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Wednesday, 21 July 2010 |
 The rising prices of cotton, the main input for yarn, which fabric makers buy in bulk, has had a spiraling effect on the value chain with both yarn and fabric manufacturers raising prices in turn. Fabric prices have, in fact, gone up by 5-10 per cent in the past few
months but so far this has not impacted the consumers directly as apparel brands have not yet passed on the hike to the consumers. However, the situation may change soon. While the ongoing spring-summer season has not seen any price hike, retailers say the price issue will be taken up for the autumn-winter merchandize. Arvind is even hoping that cotton prices would come down, making it easier for retailers to absorb the cost themselves and not pass it on to the consumer. Cotton prices have increased 30 per cent in the last six months to Rs 27,500 a candy (one candy is 355 kg).
 The increase in prices of cotton and yarn in India is a reaction to the global prices and it has directly affected textile prices. R Satyajit, COO, Allen Solly explains, “Cotton prices have shot through the roof. Also, due to the effect of inflation on fuel prices, input costs of a few products have gone up by almost 40 to 50 per cent over the last two years. This has led to an increase in prices.” To cope up, many brands are pushing up the prices of premium segment. According to Arvind Brands, which has brands such as Arrow and Flying Machine in its portfolio, if cotton prices continue to rise, it may be forced to hike prices by 5-10 per cent across all brands. The impact will be lower on brands in the lower segment.
While on one hand domestic brands have to hike prices to offset rising input costs, they are also facing the heat as numerous foreign fashion brands are making a beeline for India and competition has grown manifold. The Rs 2,000 crores premium fashion retail segment is expected to grow at 25-30 per cent annually over the next five years to Rs 6,000 crores, according to estimates made by consulting firm Technopak. In May this year, Spanish fashion brand Zara opened its first Indian store. A month later, it was the turn of Chinese clothing giant Yishion to follow suit. They were preceded by at least three more – Diesel, Vero Moda and 7 For All Mankind.
What began as a trickle in 2004-05 has now become a deluge as foreign apparel brands are lining up to enter the Indian market. While the large Indian consumer base is an obvious reason, what also played a big role is the sharp reduction in import duties on apparel and the government’s decision to allow 51 per cent foreign direct investment in single-brand stores.
Of course, with major garment players entering India it speaks very well for the customer. However, if Indian players want to compete, they will need to improve their design capabilities, enhance their quality and be priced right to attract buyers. Perhaps a tough call given today’s market scenario. |
