2008. While drop is far less than peers, including H&M AB (down 22 per cent) and Esprit Holdings. (down 35 per cent), it illustrates that even the best in the business are not immune to the challenges of ever-increasing online and discount competition. Renowned for revolutionising the supply chain model for fashion retail, the company has gained a devoted following in the investment community. Raymond James is among 22 brokerages with a buy, outperform or equivalent recommendation on the stock.
According to analysts, as mild European weather delayed purchases of fall/winter garments. Yet they maintain that Inditex has a business model that’s unmatched in the industry. According to Macquarie capital, Inditex’s ability to get products quickly from the catwalk into stores, along with its smaller batch sizes, appeals to a modern consumer who thrives on instant gratification.
According to Inderst, the stock has been hurt by what he calls “short-term concerns” over the impact on profitability of a strong euro and a slowdown in like-for-like performance. Same-store sales growth decelerated to 6 per cent in the six months to July 31, from its strongest in at least 14 years in fiscal 2017. Berenberg’s Michelle Wilson downgraded Inditex to sell last month due to declining confidence in the sustainability of the company’s “exceptional” revenue growth as competition increases.
Such concerns prompted AllianceBernstein’s Phelps to exit his position in Inditex a couple of years ago, having closed his positions in H&M not long before that. He had owned shares in both companies since the mid-1990s, leapfrogging between the two.
Turkey second only to China in global socks exports
"Overriding Italy, Turkey has jumped to second place after China in socks exports globally, accounting for 10 per cent of world exports in 2016. China, the world’s largest socks maker, makes up 40 per cent of the world socks exports, reveals Ozkan Karaca. Though the gap is huge, yet it’s substantial win for Turkish textile industry. With its modern machinery park, and high production and export capacity, Turkey has been inking its name in the global textile market. Istanbul houses around 85 per cent of the factories, it has become an investor’s preferred paradise. "
Overriding Italy, Turkey has jumped to second place after China in socks exports globally, accounting for 10 per cent of world exports in 2016. China, the world’s largest socks maker, makes up 40 per cent of the world socks exports, reveals Ozkan Karaca. Though the gap is huge, yet it’s substantial win for Turkish textile industry. With its modern machinery park, and high production and export capacity, Turkey has been inking its name in the global textile market. Istanbul houses around 85 per cent of the factories, it has become an investor’s preferred paradise. There are more than 300 socks factories in Turkey with medium and large-scale production capabilities. In addition, there are many small-scale workshops that manufacture for the internal market.
It is estimated that 2.2 billion pairs of socks and 300 million pieces of pantyhose are produced annually in Turkey. Turkey’s largest socks manufacturers in 2016, according to the Industrial Chamber for Istanbul (ISO), included Penti Corap, with net sales of $55 million, Beks Corap, with net sales of $51 million, Altin Iplik Corap, with net sales of $41 million, and Bony Corap, with net sales of $40 million.
Exports on fast forward growth track
Being an export-oriented sector, around 75 per cent of socks produced in the country are being exported. The industry is exporting an average of $86 million worth of socks every month. The EU ranks first in exports, with 85 per cent of socks going to EU countries in 2016. The three largest buyers are UK, Germany and France. According Turkish Statistical Institute, in 2016, Turkey exported 1.5 billion pairs of socks and 146.5 million pieces of pantyhose, worth $1 billion 36 million. Of these socks, 1.2 billion pairs are made of cotton. Between January-October 2017, total socks exports amounted to $862.5 million.
The total socks exports was, $1 billion 36 million in 2016 amounting to $251.6 million. With these exports in 2016, UK is the first with a share of 24.3 per cent in Turkey’s total sock exports. United Kingdom was followed by Germany (21.6 per cent) with exports of $224 million. France (10.7 per cent) was in third place with $110.8 million. The share of these three countries in total sock exports was 56.6 per cent.
