Trend Analysis

National Institute of Fashion TechnologyHyderabad

Overview of Global Fashion Industry

Trend Analysis of India to US and EU

Submitted to: Submitted by:

Ms. Chitra Singh Surbhi Jain

Assistant Professor Roll No: 29

FMS Department MFM,1st Semester

NIFT, Hyderabad NIFT, Hyderabad

National Institute of Fashion Technology, HyderabadDepartment of Fashion Management Studies 1

Acknowledgement

I express special thanks to Ms. Chitra Singh, my project guide, who has helped and guided me throughout this project.

I would also like to extend my gratitude towards the faculty, seniors and also to my friends who have supported me during the project.

Surbhi Jain


Contents

International Trade 4

Global Value Chains 5

International Statistics Textile Segment Clothing Segment

81215

UK Fashion Market 18

Italian Fashion Market 18

Japanese Fashion Market 19

US Fashion Market 19

French Fashion Market 20

Indian Fashion Market 23

Indian Exports 26

Indian Imports 29

Indian performance in US market 30

Indian performance in US market 32

Indian Retail Market 34

Bibliography 37


International trade International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history (see Silk Road, Amber Road), it’s economic, social, and political importance has been on the rise in recent centuries.

Industrialization,advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders.

International trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.

Another difference between domestic and international trade is that factors of production such as capital and labour are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production. Then trade in goods and services can serve as a substitute for trade in factors of production.

Instead of importing a factor of production, a country can import goods that make intensive use of the factor of production and are thus embodying the respective factor. An example is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor the United States is importing goods from China that were produced with Chinese labor.

International trade is also a branch of economics, which, together with international finance, forms the larger branch of international economics.

Regulation of International TradeTraditionally trade was regulated through bilateral treaties between two nations. For centuries under the belief in mercantilism most nations had high tariffs and many restrictions on international trade. In the 19th century, especially in the United Kingdom, a belief in free became paramount. This belief became the dominant thinking among western nations since then. In the years since the Second World War, controversial multilateral treaties like the General Agreement on Tariffs and Trade (GATT) and World Trade Organization(Later named) have attempted to promote free trade while creating a globally regulated trade structure. These trade agreements have often resulted in discontent and protest with claims of unfair trade that is not beneficial to developing countries.

Free trade is usually most strongly supported by the most economically powerful nations, though they often engage in selective protectionism for those industries which are strategically important such as the protective tariffs applied to agriculture by the United States and Europe. The Netherlands and the United Kingdom were both strong advocates of free trade when they were economically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other countries (such as India, China and


http://en.wikipedia.org/wiki/Japan

http://en.wikipedia.org/wiki/Australia

http://en.wikipedia.org/wiki/Netherlands

http://en.wikipedia.org/wiki/Europe

http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Protectionism

http://en.wikipedia.org/wiki/Developing_countries

http://en.wikipedia.org/wiki/Free_trade

http://en.wikipedia.org/wiki/World_Trade_Organization

http://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Trade

http://en.wikipedia.org/wiki/Multilateral

http://en.wikipedia.org/wiki/Second_World_War

http://en.wikipedia.org/wiki/United_Kingdom

http://en.wikipedia.org/wiki/Tariff

http://en.wikipedia.org/wiki/Mercantilism

http://en.wikipedia.org/wiki/List_of_bilateral_free_trade_agreements

http://en.wikipedia.org/wiki/International_economics

http://en.wikipedia.org/wiki/International_finance

http://en.wikipedia.org/wiki/Economics

http://en.wikipedia.org/wiki/Labour_economics

http://en.wikipedia.org/wiki/Factors_of_production

http://en.wikipedia.org/wiki/Tariff

http://en.wikipedia.org/wiki/Domestic_trade

http://en.wikipedia.org/wiki/Globalization

http://en.wikipedia.org/wiki/Outsourcing

http://en.wikipedia.org/wiki/Multinational_corporation

http://en.wikipedia.org/wiki/Globalization

http://en.wikipedia.org/wiki/Transport

http://en.wikipedia.org/wiki/Industrialization

http://en.wikipedia.org/wiki/Amber_Road

http://en.wikipedia.org/wiki/Amber_Road

http://en.wikipedia.org/wiki/Silk_Road

http://en.wikipedia.org/wiki/Trade

http://en.wikipedia.org/wiki/Gross_domestic_product

http://en.wikipedia.org/wiki/International_borders

http://en.wikipedia.org/wiki/Service_(economics)

http://en.wikipedia.org/wiki/Good_(economics)

http://en.wikipedia.org/wiki/Capital_(economics)

Russia) are increasingly becoming advocates of free trade as they become more economically powerful themselves. As tariff levels fall there is also an increasing willingness to negotiate non tariff measures, including foreign direct investment, procurement and trade facilitation. The latter looks at the transaction cost associated with meeting trade and customs procedures.

Traditionally agricultural interests are usually in favor of free trade while manufacturing sectors often support protectionism. This has changed somewhat in recent years, however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan, are chiefly responsible for particular rules in the major international trade treaties which allow for more protectionist measures in agriculture than for most other goods and services.

During recessions there is often strong domestic pressure to increase tariffs to protect domestic industries. This occurred around the world during the Great Depression. Many economists have attempted to portray tariffs as the underlining reason behind the collapse in world trade that many believe seriously deepened the depression.

The regulation of international trade is done through the World Trade Organization at the global level, and through several other regional arrangements such as MERCOSUR in South America, the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, and the European Union between 27 independent states. The 2005 Buenos Aires talks on the planned establishment of the Free Trade Area of the Americas (FTAA) failed largely because of opposition from the populations of Latin American nations. Similar agreements such as the Multilateral Agreement on Investment (MAI) have also failed in recent years.

Risks Involved in International tradeCompanies doing business across international borders face many of the same risks as would normally be evident in strictly domestic transactions. For example,

Buyer insolvency (purchaser cannot pay); Non-acceptance (buyer rejects goods as different from the agreed upon specifications); Credit risk (allowing the buyer to take possession of goods prior to payment); Regulatory risk (e.g., a change in rules that prevents the transaction); Intervention (governmental action to prevent a transaction being completed); Political risk (change in leadership interfering with transactions or prices); and War and other uncontrollable events.

In addition, international trade also faces the risk of unfavorable exchange rate movements (and, the potential benefit of favorable movements

Global Value chainsIn global capitalism, economic activity is international in scope and global in organization. “Internationalization” refers to the geographic spread of economic activities across national boundaries. As such, it is not a new phenomenon. It has been a prominent feature of the world economy since atleast the seventeenth century when colonial powers began to carve up the world in search of raw materials and new markets. “Globalization” is more recent, implying functional integration between internationally dispersed activities.


http://en.wikipedia.org/wiki/Multilateral_Agreement_on_Investment

http://en.wikipedia.org/wiki/Free_Trade_Area_of_the_Americas

http://en.wikipedia.org/wiki/European_Union

http://en.wikipedia.org/wiki/North_American_Free_Trade_Agreement

http://en.wikipedia.org/wiki/MERCOSUR

http://en.wikipedia.org/wiki/Great_Depression

http://en.wikipedia.org/wiki/Recession

http://en.wikipedia.org/wiki/Customs

http://en.wikipedia.org/wiki/Transaction_cost

http://en.wikipedia.org/wiki/Trade_facilitation

Industrial and commercial firms have both promoted globalization, establishing two types of international economic networks. One is “producerdriven” and the other “buyer-driven”.1 In producer-driven value chains, large, usually transnational, manufacturers play the central roles in coordinating production networks (including their backward and forward linkages). This is typical of capital- and technology-intensive industries such as automobiles, aircraft, computers, semiconductors and heavy machinery. Buyer-driven value chains are those in which large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in developing countries. This pattern of trade-led industrialization has become common in labour-intensive, consumer-goods industries such as garments, footwear, toys, handicrafts and consumer electronics. Tiered networks of third-world contractors that make finished goods for foreign buyers carry out production. Large retailers or marketers that order the goods supply the specifications.Firms that fit the buyer-driven model, including retailers like Wal-Mart, Sears and JC Penney, athletic footwear companies like Nike and Reebok, and fashion-oriented apparel companies like Liz Claiborne, Gap and The Limited Inc., generally design and/or market—but do not make—the branded products they order. They are “manufacturers without factories”, with the physical production of goods separated from the design and marketing. Unlike producer-driven chains, where profits come from scale, volume and technological advances, in buyer-driven chains profits come from combinations of high-value research, design, sales, marketing and financial services that allow the retailers, designers and marketers to act as strategic brokers in linking overseas factories and traders with product niches in their main consumer markets. Profitability is greatest in the concentrated parts of global value chains that have high entry barriers for new firms. In producer-driven chains, manufacturers of advanced products like aircraft,automobiles and computers are the key economic agents both in terms of their earnings and their ability to exert control over backward linkages with raw material and component suppliers, and forward linkages into distribution and retailing. The lead firms in producer-driven chains usually belong to international oligopolies. Buyer-driven value chains, by contrast, are characterized by highly competitive and globally decentralized factory systems with low entry barriers. The companies that develop and sell brand namedproducts have considerable control over how, when and where manufacturing will take place, and how much profit accrues at each stage. Thus, large manufacturers control the producer-driven value chains at the point of production, while marketers and merchandisers exercise the main leverage in buyer-driven value chains at the design and retail stages.

