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Retailers Step Up Their Expectations

Gary Evans -- Home Textiles Today, February 21, 2005

The elimination of quota seven weeks ago has already opened India's home textiles industry to rapid change — with more expected.

India's manufacturing base is expanding, even as segment leaders foresee consolidation. Weavers shifting into finished goods portend a tightening of India's greige availability, even as some short-term over-capacities in towels and sheets may occur.

Perhaps most significantly, U.S. retailers are now stepping up their demands for shorter delivery schedules and a more compressed supply chain.

“More and more large retailers from the U.S. are trying to push supply chain functions to their off-shore resources,” said P.K. Markanday, joint managing director of towel manufacturer Trident/Abhishek Industries Limited of India. “The retailers want their global resources to ship straight to their stores on a flow-through basis via their distribution centers.”

As the country's top manufacturers work to meet these demands, capital also is flowing to small factories intent on refashioning themselves as vertical players. The activity sets the stage for what India's textiles promoters hope will be explosive growth for the industry.

The country's cotton export council, Texprocil, expects exports of finished home textiles to skyrocket by 88 percent over the next 18 months, from $1.7 billion to $3.2 billion, according to Siddharth Rajgopal, managing director.

“Capital is not a problem. Production of fine-count sheets is expanding in a big way. Most towel factories are booked for the next six to eight months,” he said. “The domestic market is also expanding. So if you don't sell for export, you can sell domestic.”

Towel manufacturer Welspun is among those expanding and will begin producing sheets within the coming 12 to 15 weeks. However, Executive Director and CEO Rajesh Mandawewala said that even major players in India have been surprised by the rapid build-up of capacities in the past few months.

Even though a significant part of the new capacity will service India's burgeoning domestic market, Mandawewala believes the driver of growth will continue to be exports.

But he sees that scenario leading inevitably to consolidation.

“Most new players do not have the relevant skill sets nor the experience to work with retailers and meet their stringent product and service demands,” he added. “The newcomers, as well as the mediocre companies, will find it hard to survive. Some will fall off; some will be consolidated by larger players.”

And retailer demands are intensifying.

Ajay Anand, managing director and CEO of bath rug and blanket producer Faze 3, said larger U.S. retailers are now pressing their key resources to open distribution centers and permanent offices in the United States — or at the very least, hire a full-time, U.S.-based rep.

The argument for doing so is particularly strong for commodity goods such as bath rugs, he added.

“Basic products can easily be made into direct imports. On commodity goods, at the end of the day, it's going to be about price,” he said.

Retailers are also asking overseas manufacturers to shorten their lead times, according to G. Kannappan, chairman and managing director of towel manufacturer Sharadha.

“They would like to have the same deliveries they've had with U.S. manufacturers — three days, four days,” he said.

He noted that such a transition will take time, but said that 60-day cycles can probably be reduced to 30 days in a reasonable period.

Trident's Markanday said the retail standard for volume-oriented off-shore sources now includes being EDI-enabled and having the ability to carry inventory and ship within 3 to 5 days of order.

“Perhaps in the time to come they may not want the goods to touch their DCs at all and may work out a more efficient way to transfer goods straight from port of entry to their stores,” Markanday added.

TOP MANUFACTURERS: INDIA

Company Name 2004 Sales* (millions) % Export to U.S.
*Sales are home textiles only.
Source: HTT research
** Handfab are sales to U.S. only.
1. Welspun $82 70%
The bath towel giant launches its sheeting production this spring.
2. Bombay Dyeing 78 70
The sheeting leader faces growing competition as other mills enter the category.
3. Abhishek/Trident 59 71
After aggressively ramping up capacity, the mill plans for significant growth.
4. Alok 50 N/A
The apparel maker launched sheet production in spring '04, with explosive results.
5. Faze 3 36 65
The bath rug and blanket producer has added a new backing plant and expects to double growth.
6. Sharadha 25 65
The towel mill that launched the zero-twist craze with its MicroCotton towel, is now bringing MicroCotton into bedding.
7. Handfab India 19** N/A
One of the largest suppliers of table linens to the U.S., the company keeps a tight mass market focus.
8. Textrade 10 N/A
The manufacturer of bedsets, curtains and cushions plans significant export growth this year.


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