Target markets: US and Japan
Turkey is eyeing expansion with the The Socks Committee taking umpteen initiatives. The Committee is preparing projects to increase socks exports within the Istanbul Apparel Exporters Union. Ozkan Karaca, chairperson of this committee says two countries were identified as the target market. The US is the world’s largest importer of socks by importing socks of $2.2 billion annually. Germany is second with $1 billion 20 million imports, and Japan comes third with about $1 billion socks imports. In order to enhance its reach, Turkey has started joining the Las Vegas Magic Show in the US as exporters of socks. It is also attending the Shanghai International Hosiery Purchasing Expo in China, the largest sock supplier in the US. This fair is a good platform where both US buyers, as well as buyers from Japan and Australia attend. Özkan Karaca forecasts by 2020, they aim to export $100 million worth of products to the US market and would like to make Turkey one of the five biggest export destinations.
Competing with China
Turkey and China, which export 85 per cent of their exports to EU countries, are experiencing intense competition in this market. According to Eurostat, the difference between the two countries is $43 million. Özkan Karaca states he was the first in the EU market offering price advantage over Chinese produce And the most important advantage of socks made in Turkey is they are three hours away from the EU and can be delivered in a short time of around three days. The disadvantage is that most of the socks factories operate in Istanbul, where the labour, input and production costs are high. Turkish socks workers should establish factories in Anatolia where government support is at hand and labour and input costs are low.
Textile Ministry indentifies 13 potential markets to enhance exports
The textile ministry, in an effort to enhance exports from the country, has designed a new marketing plan that will help various segments in the industry to increase exports. The Ministry will follow a segment wise methodology to cater to the specific needs of countries and has to this effect identified 13 potential markets where it will begin marketing activities to promote Indian products such as handicrafts, jute, cotton, textiles and apparel. Textile exports have been on the downslide post GST, which had significantly reduced import duties which is a bone of contention in the industry. Textile and apparel exports from the country have dipped in recent years due to subdued demand in key importing countries including the US and the EU.
Following this debacle, an Integrated Marketing Plan 2017-18 has been created by the Ministry of Textiles to enhance exports. The country’s total textile and apparel exports for the last fiscal was $ 39.7 billion. The textile ministry has set a target of $45 billion exports for the 2017-18 fiscal. The Integrated Marketing Plan 2017-18 will be launched through promotional activities such as B2B meetings, exhibitions and road shows in countries like Germany, France, Italy, the US, China, Hong Kong, Turkey, Australia, Russia, the UAE, Brazil, Egypt and Chile, as per the requirements of Indian products in these markets.
The Ministry said in a statement, “There exists a huge potential for India to increase its market share in various markets by aligning the product with specific market. In line with this, the Marketing Plan has been prepared to synergise various on-going marketing initiatives while adopting specific approaches for traditional, emerging and other important markets.”
The government is also working towards expediting the delayed India-EU FTA. The textile industry has long since been asking for duty-free access for Indian textile and garment items to the EU following competitive pressures from countries such as Bangladesh, Vietnam and Pakistan.
TPP members agree on core elements of new deal
The US President, Trump, discussed bi-lateral trade relations with leaders of mainland China, Vietnam, the Philippines and other US trade partners, during his two-week trip to Asia but seemed to have made no headway as no specific takeaways were in his basket. Simultaneously, the 11 members of the Trans- Pacific Partnership strove towards modifying and implementing the TPP agreement. While President Trump said at the APEC summit in Vietnam to “Make bi-lateral trade agreements with any Indo-Pacific nation that wants to be our partner and that (they) will abide by the principles of fair and reciprocal trade,” it is doubtful whether his apparent attempt to strengthen US trade and economic relations with Asia, including mainland China, will produce any meaningful results.
The President stressed the importance of ‘rebalancing’ trade relations with China in a way that “strengthens American jobs and exports.” He also called on the Chinese government to guarantee “fair and reciprocal treatment” to US companies, provide greater market access to U.S. exports and firms and speed up implementation of market-oriented reforms to reduce its trade surplus with the US. Trump criticised government intervention in mainland Chinese economy, which he said “has caused stresses in the global trading system,” and stated that the US “will use all available trade remedies to create a level playing field for US workers and businesses.”