Apparel as buyer driven value chainApparel is an ideal industry for examining the dynamics of buyer-driven value chains. The relative ease of setting up clothing companies, coupled with the prevalence of developed-country protectionism in this sector, has led to an unparalleled diversity of garment exporters in the third world. Furthermore, the backward and forward linkages are extensive, and help to account for the large number of jobs associated with the industry. The apparel value chain is organized around five main parts: raw material supply, including: natural and synthetic fibres; provision of components, such as the yarns and fabrics manufactured by textile companies; production networks made up of garment factories, including their domestic and overseas subcontractors; export channels established by trade intermediaries; and marketing networks at the retail level. There are differences between these parts, such as geographical location, labour skills and conditions, technology, and the scale and type of enterprises, which also affect market power and distribution of profits among the main firms in the chain. Entry barriers are


low for most garment factories, although they become progressively higher when moving upstream to textiles andfibres; brand names and stores are alternative competitive assets that firms can use to generate significant economic rents. The lavish advertising budgets and promotional campaigns needed to create and sustain global brands, and the sophisticated and costly information technology employed by megaretailers to develop “quick response” programmes that increase revenues and lower risks by getting suppliers to manage inventories, have allowed retailers and marketers to displace traditional manufacturers as the leaders in many consumer-goods industries. In apparel, the split between manufacturing and marketing that prompted the emergence of “lean retailing” (i.e. the model of frequent shipments by suppliers to fill ongoing replenishment orders by retailers, based on real-time sales information collected at the retailer’s stores on a daily basis) was caused by the development of several key information technologies. These included: bar coding and point-of-sale scanning used to provide immediate and accurate information on product sales; electronic data interchange (EDI) used by the retailer to restock; and automated distributioncentres to handle small restocking orders, rather than the traditional warehouse system used for large bulk shipments.

A major hypothesis of the global value chains approach is that national development requires linking up with the most significant lead firms in an industry. These lead firms are not necessarily the traditional vertically integrated manufacturers, nor are they necessarily involved in making finished products. Lead firms, such as fashion designers or private label retailers, can be located upstream or downstream from manufacturing, or they can be involved in the supply of critical components (e.g. microprocessor companies like Intel or software firms like Microsoft in the computer industry). What distinguishes lead firms from non-lead firms is that they control access to major resources (such as product design, new technologies, brand names or consumer demand) that generate the most profitable returns.


Part 1

International Statistics


Textile Segment

Share of textiles in trade in total merchandise and in manufactures by region, 2008

Exports Imports

Share in total merchandise

World 1.6 1.6North America 0.8 1.2South and Central America 0.6 2.3Europe 1.4 1.4Commonwealth of Independent States (CIS) 0.3 2.1Africa 0.4 3.6Middle East 0.9 2.7Asia 2.8 1.6

Australia, Japan and New Zealand 0.8 1.1Other Asia 3.5 1.8

Share in manufactures World 2.4 2.4North America 1.2 1.8South and Central America 2.2 3.5Europe 1.9 2.1Commonwealth of Independent States (CIS) 1.4 2.8Africa 2.3 5.4Middle East 4.2 3.6Asia 3.6 2.7

Australia, Japan and New Zealand 1.1 2.2Other Asia 4.3 2.8

Note: Import shares are derived from the Secretariat's network of world merchandise trade by product and region.


Leading exporters and importers of textiles, 2008

Value

Share in world exports/imports Annual percentage change

2008198

0199

0200

0200

8 2000-08200

6200

7200

8

Exporters

European Union (27) 80.21 - - 36.1 32.1 4 5 11 -2 extra-EU (27) exports 24.17 - - 9.9 9.7 6 5 10 2

China a 65.26 4.6 6.9 10.3 26.1 19 19 15 17United States 12.50 6.8 4.8 7.0 5.0 2 2 -2 1Hong Kong, China 12.26 - - - - -1 1 -4 -9

domestic exports 0.40 1.7 2.1 0.7 0.2 -13 -12 -13 -14 re-exports 11.86 - - - - 0 1 -3 -8

Korea, Republic of 10.37 4.0 5.8 8.1 4.1 -3 -3 3 0India 10.27 2.4 2.1 3.5 4.1 8 8 9 6Turkey 9.40 0.6 1.4 2.3 3.8 12 7 18 5Taipei, Chinese 9.22 3.2 5.9 7.6 3.7 -3 1 0 -5Japan 7.34 9.3 5.6 4.5 2.9 1 0 3 3Pakistan 7.19 1.6 2.6 2.9 2.9 6 5 -1 -3United Arab Emirates b 5.75 0.1 0.0 2.0 2.3 8 100 26 0Indonesia 3.67 0.1 1.2 2.2 1.5 1 8 6 -4Thailand 3.21 0.6 0.9 1.2 1.3 6 4 8 3Mexico a 1.99 0.2 0.7 1.6 0.8 -3 3 1 -10Canada 1.99 0.6 0.7 1.4 0.8 -1 -4 -2 -14

Above 15 228.7

6 - - 91.4 91.4 - - - -Importers

European Union (27) 83.96 - - 34.3 31.9 5 7 12 -2 extra-EU (27) imports 27.93 - - 9.7 10.6 7 11 14 2

United States 23.13 4.5 6.2 9.5 8.8 5 4 3 -4China a, c 16.23 1.9 4.9 7.7 6.2 3 6 2 -3Hong Kong, China 12.31 - - - - -1 1 -3 -9

retained imports 0.45 3.7 3.8 0.9 0.2 -14 5 1 -25Japan 6.95 3.0 3.8 2.9 2.6 4 6 2 10Viet Nam b 6.05 ... ... 0.8 2.3 20 16 29 18Turkey 5.65 0.1 0.5 1.3 2.1 13 6 28 -6Russian Federation b 5.51 - - 0.8 2.1 20 26 22 25Mexico a, d 5.37 0.2 0.9 3.5 2.0 -1 -2 -5 -5United Arab Emirates b 4.77 0.8 0.9 1.2 1.8 11 10 15 16Canada d 4.43 2.3 2.2 2.5 1.7 1 2 2 -2Korea, Republic of 4.11 0.7 1.8 2.0 1.6 3 10 6 -1Indonesia 3.26 0.4 0.7 0.7 1.2 13 -3 8 315Brazil 2.95 0.1 0.2 0.6 1.1 14 38 37 35Thailand 2.44 0.3 0.8 1.0 0.9 5 4 5 13

Above 15 175.2 - - 69.7 66.7 - - - -


Textile exports of economies by destination, 2008

Value Share in region's

exports Share in world

exports Annual percentage

change

2008 2000 2008 2000 2008 2000-08200

7200

8

World250.

2100.

0100.

0100.

0100.

0 6 9 4Asia

World123.

9100.

0100.

0 43.9 49.5 8 8 9Asia 54.7 57.0 44.1 25.0 21.9 4 3 6Europe 22.3 14.2 18.0 6.2 8.9 11 16 5North America 17.7 13.2 14.3 5.8 7.1 9 0 2Africa 8.8 4.0 7.1 1.8 3.5 16 19 20Middle East 8.7 6.3 7.0 2.8 3.5 9 9 18South and Central America 6.6 4.5 5.3 2.0 2.6 10 28 14Commonwealth of Independent States (CIS) 5.0 0.8 4.0 0.3 2.0 32 35 54

China

World 65.3100.

0100.

0 10.3 26.1 19 15 17Asia 24.0 54.8 36.8 5.6 9.6 13 11 12Europe 12.1 15.6 18.5 1.6 4.8 22 21 15North America 10.5 15.0 16.1 1.5 4.2 20 6 6Africa 6.1 5.3 9.3 0.5 2.4 28 21 27Commonwealth of Independent States (CIS) 4.4 1.3 6.8 0.1 1.8 47 36 59Middle East 4.2 4.1 6.4 0.4 1.7 26 12 20South and Central America 4.0 3.9 6.1 0.4 1.6 26 37 26

Other economies in Asia

World 58.7100.

0100.

