I was once invited to attend and participate in a conference in New Delhi, located on the beautiful grounds of the India Habitat Center.
I would like to address some of the observations I have come away with, that I found interesting in speaking directly with the many attendees to this conference.
How do you explain the Indian manufacturer who is making apparel for their local market, to take the risk to EXPAND to EXPORT globally?
The costs, the risk, the possibility in the beginning of lower gross margins, are all road blocks to change.
I have said many times before that India has the HUMAN RESOURCES, to maintain a highly educated population, and still have the labor to maintain the textile, apparel industry for many years to come.
The FACT that India is opening its doors to retailers from different countries ownership, is going to make the middle class growing consumer now have choices, selections, and very competitive pricing that will soon cut into the local manufacturers profits.
I have seen this take place in Korea, Japan, Mexico, and now China, as the Barriers, Tariffs, will soon come down, and FREE OPEN MARKET PLACE, will just smother the local manufacturer.
Therefore, for the local manufacturer to grow, they must move their future model to grow and compete.
I have said many times before that India has the HUMAN RESOURCES, to maintain a highly educated population, and still have the labor to maintain the textile, apparel industry for many years to come.
The other countries, I mentioned above except for China, they have moved from garment manufacturing to higher technology work, and now import their apparel from other countries.
In each case from the time they manufactured themselves, to importing garments, went from 20 years to as little as 10 years and less.
With India opening its doors, to satisfy the growing middle class consumer, I believe it will be a shorter time that the consumer will be desiring global styles and brand names, and cut into the local manufacture.
The proof of this will take place, China has gone through, and still having to pay higher labor costs, losing business to other countries, the major players Vietnam, Pakistan, Sri Lanka and Bangladesh.
Bangladesh with no spinning or textile manufacturing picked up almost 40% of what China lost and the other countries picking up in the 20% and above range of per cent, while India picked up 3.1%.
Why only 3.1%?
I was able to look at the method of how calculating the costs is stopping growth:
I will now give lesson #101 of why the costing is incorrect for expanding and exporting.
There is MARK ON and MARK UP:
Mark On is where to take all your raw materials cost, your administrative overhead cost per cent, and then add on profits, this is only for fast turnover moving items like food stuffs in a supermarket that must be replaced daily.
Mark Up is where you take all your raw materials cost including freight in per unit, this is called the cost of goods, this amount is subtracted from the selling price, leaves you your gross margin/profit, you then subtract all your overhead and selling costs, and this leaves you your profit/or loss.
The industry calculates its Gross Margin per cent, by taking your selling price divided into your cost of goods, this will give you your gross margin per cent.
These gross margins are the guidelines to monitoring your total business.
The proper education is the only means to succeed and moving forward the industry.
Yes! There is light at the end of the tunnel.