The US Commerce Secretary, Wilbur Ross, welcomed the signing of business deals between the US and mainland Chinese companies valued at over $250 billion that are expected to “bring thousands of new jobs to America” by increasing U.S. exports to the mainland and stimulating investment throughout the US.
WTO, ITC launch cotton portal to enhance transparency, support development
The World Trade Organization (WTO) and the International Trade Centre (ITC) have launched an on-line platform for market intelligence for cotton products, which will enable cotton producers, traders and policymakers to better harness market opportunities in the sector. The Cotton Portal, revealed at the WTO's 11th Ministerial Conference in Buenos Aires, will contribute to a more efficient cotton trading system by providing improved transparency and accessibility of trade- related information for cotton products and other relevant information for the daily activities of cotton producers, traders and policy makers.
The launch of the Cotton Portal delivers on a key commitment of Nairobi’s decision to identify and examine market access barriers, including tariff and non- tariff barriers for cotton products, particularly those exported by least-developed countries. ITC Executive Director Arancha Gonzalez says that Cotton Portal will enable cotton producers and traders to harvest greater benefits from increased participation in global trade, particularly for least developed countries. By making the sector more transparent, businesses will have easier access to trade and market intelligence, allowing them to add additional value to their exports.
The Cotton Portal is designed for exporters, importers, investors and trade support institutions to search business opportunities and market requirements for cotton products. It provides a single entry point for all cotton-specific information available in WTO and ITC databases on market access, trade statistics, country-specific business contacts and development assistance-related information as well as links to relevant documents, webpages and to other organizations active in the cotton sector.
The 2015 Nairobi ministerial decision on cotton contains provisions on improving market access for least-developed countries, eliminating export subsidies, and the efforts to be made to reform domestic support. It also underlines the importance of effective assistance to support the cotton sector in developing countries.
Panipat’s recycling industry goes out of fashion
For decades, donation bins have offered consumers in rich countries a guilt-free way to unload their old clothing. In a virtuous and profitable cycle, a global network of traders would collect these garments, grade them, and transport them around the world to be recycled, worn again, or turned into rags and stuffing. Fashion trends are accelerating, new clothes are becoming as cheap as used ones, and poor countries are turning their backs on the secondhand trade. Without significant changes in the way that clothes are made and marketed, this could add up to an environmental disaster in the making.
Located 55 miles North of Delhi, the dusty city of 450,000 has served as the world's largest recycler of woolen garments for at least two decades, becoming a crucial outlet for the $4 billion used-clothing trade. Panipat's mills specialize in a cloth known as shoddy, made from low-quality yarn recycled from woolen garments. Much of what they produce is used to make cheap blankets for disaster-relief operations.
What's good for Panipat and its customers is bad news for donors and the environment. Even if Panipat were producing shoddy at its peak, it probably couldn't manage the growing flood of used clothing entering the market in search of a second life. The good news is that nobody has a bigger incentive to address this problem than the industry itself. By raising temperatures and intensifying droughts, climate change could substantially reduce cotton yields and thus make garment production less predictable and far more expensive. Industry executives are clearly concerned.
None of these options can replace Panipat and the other mill towns that once transformed rich people's rags into cheap clothes for the poor. But, like it or not, that era is coming to an end. Now the challenge is to stitch together a new set of solutions.
US officials speculate surge in Chinese cotton imports
China’s cotton imports are predicted to significantly rise in volume terms this season due largely to the demand for high-quality fibre by their local spinning industry, US officials analysed. The US Department of Agriculture’s (USDA) Beijing bureau assessed China’s cotton imports at 1.30m tonnes (5.97 m bales) in 2017-18, on an August-to- July basis. That would represent an increase of over 2,00,000 tonnes year on year, significantly bigger than the 58,000-tonne increase, to 1.15m tonnes (5.30m bales), that the USDA has officially forecast.