0 33.6 23.4 1 2 1Asia 30.7 57.6 52.3 19.4 12.3 0 -1 2Europe 10.2 13.7 17.4 4.6 4.1 4 11 -4North America 7.2 12.6 12.3 4.2 2.9 1 -6 -4Middle East 4.5 7.0 7.6 2.4 1.8 2 6 16Africa 2.8 3.6 4.7 1.2 1.1 5 14 5South and Central America 2.6 4.7 4.5 1.6 1.1 1 18 0Commonwealth of Independent States (CIS) 0.6 0.6 0.9 0.2 0.2 7 28 21

Europe

World 92.1100.

0100.

0 39.6 36.8 5 11 -1Europe 68.9 77.3 74.8 30.6 27.5 5 12 -3Africa 5.7 5.4 6.2 2.1 2.3 7 18 9Asia 5.6 5.8 6.1 2.3 2.2 6 8 0Commonwealth of Independent States (CIS) 4.3 1.8 4.7 0.7 1.7 18 20 12North America 4.2 6.3 4.5 2.5 1.7 1 1 -11Middle East 2.1 1.9 2.2 0.8 0.8 7 10 21South and Central America 0.8 1.0 0.9 0.4 0.3 3 20 7

North America

World 16.5100.

0100.

0 10.0 6.6 1 -2 -3North America 9.2 69.0 55.7 6.9 3.7 -2 -5 -8South and Central America 3.5 10.2 21.4 1.0 1.4 10 5 3Asia 1.9 9.3 11.7 0.9 0.8 4 0 7Europe 1.5 9.9 9.1 1.0 0.6 0 4 1Middle East 0.2 1.0 1.1 0.1 0.1 2 2 20Africa 0.1 0.5 0.7 0.0 0.0 6 0 50Commonwealth of Independent States (CIS) 0.1 0.2 0.4 0.0 0.0 10 -5 0


Textile imports of selected economies, 1990-2008

Value

Share in economy's total

merchandise imports

1990 2000 2006 2007 2008 200

0 2008 a

Argentina 53 653 820 1000 1147 2.6 2.0

Australia b 1445 1632 1837 2051 2210 2.3 1.2Bangladesh c, d 452 1350 1538 1206 1546 15.2 6.5Belarus - 256 427 487 591 3.0 1.5Bolivarian Rep. of Venezuela 112 286 644 1079 1427 2.0 2.9Bosnia and Herzegovina ... ... 241 294 329 ... 2.7Brazil e 252 1045 1599 2183 2947 1.9 1.7Cambodia d ... 432 1202 1350 ... 22.3 24.9Canada b 2325 4126 4472 4544 4431 1.7 1.1Chile 203 431 522 563 642 2.3 1.0

China f 52921283

21635

81664

51622

8 5.7 1.4Colombia 75 558 864 988 999 4.8 2.5Costa Rica f 83 184 232 232 290 2.9 1.9Croatia ... 249 484 566 598 3.2 1.9Dominican Republic b, d, f ... 1173 941 838 774 12.4 4.8Egypt d 211 526 1094 1279 1628 3.8 3.4El Salvador d, f 111 325 672 694 693 6.6 7.1

European Union (27) g -5742

27632

98548

08396

2 2.2 1.3

extra-EU (27) imports -1622

22392

72738

52792

7 1.8 1.2FYR Macedonia ... 27 339 425 464 1.3 6.8

Guatemala f 38 59 | 1144 1043 990 1.2 6.8

Honduras 26 501 1239 1413 1559 12.6 15.0

Hong Kong, China 1018

21371

61397

51355

91231

3 6.4 3.1 retained imports 4140 1451 595 604 454 4.2 1.6India 240 578 1972 2123 2322 1.1 0.8Indonesia 785 1251 730 785 3262 2.9 2.6Iran, Islamic Rep. of d ... 298 412 375 428 2.1 0.7Israel 474 759 718 763 801 2.0 1.2Japan 4133 4935 6176 6297 6947 1.3 0.9Jordan 107 172 725 670 651 3.7 3.9Kenya 17 47 249 250 258 1.5 2.3


Korea, Republic of 1947 3359 3909 4140 4112 2.1 0.9Kuwait 168 212 343 325 341 3.0 1.4Macao, China 619 902 618 485 310 40.0 5.8Madagascar d 20 200 314 417 536 18.2 13.3Malaysia f 951 1114 1063 1184 1121 1.4 0.7Mauritius d 336 411 266 290 264 19.6 5.7Mexico b, f 992 5822 5951 5661 5366 3.3 1.7Morocco f 361 1364 1915 2306 2296 11.8 5.5New Zealand 396 369 506 564 537 2.7 1.6Norway 554 509 772 927 1020 1.5 1.1Pakistan 126 130 551 579 589 1.2 1.4Peru d 17 165 358 472 691 2.2 2.3Philippines 910 1250 1244 1189 873 3.4 1.4Russian Federation d - 1316 3613 4408 5512 2.9 1.9Saudi Arabia d 1312 986 1204 1296 1655 3.3 1.4

Singapore 1778 1275 | 1101 1174 1193 0.9 0.4

retained imports 1016 661 | 475 525 582 0.9 0.4

South Africa b 561 570 975 1015 1019 2.1 1.2Sri Lanka d 412 1483 1540 1609 1694 20.7 12.1Switzerland 1849 1326 1800 2032 2177 1.6 1.2

Syrian Arab Republic d 168 399 | 353 292 358 10.5 2.0

Taipei, Chinese 1013 1460 1141 1188 1175 1.0 0.5Thailand 898 1630 2059 2160 2444 2.6 1.4Tunisia 790 1207 1594 1997 2088 14.1 8.5Turkey 567 2124 4686 6009 5646 3.9 2.8Ukraine - 450 916 984 1118 3.2 1.3United Arab Emirates d 983 2055 3567 4100 4771 5.9 2.9

United States 67301598

52349

82408

92312

8 1.3 1.1Viet Nam d ... 1379 3988 5139 6048 8.8 7.5

a Or nearest year. b Imports are valued f.o.b. c Figures refer to fiscal year. d Includes Secretariat estimates. e Beginning 2000, imports are valued f.o.b. f Includes significant imports into processing zones. g See the Metadata for information on intra-EU (27) imports.


Apparel Segment

Leading exporters and importers of clothing, 2008

Value Share in world exports/imports Annual percentage change

2008 1980 1990 2000 2008 2000-08 2006 2007 2008

Exporters China a 120.0 4.0 8.9 18.2 33.2 16 29 21 4European Union (27) 112.4 - - 28.4 31.1 9 7 15 7

extra-EU (27) exports 27.7 - - 6.6 7.7 10 10 18 12Hong Kong, China 27.9 - - - - 2 4 1 -3

domestic exports 2.9 11.5 8.6 5.0 0.8 -14 -7 -26 -42 re-exports 25.0 - - - - 7 8 10 5

Turkey 13.6 0.3 3.1 3.3 3.8 10 2 15 -2Bangladesh b 10.9 0.0 0.6 2.6 3.0 10 21 6 23India 10.9 1.7 2.3 3.0 3.0 8 11 3 11Viet Nam b 9.0 ... ... 0.9 2.5 22 19 33 21Indonesia 6.3 0.2 1.5 2.4 1.7 4 16 2 7Mexico a 4.9 0.0 0.5 4.4 1.4 -7 -13 -19 -5United States 4.4 3.1 2.4 4.4 1.2 -8 -2 -12 3Thailand 4.2 0.7 2.6 1.9 1.2 2 4 -4 4Pakistan 3.9 0.3 0.9 1.1 1.1 8 8 -3 3Tunisia 3.8 0.8 1.0 1.1 1.0 7 -3 18 5Cambodia b 3.6 ... ... 0.5 1.0 18 13 39 4Malaysia a 3.6 0.4 1.2 1.1 1.0 6 15 11 15

Above 15 314.4 - - 78.4 86.9 - - - -

Importers European Union (27) 177.7 - - 39.8 47.3 10 10 14 8

extra-EU (27) imports 93.1 - - 19.2 24.8 11 13 14 10United States 82.5 16.4 24.0 32.1 22.0 3 4 2 -3Japan 25.9 3.6 7.8 9.4 6.9 3 6 1 8Russian Federation b 21.4 - - 1.3 5.7 30 2 79 48Hong Kong, China 18.5 - - - - 2 2 2 -3

retained imports ... ... ... ... ... ... ... ... ...Canada c 8.5 1.7 2.1 1.8 2.3 11 17 12 8Switzerland 5.8 3.4 3.1 1.5 1.5 8 5 11 12United Arab Emirates b 5.5 0.6 0.5 0.4 1.5 27 72 64 10Australia c 4.3 0.8 0.6 0.9 1.1 11 5 13 16Korea, Republic of 4.2 0.0 0.1 0.6 1.1 16 29 15 -2Norway 2.7 1.7 1.1 0.6 0.7 10 7 16 19Mexico a, c 2.5 0.3 0.5 1.7 0.7 -4 0 -2 3China a 2.3 0.1 0.0 0.6 0.6 8 6 15 15Singapore 2.2 0.3 0.8 0.9 0.6 2 17 -3 -8

retained imports 0.9 0.2 0.3 0.3 0.2 6 12 16 2Turkey 2.2 0.0 0.0 0.1 0.6 30 39 43 41

Above 15 d 347.8 - - 91.8 92.6 - - - -

a Includes significant shipments through processing zones b Includes Secretariat estimates. c Imports are valued f.o.b. d Excludes retained imports of Hong Kong, China.


