Retailers cut sourcing by 15%

Indian retailers have cut sourcing of garments by 15 per cent as sales slow, key suppliers said. Overseas retailers have almost halved their sourcing.

The move to cut supplies comes in the midst of a gloomy outlook for the year ahead as companies cut production, freeze hiring and cut salaries to combat recessionary trends in key developed countries. Reflecting the trend India’s gross domestic product is expected to grow at a lower pace of 6.5 per cent compared with an earlier estimate of over 7.5 per cent.

Garment manufacturers have been asked to reduce overall supply by 15 per cent to retailers including Future Group, Shopper’s Stop, Globus and Reliance, said P Chandrashekhar, secretary of Clothing Manufacturers Association of India (CMAI).

“Our members have had to cut their supply because of piling up inventory. Retail sales have suffered a lot lately,’’ said Chandrashekhar.

Future Group’s founder, Kishore Biyani, however, denied any move to cut sourcing. Instead he said they were stepping up their sourcing. Shopper’s Stop did not respond to phone calls.

“The sales growth has not been in line of expectation. So most brands are cautious in planning to avoid inventory backlog,” said Bipin Gurnani, chief executive officer of Promart, the value format of Provogue (India), adding that for formats like theirs, it has been the reverse and the sales growth has been good.’

Gokaldas Exports, which supplies 5 per cent of its production to domestic retailers including to Reliance said it has been witnessing a cut in orders. “Retailers like Reliance whom we supply in the domestic markets have been cutting down on sourcing due to the current inflationary trends. However, since domestic market forms a very small part of our total sales, it hasn’t affected our business much,” said SN Rangaiah, general manager - finance of Gokaldas Exports Limited.

Garment suppliers to overseas retailers have in particular been worst hit. According to Swaminathan, director of Carona Knitwear and president of South India Hosiery Manufacturers Association, garment supplies have dropped to around 50,000 pieces in December so far as compared one lakh pieces in the corresponding period last year.

“Garment manufacturers like us have been witnessing a decline in order books both in domestic and overseas markets. With the purchasing power of consumers decreasing, we have not received any sampling requests as well,” said Swaminathan who supplies garments to countries like Italy, UK and the US. Experts and analysts tracking the industry say demand even during festival season including Christmas hasn’t been good.

“The domestic demand in the textile industry is down by 14 per cent whereas exports have taken a major hit of 40 per cent. Christmas time is usually peak season for retailers, but there is a dearth of demand. The recession in US is impacting exports. As many as 535,000 employees were laid off in US in the month of November and this has an impact on Indian exports. Also there is personal insecurity which is impacting the sector,” said Sunil Parekh, advisor, Crisil.

Garment suppliers from Gujarat also echoed similar views. “We have reduced our supply to retailers like Pantaloons, Vishal MegaMart and Reliance and instead focusing on creating better samples in preparation of the summer season,” said Vijay Purohit, vice president of Gujarat Garment Manufacturers’ Association (GGMA). “We are now focusing our attention for the summer season instead.’’

Coupled with cutting down sourcing, some retailers are also rescheduling of payments. “While we haven’t experienced any defaults, clients have been delaying their payments by an average of three to six months. The late payments have begun occurring after Diwali which reflects the impact of downturn,” said Purohit.