The bureau’s estimate comes despite persistent market rumours that China may be poised for accelerating buy-ins, with some rumours of a potential increase in their import quota of 8,94,000 tonne permitted in with a 1 per cent tariff that is within an agreement with the World Trade Organisation.
The bureau emphasised that since July, anecdotal reports have circulated that the Government might be considering special approval to allow for some imports of high-grade cotton. Given the Chinese textile sector’s increasing demand for high-grade cotton, traders anticipate the government may increase its flexibility in issuing additional import quota.
The Chinese textile sector grew steadily in 2017 and in consideration of all these factors, it is logical for the Government to approve some cotton imports to meet the industry demand in 2018, the bureau said, adding that it remains unclear when the government will allow additional cotton imports.
Latest Chinese cotton import customs data, for October, the month after the closure of the government’s 2017 auction programme of supplies from the country’s cotton stockpiles, came in at 78,128 tonnes, a rise of 89 per cent year on year.
Nandan Denim’s strategic initiatives to enhance global footprint
Nandan Denim of the Chiripal Group, is implementing strategic initiatives to enhance its overall profitability and strengthen its global footprint at this opportune moment when China’s textile competitiveness is being downgraded by higher labour costs. During 2016-17, Nandan Denim’s revenue crossed Rs 1,200-crore for the first time. The company is now focusing on growing internationally with the largest denim manufacturing capacity in India. This has only enhanced its prospects from being a peripheral player in the denim segment to becoming a global payer.
The brand has expanded its denim manufacturing capacity from 99 MMPA in FY16 to 110 MMPA in FY17 making it the largest denim manufacturer in India and a leading global manufacturer. It has also expanded its spinning capacity from 70 TPD in FY16 to 141 TPD in FY17. The advanced spinning facility is capable of producing specialised yarns such as dual core, coloured slubs and cotton stretch yarns.
The company has invested in manufacturing competitiveness mainly due to integration of its yarn spinning at one end and denim manufacture at the other. Through the years, it has strengthened its manufacturing integration through various priorities including balancing its manufacturing across both products thus enabling the yarn it manufactured to be consumed in the downstream production of denim resulting in larger value addition; investing in cutting-edge manufacturing technologies from leading suppliers worldwide, which translated into a higher capacity utilisation and lower waste generation; it addressed the manufacture of value-added denim, making it possible to somewhat insulate itself from the competition.
Mouvent sees potential in Chinese textile market
Switzerland-based digital print start up Mouvent, is set to exhibit at next year’s TPF digital print exhibition in Shanghai, which keeps a close watch on market trends and technology development. The company will be demonstrating the TX801 - an 8-colour multi-pass digital textile printer producing the highest print quality on textiles with up to 2,000 dpi optical resolution that compliments high printing speeds.
Reto Simmen, CEO, Mouvent disclosed they started to focus on textile and realised China has one of the biggest market potential besides India, Italy and Turkey. Taking into consideration the competitive environment, they have positioned their printer in the mid-to- high end segment of the market as it delivers crisp, colourful and very high printing quality in a cost-effective way. The textile market is next that is going digital and they have started to set up a network within the textile industry. They have established a strong working relation with Paul Yuan in China and experts in other countries.
In the current scenario, production is moving to countries that can produce cheaply, correspondingly Chinese printer manufacturers to be in the business have to come up with new ideas. Besides they have to be fast because most businesses are looking at digital printing systems which is the only way to move their business forward. Currently there are a few strong local brands established in China. The business trend is to look at faster printers, so organisations have to keep up with reality or stagnate.
Reto Simmen says with an ink development centre in Switzerland, in the second half 2018 the company is planning to introduce a double speed machine with 16 heads, this will double the output. In 2019, their future plans are to introduce a single-pass machine. He is convinced that China is a good market. TPF 2018 will be organised by UBM China and Sunexpo will be held from April 19 to 21, 2018 at Shanghai New International Expo Centre, China.