Clothing exports of selected economies by destination, 2008

Value Share in region's

exports Share in world

exports Annual percentage

change

2008 2000 2008 2000 2008 2000-08 2007 2008

World 361.9 100.0 100.0 100.0 100.0 8 12 5

Asia

World 188.3 100.0 100.0 46.1 52.0 10 13 5

Europe 59.7 23.7 31.7 10.9 16.5 14 0 17

North America 56.9 39.3 30.2 18.1 15.7 6 7 -3

Asia 39.7 29.4 21.1 13.6 11.0 5 10 2

Commonwealth of Independent States (CIS) 16.1 1.9 8.6 0.9 4.5 32 95 14

Middle East 7.3 2.8 3.9 1.3 2.0 14 61 4

South and Central America 4.8 1.7 2.6 0.8 1.3 15 42 2

Africa 3.7 1.2 1.9 0.5 1.0 17 47 -25

China

World 120.0 100.0 100.0 18.2 33.2 16 21 4

Europe 35.3 16.8 29.4 3.1 9.7 25 -2 24

Asia 32.3 51.8 26.9 9.5 8.9 7 13 1

North America 24.5 20.7 20.4 3.8 6.8 16 20 -10


Middle East 5.2 2.6 4.3 0.5 1.4 24 87 -3

South and Central America 4.1 3.1 3.4 0.6 1.1 18 48 -1

Africa 2.9 1.6 2.4 0.3 0.8 23 54 -30

Other economies in Asia

World 68.3 100.0 100.0 27.8 18.9 3 1 6

North America 32.4 51.5 47.5 14.3 9.0 2 -1 3

Europe 24.4 28.3 35.7 7.9 6.7 6 3 8

Asia 7.4 14.7 10.8 4.1 2.0 -1 -4 4

Middle East 2.1 2.8 3.1 0.8 0.6 4 13 26

Africa 0.7 0.9 1.1 0.2 0.2 5 16 7


Commonwealth of Independent States (CIS) 0.4 0.9 0.7 0.2 0.1 -1 15 15

Europe

World 130.5 100.0 100.0 32.6 36.1 9 15 6

Europe 108.0 82.7 82.7 27.0 29.8 9 15 5


Asia 5.4 4.4 4.1 1.4 1.5 8 14 10

North America 4.6 7.1 3.5 2.3 1.3 0 2 -6

Middle East 2.9 1.7 2.2 0.5 0.8 13 24 25

Africa 1.5 1.7 1.2 0.6 0.4 4 2 12


South and Central America

World 12.4 100.0 100.0 5.9 3.4 1 1 -2

North America 10.1 92.9 81.4 5.5 2.8 -1 -7 -5


Europe 0.3 1.6 2.5 0.1 0.1 7 22 -6

Asia 0.0 0.1 0.4 0.0 0.0 18 39 -1

Africa 0.0 0.0 0.2 0.0 0.0 44 26 70


Middle East 0.0 0.1 0.1 0.0 0.0 8 13 21

Clothing imports of selected economies, 1990-2008

Value Share in economy's total

merchandise imports

1990 2000 2006 2007 2008 2000 2008 a

Albania

... 68 173 232 246 6.3 4.7

Argentina 6 333 192 271 417 1.3 0.7

Australia b 711 1858 3279 3703 4280 2.6 2.2

Bangladesh c, d 14 174 168 197 252 2.0 1.1

Bolivarian Rep. of Venezuela 101 390 736 1443 1593 2.7 3.2

Bosnia and Herzegovina ... ... 162 189 220 ... 1.8

Brazil e 59 173 442 614 883 0.3 0.5

Canada b 2388 3690 6987 7796 8452 1.5 2.1

Chile 52 501 1003 1169 1348 2.7 2.2

China f 48 1192 1724 1976 2282 0.5 0.2

Colombia 19 80 159 258 335 0.7 0.8

Costa Rica f 17 592 214 236 272 9.3 1.8

Croatia ... 278 518 691 762 3.5 2.5

Ecuador 1 23 154 185 214 0.6 1.1

Egypt d 9 404 411 817 622 2.9 1.3

El Salvador d, f 171 713 217 187 117 14.4 1.2

European Union (27) g - 83181 144448 164993 177741 3.2 2.8

extra-EU (27) imports - 40148 74370 84653 93083 4.4 4.1

Guatemala f 5 33 | 190 208 183 0.7 1.3

Honduras 25 1304 423 333 186 32.7 1.8

Hong Kong, China 6913 16008 18852 19149 18546 7 5

retained imports ... ... ... ... ... ... ...

Iceland 75 88 156 184 169 3.4 2.7

Israel 61 471 788 949 1123 1.2 1.7

Japan 8765 19709 23831 23997 25866 5.2 3.4

Jordan 28 61 247 296 326 1.3 1.9

Korea, Republic of 151 1307 3744 4318 4223 0.8 1.0

Kuwait 206 317 567 699 698 4.4 2.8

Macao, China 26 214 1056 1105 872 9.5 16.3

Malaysia f 76 148 359 410 492 0.2 0.3

Mexico b, f 573 3602 2517 2474 2544 2.1 0.8

Morocco f 8 232 274 321 337 2.0 0.8

New Zealand 149 401 740 877 914 2.9 2.7

Norway 1231 1287 1977 2286 2729 3.7 3.1

Peru d 1 59 134 184 268 0.8 0.9

Qatar 29 54 211 264 302 1.7 1.1


Russian Federation d - 2688 8103 14505 21427 6.0 7.3

Saudi Arabia d 833 813 1649 1939 2018 2.7 1.8

Serbia ... ... 222 362 492 ... 2.1

Serbia and Montenegro ... 46 ... ... ... 1.2 1.3

Singapore 920 1881 | 2497 2428 2224 1.4 0.7

retained imports 328 560 | 750 872 893 0.7 0.6

South Africa b 108 223 1123 994 993 0.8 1.1

Switzerland 3437 3160 4654 5184 5804 3.8 3.2

Taipei, Chinese 290 978 1223 1118 1171 0.7 0.5

Thailand 29 131 276 331 392 0.2 0.2

Tunisia 191 438 550 644 635 5.1 2.6

Turkey 16 264 1098 1566 2216 0.5 1.1

Ukraine - 60 342 375 877 0.4 1.0

United Arab Emirates d 514 832 3055 5010 5503 2.4 3.3

United States 26977 67115 82969 84851 82464 5.3 3.8

Viet Nam d ... 450 271 270 446 2.9 0.6


UK Fashion MarketThe UK high street fashion industry is worth an estimated £44.5 billion. In 1960 10% of household expenditure was spent on clothing and footwear. Today, thanks to discounted prices, lower production costs abroad and a flood of Chinese imports, only 6% of household expenditure is spent on keeping us fashionable. Encouragingly for the consumer, between 2001 and 2005 average clothing and footwear prices fell 14.4% whilst the cost of living has risen by 12.6%.

Discounting is rife in the ultra-competitive UK fashion market. Marks & Spencer remains the market leader in the sale of high street fashion, but faces fierce competition from discount fashion specialists such as Primark and TK Maxx. Increasingly, affluent younger consumers are buying formerly exclusive high fashion brands such as; Prada (Italy), Chloe (France), Hugo Boss (Germany), Burberry (UK) and Donna Karan (U.S) to mention but a few.

The rise of cheap imports has nearly wiped out UK manufacturing. These days UK manufacturing concentrates on specialist fashion clothing or luxury products, mostly made for wealthy consumer in other developed countries. A continued trend in the fashion industry is the integration of manufacturers and retailers. The top three fashion retailers in UK; Next, Marks & Spencer and Arcadia (Topshop, Dorothy Perkins, BHS etc.), are all manufacturing and retailing their own fashion brands. Exceptions to this vertical integration are the street fashion brands of Nike, Adidas and Reebok, who prefer specialist retailers.

To conclude, the UK fashion market will continue to be driven by retailers rather than manufacturers with a polarisation between discounters and full-price retailers. The full-price retailers will capitalise on young consumer demand for couture-house designs, quality materials and individual styles sold as “fast fashion” with items offered for a limited time before new styles are released. Forecasts to 2010 are for the women’s, girls and infants fashion market to grow by 23% with a 15.6% growth for the men’s and boys fashion market.