Joint statement of ABIT and Euratex on the EU-Mercosur FTA
The European Apparel and Textile Confederation (Eureatex) and the Brazilian Textile Industry (ABIT), representing the Textile and Clothing (T&C) industries in both EU and Brazil, welcomed negotiations for an important EU-Mercosur Free Trade Agreement (FTA). ABIT and EURATEX has said, The T&C industry is a vivid and global sector in which Europe and Mercosur countries have a key role to play. “Our focus is on high quality products manufactured in a sustainable manner under high standards, be it from an environmental, labour and the social point of view. Euratex and ABIT maintain strong cooperation links since many years and we have always been supportive of the conclusion of an FTA.
Over the last months, we have intensified our talks and we have jointly worked on a wide range of topics related to Textile and Clothing trade namely regulatory cooperation, customs procedures, technical barriers to trade, sustainability requirements etc. Tariffs dismantling and rules of origin have also been very much at the centre of thorough and sometimes hard talks.
The EU-Mercosur FTA benefit, both parties and increase trade and investments of T&C industries of both sides, Euratex and ABIT made efforts to build a balanced rules of origin considering the structure of industries. Therefore, they are happy to share a suggestion from the private sector to both governments with our common views on the Product Specific Rules and Tariff Dismantling to be enshrined in the EU-Mercosur FTA.
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Indian economy likely to grow 7.2 per cent in 2018, 7.4 per cent in 2019: UN Report
Indian economy is likely to grow by 7.2 per cent in 2018 and go up further to 7.4 per cent in the following year on the back of strong private consumption, public investment and the ongoing structural reforms, says a UN report. The ‘World Economic Situation and Prospects 2018’ report unveiled by United Nations Department of Economic and Social Affairs (UN DESA) stated the overall, economic outlook for South Asia is seen largely favourable and steady for the short term, notwithstanding significant medium-term challenges.
On India, the report has projected a positive outlook despite the slowdown early this year and the lingering effects of demonetisation. The UN DESA report says that the GDP growth is projected to accelerate from 6.7 per cent in 2017 to 7.2 per cent in 2018 and 7.4 per cent in 2019.
The report further stated that Central banks in developed economies are currently operating in largely unchartered territory, with no historical precedent as guidance. This makes any adjustment of financial markets less predictable than during previous recoveries and amplifies the risks associated with policy errors.
Inventory management game changer for fashion brands this Christmas
Michael Kors Holdings, and Ralph Lauren Corp. are some of the top fashion brands who are in a high-stakes battle this Christmas. Unfortunately, success will not go to the company that sells the most, it will be the company that closes inventory with the least amount of unwanted goods. Inventory management is tough business. Big brands are increasingly using sophisticated software to track apparel and accessories through the supply chain this holiday season. The key is to improve profit margins, even if it means losing some revenue, say experts.
The decline of department stores has worsened the problem, in recent years, with their unending discounting that is hurting the perceived value of brands such as Polo amongst others. That’s increased pressure on brands this holiday season. On the first day of every week, retailers conduct a manager meeting to look at the sell-through rates, or the percentage of the total inventory sold, during the last seven days and decide if they should continue promotions or increase their markdowns to ‘get rid of’ inventory.
The rise of omni-channel marketing, including ‘seamlessly’ e-commerce, has its share of problems when say customers may buy an item online and then return it to a brick-and- mortar store. Michael Kors and other upmarket brands are still using discounts to drive sales. But they’re aiming to be more targeted with their promotions. Michael Kors Chief Executive Officer, John Idol has announced plans to reduce the number of days with big promotions by as much as 65 per cent this quarter.
Building an impression of scarcity is the key for high-end brands. Research firm Edited which supplies the world's leading fashion retailers with the retail analytics they need to have the right product at the right price, at the right time discloses that ‘Toward that end, Michael Kors lowered its number of stock-keeping units by 12 per cent this month.’
In the week leading up to Black Friday, the number of marked-down apparel and accessories was up threefold when compares to the same period in 2014, as per EDITEDs data, which tracks the websites of America’s 19 largest retailers. Retailers have mainly been dependent on past sales and loyalty data to predict trends. In an era of big data, they’re relying more on analytics and artificial intelligence to maintain inventory more efficiently.
It’s probably safer to stock too little than too much. But that means companies will have lower sales growth when they begin to rebound, said Simeon Siegel, an analyst at Instinet LLC. He says lean inventory is like being on antibiotics, a painful but necessary part of getting healthy again.
Mojostar to launch celebrity fashion brands in 2018
Mojostar is a step closer to attaining its goal of launching retail brands in India through collaborations with celebrities as it’s talks with investors to raise Rs 64 crore in Series A funding are nearing completion. The company has already signed deals with Bollywood actors Tiger Shroff, Jacqueline Fernandez and if the company manages to raise funds this year it will give a big boost to the company to start manufacturing its brands.
The fashion labels with Tiger, Jacqueline and another Bollywood actor are expected to hit the market by 2018. Mojostar was formed in August this year when Kwan Entertainment and Dream Theatre decided to join hands to get into the celebrity brands business in India to cash in on the large, profitable fashion market.
Mojostar has roped in Abhishek Verma as its CEO who will be responsible for building the brands for the company with the celebrities. Verma has brand building experience as he played a pivotal role in creating Myntra’s in house brands like HRX, Roadster and Wrogn. Unlike the West, the concept of celebrity brands is relatively new to India with a handful of brands like Hrithik Roshan’s HRX, Shahid Kapoor’s Skult, Deepika Padukone’s All about You, Virat Kolhi’s Wrogn, Yuvraj Singh’s YWC, Sonam Kapoor’s Rheson amongst others competing in India’s $100 billion apparel market.
G-Star Raw, partners Artistic Milliners, DyStar, Saitex to launch ‘Most Sustainable Jeans Ever’
Amsterdam-based, Dutch designer clothing company, G-Star Raw, has partnered Pakistan-based Artistic Milliners, colour solutions provider DyStar, and global denim manufacturer Saitex to launch the G-Star Elwood RFTPi jeans which the company claims is its most sustainable jeans ever.Developed with a clean indigo dyeing process, eco-friendly sustainable washing techniques, organic material and responsibly sourced materials, consumers can in the very near future purchase the G-Star Elwood RFTPi jeans and its D-Staq RFTPi denim jacket. G-Star Raw collaborated with Saitex to manufacture and wash the G-Star Elwood RFTPi jeans using sustainable technologies and renewable energy. The manufacturing and washing process ensures that no water is discharged into the local environment—with 98per cent of water recycled or reused and the remaining 2 per cent is evaporated. Besides, G-Star Raw used 100 per cent organic cotton, eco-finished metal buttons and responsibly sourced labelling for their jeans.
The brand also partnered Artistic Milliners and Dystar to develop Crystal Clear which G-Star Raw claimes to be "the cleanest indigo dyeing process in the world". Unlike conventional denim dyeing methods, Crystal Clear uses 70 per cent less chemicals, omits salts and doesn’t create salt by product during the denim reduction and dyeing process. This sustainable dyeing method could help companies conserve natural resources and leave recyclable water effluent post the dyeing process. In addition to launching the G-Star Elwood RFTPi jeans, G-Star Raw is working with its mill partner to share the jean’s fabric material through the Cradle-to-Cradle Products Innovation Institute’s certification process, which rates products based on their contributions to the circular economy.
G-Star Raw Corporate Responsibility Director, Frouke Bruinsma says, as a key player, G-Star Raw takes responsibility to lead by example in promoting sustainable denim innovation. The new denim fabric and its revolutionary indigo process will become an open source for the rest of the industry to use.