Italian Fashion MarketItalian fashion industry in the world, with revenues for 48 billion euro, 70.000 companies and 700.000 people employed, makes Italy the most active in the world, in terms of quantity, second only to China, and holds leadership in the prêt-à-porter, despite Italy not being favoured by the richness of raw materials or the cost of labour force. With these premises Mario Boselli, the president of the National chamber for Italian fashion, started in the occasion of the presentation of Emanuela Cavalca Altan's book "L'anima del vestito nuovo" (The soul of the new dress) published by FrancoAngeli.

And, if Italy does not start with privileged market premises, Boselli continued, the secret of 'made in Italy' fashion's success is to be found in the creativity and the technological skill Italian companies are rich in: a human and professional patrimony representing the strategic factor for the prestige of Italian fashion in the world.

700.000 professionals who, behind the image and the griffe, represent the basic pieces for a process which still needs quality, specialisation and ability to propose. The National Chamber of


Italian Fashion itself feels very deeply the need and the priority of offering qualified training courses with stage within the companies, to prepare workers who will be able to interpret with the sensitivity that makes the difference in Italy's tailoring school, the ongoing of the markets, of trends and of communication.

Concerning communication Mario Boselli, pointed out how, inside a wide and articulated strategy planned by the National chamber for Italian fashion to export the image of Italian production, even using mass media the product should always and strictly communicate the values of quality, charm ad exclusivity of which the product itself is the emblem and the result.

Japanese Fashion MarketOverall the Japanese wholesale apparel market in 2000 is estimated at yen 5,500 billion or $47 billion. With the sluggish economy and low average product prices, the market has shrunk considerably. However, after the U.S., the Japanese apparel market is still the world's second largest apparel market, with the young women's casual fashion market maintaining the largest segment in the apparel market. Based on the Japanese "Family Income and Expenditure Survey" and industry experts, the women's apparel market is approximately 60% of the overall market, or in terms of wholesale value, estimated at yen 3,300 billion or $28.0 billion.

Japan is open to apparel imports. Leading Japanese apparel manufacturers have been shifting to off-shore production leading to apparel imports from Asian countries that have increased by over 50% in 8 years. On the other hand, apparel imports from the U.S. and other European countries have been decreasing for the last several years.

Two themes of casual fashion may have potential for U.S. apparel suppliers: "street casual" including jeans and T-shirts, and "office casual" meaning U.S. sportswear that can be worn to the office. As a market segment, young Japanese women continue to seek new ways to appear trendy and fashionable. In either theme, clothing that is well designed to make women look more beautiful, has potential.

A reasonably-priced Japanese casual fashion chain experienced high sales in the fall of 1998 when they sold fleece pullovers and jackets at only yen 1,980 ($17). This chain offers simple and basic casual wear, such as T-shirts, shirts, pants, skirts, socks and outerwear at low prices, for example yen 1,000 ($8) for a T-shirt and yen 1,900 ($16) for a cotton twill shirts. Product quality is quite good for the price. In order to compete against such inexpensive products, U.S. apparel suppliers should offer value-added, well-designed clothing made from excellent materials.

US Fashion MarketThe U.S. textile and apparel industry complex is experiencing its worst downturn in over two decades. It is faced with a major crisis that is believed to have been caused by recent global trade liberalization and Asian currency devaluation. Most observers credit policies stemming from global trade liberalization, such as the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA), with contributing to rapid job losses, especially in


the rural areas of the Southeast region where the industry complex is disproportionately located. However, since 1995 and especially following the 1997-98 global financial crisis, the currencies of the top textile exporting countries in Asia seem to have collapsed, causing a shock wave of low-priced textile products in global markets. The value of textile imports from Asia, which had shown relatively little growth over the previous ten years, grew rapidly by about 36 percent (%) from 1995 through 2001 in tandem with a decrease in Asian currencies. Additionally, volatility in the apparels market, fueled by frequent fashion changes, have contributed to exacerbating the economic stress faced by industry participants and rural residents. Therefore, the recent spate of plant closures may seriously impact economic development opportunities that are offered by the industry complex in those rural communities where a majority of plants are located.

Recently, the U.S. textile complex has experienced (i) overcapacity of production; (ii) global financial crisis; (iii) multilateral and regional trade agreements; (iv) rapid changes in fashion trends and demand; and (v) cheap imports from Asia and NAFTA nations (mainly Mexico). To become more competitive and profitable, U.S. textile manufacturers have focused on achieving greater speed, efficiency, and high quality production by investing heavily in automated technology and more integrated relationships while sacrificing domestic jobs. In 1997, U.S. textiles and apparel exports were worth $16.9 billion, and represented 31% of the industry’s $53.9 billion in total sales. U.S. exports to NAFTA partners equaled 41% of its global textile exports. In 2000, U.S. textile complex exports to Mexico and Canada was $9.5 billion which constituted 51% of total exports. However, global overcapacities in production of textiles and ease of substituting import products for apparel manufacturing have intensified market competition in the U.S. In part because of pressure from low-priced Asian imports, prices for U.S. textile products have fallen since 1997. Low-priced Asian imports are believed to have been caused by the currency devaluation of major textile exporters such as Hong Kong, India, Indonesia, Japan, Pakistan, Philippines, South Korea, Sri Lanka, Taiwan, and Thailand. Figure 3 shows that with the exception of China, a weighted index of all the currencies of major exporters have declined by nearly 40% since 1995. Indeed, the analysis reveals that following the sharp currency declines during the “Asian financial crisis” from 1997 through 1998, Asian currencies stabilized through 2000, and resumed their downward path. At its zenith, U.S. textile imports from major Asian exporters were at $34.80 billion. In particular, U.S. textile imports from China rose from $8.81 billion to $10.24 billion. For apparel firms, the desire for exclusive products, the transient nature of fashion, and timing and seasonality of products has also contributed to increasing market volatility. Yet, U.S. apparel manufacturers seem to have benefitted from the cheaper Asian imports of textiles by the U.S. Global sourcing strategies by the industry in locating manufacturing plants tend to also influence its competitiveness. Sourcing is explained by the cost of investing in facilities and equipment, production costs, labor costs and availability, quality control, timing, risks (language, culture, political, etc.,) and reliability of product supply in the international market. Therefore, the industry complex which posted near-record profits of up to $2.1 billion in 1998, has seen its profits fall to a dismal -$0.4 billion in 2000 because of competition.

French Fashion MarketFrance is the second largest country in Europe and the fifth largest industrial powe, France is known to many as the fashion capital of the world hosting many world renowned designers such as Gucci, Chanel, Prada and many more. However, France is the 6th largest fashion center of the world and holds the title as the largest fabric industry (www.wikapedia.com). The country


has advantages in being well known for fashion in that many consumers have often travelled to France to obtain firsthand experience of the beautiful glamorous lifestyles associated with the country of fashion. In terms of tourism, France is the most visited country in the world and hosts seventy-five million visitors a year. The success of the tourism industry through the fashion attraction has help the economy grow in that people from all over the world bring money from various countries to spend in France.

Many businesses would agree that location is a key factor in the success of a business. France is weak in buying property. There is no central listing system which means that unlike the United States, France’s real estate agents compete to sell all the property in the country. Hence, the people and businesses that thrive are those with power and money and the less fortunate will not have the same opportunity as those in the Unites States. The fashion industry produces a great deal of money for the economy but unstructured real estate market can have many at odds with how to progress in the situation that is at hand.


Part 2

Indian Statistics


Indian Fashion MarketFor the global fashion industry, India is a very big exporter of fabrics and accessories. All over the world, Indian ethnic designs and materials are considered as a significant facet for the fashion houses and garment manufacturers. In fabrics, while sourcing for fashion wear, India also plays a vital role as one of the biggest players in the international fashion arena. India’s strengths not only depend on its tradition, but also on its raw materials. World over, India is the third largest producer of cotton, the second largest producer of silk and the fifth largest producer of man-made fibres.

In the international market, the Indian garment and fabric industries have many fundamental aspects that are compliant, in terms of cost effectiveness to produce, raw material, quick adjustment for selling, and a wide ranges of preference in the designs in the garments like with sequin, beadwork, aari or chikkon embroidery etc, as well as cheaper skilled work force. India provides these fashion garments to the international fashion houses at competitive prices with shorter lead time and an effective monopoly in designs which covers elaborated hand embroidery – accepted world over.

India has always been considered as a default source in the embroidered garment segment, but the changes of rupee against dollar has further decreased the prices, thereby attracting buyers. So the international fashion houses walk away with customized stuff, and in the end crafted works are sold at very cheap rates.

As far as the market of fabrics is concerned, the ranges available in India can attract as well as confuse the buyer. A basic judgmental expectation in the choosing of fabrics is the present trend in the international market. Much of the production tasks take place in parts of the small town of Chapa in the Eastern state of Bihar, a name one would have never even heard of. Here fabric making is a family industry, the ranges and quality of raw silks churned out here belie the crude production methods and equipment used- tussars, matka silks, phaswas, you name it and they can design it. Surat in Gujarat, is the supplier of an amazing set of jacquards, moss crepes and georgette sheers – all fabrics utilized to make dazzling silhouettes demanded world over. Another Indian fabric design that has been specially designed for the fashion history is the “Madras check” originally utilized for the universal “Lungi” a simple lower body wrap worn in Southern India, this product has now traversed its way on to bandannas, blouses, home furnishings and almost any thing one can think of.

Recently many designers have started using traditional Indian fabrics, designs and cuts to enhance their fashion collections. Ethnic Indian designs with batik cravat, tie-and-dye or vegetable block print is ‘in’ not just in India but all across the world.

In India, folk embroidery is always associated with women. It is a way of their self expression, and they make designs that depict their native culture, their religion and their desires. Women embroider clothes for their personal use, and the people linked with the pastoral profession prepare embroidered animal decorations, decorative covers for horns and foreheads and the


Rabaris of Kutch in Gujarat do some of the finest embroidery. Embroidered pieces are made during the festivals and marriages, which are appliquÃ© work called ‘Dharaniya’. One of the significant styles of Saurashtra is ‘Heer’ embroidery, which has bold geometric designs, woven on silks. The Mutwa women of the Banni area of Kutch have a fascinating embroidery where they make fine embroidery works with designed motifs and mirrors in the size of pinheads, the Gracia jats use geometric designs on the yoke of long dresses. Moreover, the finest of quilts with appliquÃ© work are also made in Kutch.

Garments embellishment with bead work is another area where it in demand in the international market. Beads are used to prepare garlands and other accessory items like belts and bags and these patterns now available for haute couture evening wear too. According to a survey, in recent times Indian women have given up their traditional sari for western wears like t-shirts and shorts, as they feel more comfortable in skirts and trousers instead of saris and salwar kameez. It’s been noted that women spend just $165 million on trousers and skirts against 1.74 billion dollars spent by men on trousers. With more women coming out to work, the (combined) branded trouser and skirts market has been increasing at a whopping 27 per cent in sales terms. Women feel that Western clothing is more suitable, particularly when working or using public transportation. Many corporate offices are also in favor of their employees wearing Western wear.

In India, Western inspiration is increasing due to the influence of TV and films. Besides, shopping malls selling branded clothes have also mushroomed in India and are fascinating the youngsters. Recently, designer wear is being promoted through store chains such as Shopper’s Stop, Pantaloons, Westside, etc. Companies such as Raymond and TCNS have also set up their exclusive stores for designer wear such as Be: and W. The market of India fashion industryRecently, a report stated that the Indian fashion industry can increase from its net worth of Rs 200 crore to Rs 1,000 crore in the next five to ten years. Currently, the worldwide designer wear market is amounted at $35 billion, with a 9 per cent growth rate, with the Indian fashion industry creating hardly 0.1 per cent of the international industry’s net worth.

According to approximations, the total apparel market in India is calculated to be about Rs 20,000 crore. The branded apparel market’s size is nearly one fourth of this or Rs 5,000 crore. Designer wear, in turn, covers nearly about 0.2 per cent of the branded apparel market.At present, the largest sales turnover within the designer wear segment is about Rs25 crore, with other well-known names having less turnovers of Rs10-15 crore. In view of the prospects of the Indian fashion industry for growth, the figures are not very hopeful.

The figure of fashion industry

The organized market for designer apparel is about Rs 250 crore Designer wear calculates to less than 1 per cent of the apparel market The global market for designer wear is 5 per cent of total apparel market The global market for designer wear industry is largely dependent on the small-scale

sector Consumers for designer wear have a yearly household income of Rs 10 lakh-plus. There

are 3 lakh such households developing at 40-45 per cent Designer wear industry is projected to increase to Rs 1,000 crore by 2015. More than 81 per cent of the population below 45 years of the age is fashion conscious.

Many fashion designers and management experts foresee an average growth of about 10-12 per cent for the Indian fashion industry in the coming years. Though, the growth rate could be


more than 15 per cent, if infrastructural and other logistical bottlenecks and drawbacks are over come.

More efforts required

However, despite the benefits available in India there are also some disadvantages. India is not a remarkable player in the global market with reference to brands because of its inability to add value to products. This is observed by the fact that nearly 50 per cent of its exports are apparel and made-ups where value addition is essential. Likewise, 75 per cent of domestic apparel market is commoditized and unbranded and very few Indian brands do survive in the foreign markets. Evidently, the Indian market has not made a strong stand and hence it is difficult to make Indian brands that can compete with global brands in India.

Another reason for the fashion industry’s inadequate growth is the limited experience of the designers and the platform they are offered. The insignificance stalks from the reality that most of the young talent is hired by the bigger names to work in their studios, thus imprinting their work with the label of the big designers. Though performing individual presentation is not an alternative choice for most of the young talent, because of the limitation of finance, a beginner designer’s name fails to come to the forefront. Another thing, with regards to the ramp, is what the designers offer is barely appropriate to be worn ordinarily. You’ll see there’s dissimilarity between what is there on the ramp and what the Page Three crowd wears. Some believe at present the fashion is in, but the tendency hasn’t changed much as it is the old ones coming back. We have had short kurtas, long kurtas, flowing skirts, etc. coming back into fashion with only a new variety of designs.

Many management consultants and professionals believe that the Indian fashion industry will be boosted if the new comers are paid proper attention. What they require is more support so that their work gets due recognition. According to the consultants and professionals there should be a panel of people who choose designers for showcasing according to their work and not their name or who they’ve worked for earlier, and hence selection would be purely based on quality. Besides this, the panel of judges should comprise of people from the fashion schools rather than designers. It has been observed that the media-hype around the big designers and blatant commercialism has hindered business in the Indian fashion industry. No clear cut picture is provided about the feasibility of the products. Basically it is only the famous names that are being talked of. What they offer is not quite daily-wear. The entire focal point of the industry is on commercialism. The discussion is only regarding how much is sold and for what price and nothing about the designs or styles.


Indian exportsIndia's textiles and clothing industry is one of the mainstays of the national economy. It is also one of the largest contributing sectors of India's exports worldwide. The Vision Statement for thetextiles industry for the 11th Five Year Plan (2007-12), inter-alia, envisages India securing a 7% share in the global textiles trade by 2012. At current prices the Indian textiles industry is pegged at US$ 55 billion, 64% of which services domestic demand. The textiles industry accounts for 14% of industrial production; employs 35 million people and accounts for nearly 12% share of the country's total exports basket

Milestones

1. Exports of textiles and clothing products from India have increased steadily over the last few years, particularly after 2004 when textiles exports quota were discontinued.

2. India's textiles & clothing (T&C) export registered robust growth of 25% in 2005-06, recording a growth of US$ 3.5 billion in value terms thereby reaching a level of US$ 17.52 billion and the growth continued in 2006-07 as T&C exports were US$19.15 billion recording a increase of 9.28% over previous year and reached USD22.15 billion in 2007-08 denoting an increase of 15.7% but declined by over 5% in 2008-09 with exports of USD 20.94 billion. Indian Textiles and Clothing (T&C) exports is facing various constraints of infrastructure, high power and transaction cost, incidence of state level cess and duties, lack of state-of-the-art technology etc.

3. Readymade Garments account for almost 42% of the total textiles exports. Apparel and cotton textiles products together contribute nearly 72% of the total textiles exports.

4. The exports basket consists of a wide range of items comprising readymade garments, cotton textiles, handloom textiles, man-made fibre textiles, wool and woolen goods, silk, jute and handicrafts including carpets.

5. India's textiles products, including handlooms and handicrafts, are exported to more than a hundred countries. However, the USA and the EU, account for about two-third of India's textiles exports. The other major export destinations are Canada, U.A.E., Japan, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, etc.

6. The Government fixed the target for 2008-09 at US $ 26.55 billion an increase of 20% over the actual performance of US$ 22.14 billion in 2007-08, for export of textiles. However, no targets were fixed for 2009-2010.


Export Performance in 2008

In 2007-08 the textiles exports of India suffered badly due to sharp appreciation in Rupee vis-à-vis the US$. Although the rupee has depreciated sharply vis-à-vis the US dollar since April, 2008, the exports prospects of the Indian textiles sector continues to be adversely affected. Some of the reasons attributed to this decline are the financial sector melt down and economic slow down in international markets, increased cost of production because of increasing raw material costs, high power and other input costs which have affected the profitability of textiles and garments units in India and their exports. The liquidity crunch is another factor that is affecting the industry. In such a situation the positive impact of rupee depreciation had been washed away. During the current financial year, various export promotion councils and trade bodies represented to the Government that the textiles exports had adversely been affected by recent global recession. For exports, the major markets have been USA, EU & Japan and all the three markets have went into recession during the current year. As a result, during this year exports quantities were reduced or put on hold or the orders were cancelled or buyers opted for cheaper prices elsewhere.

Country wise analysis

The calendar year 2008 since the month of August onwards was not at all conducive for the Indian T&C export as the major markets like USA, EU and Japan for T&C have been observing recessionary trends and financial crisis. In this environment, the textiles and auto sectors are the worst hit sectors, particularly as these are considered to flourish in good times. USA, the single largest importer of textiles and clothing items, observed a negative growth of 13.22% and 10.3% in its imports of T&C from the world and India, respectively in calendar year 2009. Even China which occupied about 37% market share in the USA recorded a small decline of 1.9% during same period. Almost all major countries showed negative growth in US market.

India's position in the EU markets with a share of 7.67% and growth rate of 6.42% was small in comparison to China which occupied over 38% market size with a growth of 20.46% in 2008. The EU's overall T&C import registered a growth of 13.91% in 2007 and 7.32% in 2008. In the calendar year 2009, EU's overall imports of T&C declined by 11.96% while India recorded a negative growth of 8.94% over 2008. Even China and Turkey, the two largest exporters of T&C to EU have recorded a negative growth of 6.15% and 17.42% respectively during same period.


Indian ImportsTotal textiles imports were of the order of US$ 3.5 billion in 2008-09. 44% of this was on account of import of yarn and fabrics and 46% was on account of import of raw material and semi-raw-material. The imports have increased by 5.19% during 2008-09 in dollar terms. However, import of textiles as percentage of total imports has been going down steadily and comprised only 1.20% in 2008-09.

The Indian textile industry is reeling under the pressure of the global financial crunch. Exporters, who were already suffering from the appreciation of the Rupee since January 2007, are now feeling the jolt of international monetary meltdown. High inflation rates and slow industrial growth has left textile exporters in a dire state.

The global financial crisis has created havoc on the world economy. India is also feeling the ripple effects of this international turmoil (C&I 2009, 1, 23). After steep growth for several years, the country’s economy is now witnessing a slump starting in September 2008 (Table 1). A high inflation rate and wavering industrial growth is making life hard for India’s industrial sectors. Last year was a tumultuous year for the textile and garment sector. In the first half of 2008, prices of vital raw materials like crude oil and cotton shot up, while the second half of the year witnessed an economic turmoil the likes of which has never seen before. Most of the major textile and garment producing countries are observing a slowdown in exports leading to a drop in production. Ambitious export targets that looked achievable just a few months ago seem totally unrealistic now.

The Indian textile industry is a significant contributor to the country’s economy. The total market size is estimated at US$57.6bn, and expected to reach $110bn by the end of 2012. According to the latest industry estimates, textile and garment exports should touch $24.6bn in 2008-09, up 20% from the previous year’s $20.5bn, but short by a wide margin against the government’s targeted figure of $31.17bn.

India’s performance in US market1. Of the eight cotton apparels, India’s market share (in 2000) in US import market

exceeded 10% in cotton dresses (336), W&G woven shirts (341), and cotton skirts (342). Market share grew in 336 and 341. In 336, India exported higher quantity at reduced prices, while in 341, India moved up the value chain. But the US import market grew strongly in 341 and 342, and not as much in 336. However, in 341, the size of quota is close to the size of US home market, whereas in 336, about 43% of US home market would be opened only on 1st January 2005. Therefore, not much growth should be expected in 341 in terms of US market size. Besides, there are no current threats from ‘preferred’ developing countries in 341 yet. Hence this is one category where India should very clearly focus, since the competitor countries are essentially Asian. The one big threat, would be China. Currently, China exports at an appreciably higher uvr compared to India. The evidence from 1995-2000 indicate that China has upgraded its 341 faster than India has. If China continues on that path, India may not worry too much,


since the gap between Indian and Chinese prices would be quite significant. But then, if India also upgrades its product, as it has done in 341, competitiveness based only on price will be extremely risky.

2. In descending order of uvr, Indian exports of the chosen cotton apparels belong to between 40 and 50 percentile, among all supplier countries for a given MFA product category. Which means India operates in the low value segment in most cotton apparels in the US. However, it is interesting to note that there are three cotton apparels whose uvr have been between percentiles 55 and 60. They are knit shirts (cat 338) and trousers for M&B (cat 347) and for W&G (cat 348). Incidentally, US imports of these products is growing fastest among all cotton apparel categories. However, India has lost market share in all except 347 during 1995-2000. In 347, its unit prices have grown fastest among top ten suppliers. And almost 70% of US market remain to become quota-free only on 1st January 2005. India must build up its strength in this product category quickly to capture the huge market that would suddenly open in 2005. Quite apart from ‘preferred’ group of developing countries, Pakistan is one country which has done exceedingly well in 347, and has been building its domestic manufacturing facilities very fast. But Pakistan is not yet as much of a threat since its unit value is considerably lower than India. China, however, is likely to emerge as a big threat to India in 347 since their uvr is closer to India’s and they too are upgrading their product rapidly. Their market share declined due wholly to quota constraint. But they seem to be producing less numbers, and better quality of 347 for US export market. They would pose a big challenge to India.

3. In cotton apparels, the competitor countries- aside from ‘preferred’ developing countries- are Indonesia, Malaysia, Hong Kong, Philippines, Indonesia, Sri Lanka and Bangladesh. From among these, Bangladesh is the lowest cost supplier in almost all categories. In view of the threat from ‘preferred’ developing countries, India must move away from competing only on the basis of price, since the share of this segment is any case declining with the ‘preferred’ countries growing rapidly in this segment. And when India upgrades its value, it would have to contend with strong Asian competitors like Hong Kong, China and South Korea, whose performance has been constrained due to quota ceilings. But once the quotas are removed, India may find itself again losing in this upgraded market segment due to sheer size of these countries’ exports. The important lesson for India therefore is that it must not only upgrade its values, but also begin to find ways of competing increasingly on non-price factors.

4. Within textiles, India has done commendably in made-ups (362 and 363). In towels (363), Indian performance has been excellent. It was the largest supplier, and yet managed to grow fastest in US import market among the top ten suppliers. Besides, major portion of its growth has come from value upgradation, rather than just quantity growth. This is an item of great potential for exports to US. Moreover, 47% of US market remains to open on 1st January 2005. India’s export in made-ups category 363 is expected to grow phenomenally in post-2005. Threat from price-based competition is small since India is already among the relatively high price suppliers among top ten suppliers. Mexico, Israel and Sri Lanka are building huge domestic manufacturing facilities, but they are all low-price segment players. This is likely to be India’s star performer. India has done well in 362 also in terms of improved market share, as well as higher unit prices. However, the one big threat, which is India’s close competitor, is Mexico. And India can no longer afford to compete only on price-based factors, since Mexico would have an advantage over India not only until 2004 (due to quotas) but also beyond (due to tariffs). India must rapidly develop non-price based competencies in this item of great potential. Countries such as Turkey too are building up massive domestic


facilities for manufacturing 362, but they are very low price segment players and no threat to India at all.

5. In all chosen fabric exports to US, India has lost market share during 1995-2000. Except cotton sheeting fabric (313), India did not grow even in quantity terms. So why hasn’t quotas protected Indian fabric exports in the US market? It would be useful to mention here that the protection by quotas does not imply assured export growth, as is often (mis)understood. Exports are a function of export order. However, quotas provide protection in an indirect fashion, by prohibiting other supplier from exporting more than they are competitively capable of. From an importer’s perspective therefore, all the order that the importer may like to place with an exporter may not be importable from that exporter due to quota limits on the exporter. The importer would therefore be compelled to place the ‘overspill’ order with someone who is second most competitive in the product. In this sense, the second most competitive suppliers’ exports are “protected” to the extent of the limited quota supply with the most competitive supplier. This indeed is the sense in which quota ‘protect’. Alternatively, it can be said that, but for quotas, the exports of Indian fabric to US would have been much lower. In this sense, quotas have indubitably protected the exports of Indian fabric in the US market during the quinquennium. Indian fabric exports have not revealed to be competitive in the US market. All Indian fabric chosen for this study are low-end fabrics, and the competitors are some of the ‘preferred’ countries like Mexico and Turkey, and Asian countries. India’s uvr has been declining, but the intensity of price competition in these products could be gauged from the fact that in all fabric products, the real prices of US imports have declined.

6. In the 11 apparel categories- both cotton and mmf- China is not India’s close competitor since uvr of its exports to US is significantly higher than India’s, and these two countries operate in quite different price-segments23. In 339 and 347, where it is India’s close competitor, its uvr is higher than India’s. However, China is a strong competitor of India in cotton fabrics, even though in all chosen textile categories, its uvr is (marginally) higher than India’s. The major threat from China therefore lies in fabric exports, specially if China chooses to devalue. India is one of the countries whose exports would be severely affected if China chooses to devalue its currency. And that is not an unrealistic scenario. Indian fabric exports to US would be almost wiped out. The lesson becomes stronger. India must not only upgrade in fabric exports, but also seek newer non-price criterion for competing. Or, as a country, perhaps begin to focus more on apparel and made-ups exports.

India’s Performance in the EU1. Very much in consonance with what has been noted above in the section on EU import

trends, it is clear that EU’s imports of yarns and fabric is on the decline whereas that of made-ups and garments is noticeable. Except category 26 in garments, EU import of all other garment categories have grown quite appreciably in value terms.

2. No clear picture can be drawn in respect of the uvr of total EU imports. All sectors of yarn, fabric, made-ups and garments show a mixed picture. Interestingly, the uvr of synthetic fabrics (cat. 3 and 3a) has grown quite significantly.

3. India has performed reasonably well in the EU in terms both of value and uvr. India’s good performance in synthetic products (yarn and made-ups) in textiles. Among garments, the leaders are all W&G categoriessuits, coats and jackets and skirts. The products whose exports to EU have been constrained by quotas, and hence are likely to


gain from quota dismantling in 2005, (Gainers) are cotton bleached fabric and woven bed linen. W&G dresses and blouses, and knit shirts and woven trousers are the garment categories that are expected to gain due to quota dismantling in 2005. The losers are bleached fabric made of cotton as well as synthetic fibres/yarns, and knit jerseys/pullovers. That synthetic fabric is an outlier is not really surprising to anyone who knows India’s fibre strengths and weaknesses. Woven shirts is another category that is likely to become a winner once the quotas are lifted. These would become clearer from product-wise analysis.

4. Except yarn and made-ups, the share of extra-EU imports is, on average, less than 50%, save category 8 (M&B woven shirts). The share of extra-EU import of fabric and garment is less than half. Extra-EU import of fabric in fact is very small. But the reason for that perhaps lies in the fact that the total fabric import by EU has been almost stagnant in the five-year period. The story in cotton yarn is a little different since almost entire cotton yarn requirement of EU is imported from extra-EU sources.The observation of interest to suppliers like India to EU is that the share of extra-EU imports in almost all selected ATC product categories is on the rise. The only category where the share of intra-EU imports has increased is synthetic fabric and India is an ‘outlier’ here.

5. In all other categories, specially in all garment categories, the share of extra-EUimports has increased significantly in the five years. And that should be music to the ears of garment suppliers to EU. But it must simultaneously be remembered that even within the garments category, the uvr of extra-EU imports is higher than that of intra- EU imports of the same categories. The message is quite clear. EU is importing less of yarn/fabric from outside, but more of made-ups and garments. And the uvr of both made-ups and garments from extra-EU sources are higher than that from intra-EU sources. India is a high-ranking exporter to EU of yarns, made-ups and some categories of garments. Export of Indian fabric to EU in future is likely to further slow down substantially. Made-up exports to EU, like in US, are a very big opportunity for India. In garments, Indian exports of W&G skirts and suits/ensembles is another big opportunity where India has shown good performance in the EU market over the five years 1995-2000.


Part 3

Indian Retail Sector


Indian Retail Market

During 2006 total consumption of fabric and garments including exports is estimated at Rs 2813Billion, out of which amount of spending on textiles and clothing items by the household sector was estimated at Rs 1,556 billion and exports were of the order of Rs.561 billion. In 2006 exports constituted 20 percent, household expenses 55 percent, and non household expenses 25 percent of the total sales value of cloths in 2006. Total value of production of fabric and garments for the same year was Rs.1294 billion. Thus average sales margin in 2006 comes out to be 117.35%. Table 4.7 indicates 133 that the average margin on textile and clothing products was 109 percent in 1999, 126 percent in 2003, 139 percent in 2004, and 127 percent in 2005. Such a high margin is mainly due to the long chain of wholesalers and retailers involved from the production stage to the final consumer stage. The comparison of production and consumption estimates, along with the NSSO data on per unit margin for wholesaler and retailer in Table below, indicates that on average, two wholesalers and two retailers, along with duties, could add up to a margin that is close to 100 percent. The margin for two wholesalers and four retailers will add up to 122.74 percent for cotton textile products and 106.72 percent for garments.


The high average sales margins are due to most of the retailing concentrated in traditional small and medium sized retailers. Direct sale by producers or through their franchises is very limited. But over the years there is a gradual shift toward modern retailers with single and/or multi brand outlets. But textiles and garments retailing is still dominated by traditional retailers. The structure of retailing can be broadly classified into three heads.

Small Traditional Retailers Shops are small and cramped, display system is primitive and ranges are limited. No fitting room because of the space problem, Generally computers are not used in the shop and few accept debt cards & credit cards. Costs are low, competition is intense, margins are wafer-thin and profit expectations are

modest. Focus on the selling cheap apparel to large number of middle class customers. They don’t stock the foreign or premium brand due to its high prices.

Organized Modern RetailersWe can describe it as retailer who operated relatively large and spacious stores, employ at least 6 people, adopt modern retailing business practices, display apparel attractively, offer a wide choice of clothing, create a pleasant ambience for shoppers and make special efforts to attract fashion conscious consumers by stocking fashionable and well-know brands. Most Indians like to compare brands carefully in terms of prices, fit, and styles- before they purchase, so Multi Brand Outlets (MBOs) have major advantage. But most MBOs stock only popular and fast moving clothing products and many focus on budget conscious customers and stock cheap brands. So MBO are not especially attractive for foreign companies. But foreign and Indian clothing companies sell a substantial proportion of their output through MBOs. In addition there many single brand outlets operating also.

Malls and Departmental StoresA number of upscale shops are established in the malls. Mostly single brand outlets are there in the malls. In the clothing sector, these included the franchised stores of both India and foreign retailers, e.g. Levi’s, Pepejeans, Wrangler, United Colour of Benetton, Parx, Puma, Arrow, Marks & Spencer, etc. The first shopping mall of international standards was set up in Mumbai in 1999. Each mall has an anchor store to increase visitor numbers and some have entertainment complexes. There are fewer than 150 departmental stores in India. Yet they constitute major retailing channels for many foreign clothing brands and have been growing at a much faster pace than traditional retailers do in recent years. Before liberalization departmental stores were not so developed due to limited availability of products. The first departmental store, which conformed to international standards, was set up as recently as 1992-93 by Shoppers’ stop in Mumbai. Since the 1990s, the variety of consumer goods available in India -including clothing brands-has grown enormously, and there has been a rapid spread of consumerism. Today there are about 8 major department store chains in India, namely- shoppers’ shop, Pantaloons, Big Bazaar, Vishal Mega Mart, lifestyle, Ebony; Westside, and Globus.


Retail Location in IndiaFor entry into the Indian market to be viable foreign companies have to focus on those parts of the market that are potentially the most attractive. In fact it is possible to identify 7 major cities where large number of rich sections of the population are located, who can afford to pay the relatively high prices charged for these foreign apparel brands-Mumbai, National capital Region (NCR), Chennai, Bangalore, Hyderabad

Some major pull factors for these major retail centres are- Large populations size, Relatively high income levels Consumerist culture It is easy to generate the funds for development of new malls in these cities due to

availability of other infrastructure facilities that made it quite economical.

Growth of Retail Market in IndiaBedi & Cororation, IFPRI(DP), 2008, estimated that the expenditure on clothing expanded by 10.05 per cent in nominal terms or 6.55 per cent in real term from 1990-91 to 2005-06. Because of the continued importance of tailoring, Indian consumers purchase many fabrics directly. As a result, a large number of shops concentrated on selling textiles rather than clothing.

FDI Policy in RetailSo far FDI is not completely allowed in Indian retail sector because of fear that the entry of foreign companies into retailing would adversely affect existing business and also a large number of people who are employed in the sector. Currently, India does not allow FDI in multi-brand retail but permits up to 51 per cent FDI in single brand retail and 100 per cent in cash-and-carry wholesale trading. Though there is a ban on FDI in big multi-brand retail stores, there is no restriction on companies accessing the foreign equity market through the American and global depository receipts. It will increase the quality and variety of products, keep prices competitive, expand manufacturing, besides generating employment and also it will be helpful in modernizing the retail sector in the country.


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