IMPACT OF TOP 6 INDUSTRY TRENDS

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About usApparel Resources is as an organization with over two decades of deep interaction with the Apparel and Textile industry in the Indiansubcontinent under the name and style Apparel Resources. We are an established name as a knowledge partner to not only the industry but also to the academicians and students. The organization is actively involved in Research & Development, Industrial Training and Consultancy initiatives. Apparel Resources has been involved in conducting surveys, publishing annual Top100 rating of companies in the garment industry besides insightful research/ analysis of textile and apparel trade statistics, especially related to global trade.

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Scope of White PaperIn our association with the industry, there never has been a dull moment… the garment exporters should be rechristened as ‘crisis leader’. In retrospect, the entire last year was filled with one crises or the other, while few remained confined to the year, but some will certainly impact the way business moves into 2012…

While there were many issues that were the talk of the industry, some only can be called as trends in the true sense and 6 of the most important such trends have been reflected upon…

It is interesting to see how each trend is individual, yet linked closely with the other trends… Who can deny that recession is at the heart of all the woes that the industry is facing and it is this recession that has pushed the industry for new answers… be it multi-channel retailing to increase footfalls or the search for new markets for the exporters both in emerging economies and in the growing domestic retail segment.

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table of content

5• World on SALE…Trend Continues Beyond 2011

9• Growth in Domestic

Retail Creates Opportunities for Garment Manufacturers…

• Retail goes ‘Hi-tech’ with Multi-channel Options…

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• Developing New Markets Important… Do FTAs Help… 15

18• Addressing Internal Issues Pertaining toShortage of Labour…

21• Sustainability Continues to Gain Momentum

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World on SALE…Trend Continues Beyond 2011A recession in the US, which officially started on Dec. 1, 2007 and ended in June 2009, has left a long trail of economic disorder that is still impacting the US and also pushing the European Union into a recession. Today, the worldwide dimension of the financial crisis has left even the best of analysts uncertain with no real idea where “this will go next and for how long.” Many economists claim that the USeconomy, while strong enough to skirt a recession, remains too weak to bring down an unemployment rate stuck near 9 per cent for more than two years. Some economists even claim that another recession is around the corner if strong measures are not taken to revive the economy.

In the EU, Greece, Ireland, Portugal and Spain are already in downturns or fighting to avoid them, as high unemployment and austerity belt-tightening take their toll. Instability of the EURO is hurting the industry and because of the growing socialist stand, the situation may lead to each State going its own way. GoldmanSachs predicted that both Germany and France would also slip into recession. In fact, a growing chorus of analysts now predicts that Europe is heading for an outright recession. Already, the Euro zone economy has slowed to essentially zero growth. It could stay in a slump, many economists say, at least through next spring.

In this global scenario, retailers worldwide are struggling to attract footfalls with lower gross margins and products that are considered as ‘basic necessities’ are priority with the shoppers. No wonder the demand for clothing has been on the decline with many retailers reporting negative sales growth month after month. In the US, the clothing and footwear industry has seen a near (-) 7 per cent decline in sales over the year compared to 2010. The situation is so bad that 24/7 Wall Street predicts that retail giants like Sears and American Apparel may disappear in 2012. While American Apparel posted six consecutive quarterly losses since the beginning of 2010, Sears third quarter 2011 results saw domestic comparable store sales decline 0.7 per cent,

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Kmart’s comparable store sales decline 0.9 per cent and Sears Canada comparable store sales decline 7.8 per cent.

Gap Inc. recently reported that November 2011 net sales decreased 3 per cent compared with last year and year-to-date comparable sales, including associated online sales, also decreased 3 per cent compared with a 3 per cent increase last year. JCPenney too said that consumer activity declined in its third quarter, with comparable store sales dropping 1.6 per cent. Gross margin fell 1.6 points to 37.4 per cent, as a softer-than-expected selling environment impacted profits. The company said it expects comparative sales in the fourth quarter, which includes the holiday season, to be flat from a year ago.

An interesting offshoot of the crises in the US is that used merchandise stores have emerged from the dusty fringes to become one of the fastest-growing segments of the retail industry. During the first nine months of this year, sales totalled $11.47 billion, representing a 26.7 per cent increase over the same period last year, according to the latest Census Bureau data.While non-profit outlets such as Goodwill and Salvation Army are the most familiar names in this space, privately-owned resale and consignment stores that sell higher-quality goods and cater to a more upscale clientele represent the fastest-growing segment of theresale market,” says C Britt Beemer, Chairman of America’ s Research Group, a consumer research organization.In UK the situation is getting critical, as early as March 2011; department store group Debenhams warned that consumer spending is likely to be subdued over the second of the year because of declining disposable incomes. Nick Bubb of Arden Partners said the “gloomy news” from Primark underlined the troubled state of theUK high street. A series of shock profit warnings from Mothercare and Supergroup as well as Tesco’s worst UK sales in two decades painted a picture of a high street in crisis. Richard Hyman, strategic retail adviser at Deloitte, said it was “totally predictable” thatnext year would be worse and it would see a full 12 months of the Government’s austerity drive.The fallout of the recession was noticed by Team AO which was in London last month, wherein most retailers from fast fashion retailers

A reflection of this decreasing demand was felt in the second half of the year by the Indian garment export industry with orders for S/S 2012 coming in very late, mostly post Diwali (October), even the orders that have come in are smaller in batch size and at very sharp prices.

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H&M and Zara to mass market retailers like Primark are selling similar products, with very little variations. It is obvious that retailers don’t want to risk inventory accumulation because of consumer disinterest and prefer to work in ‘safe’ styles. Not only silhouettes but the colour palettes were all in coordination, as if the whole industry was working on the same inspiration and sourcing and manufacturing their products from the same resources.

French retail company Carrefour is warning that its losses will be greater than expected for the year because of tough economic conditions. The Paris-based superstore operator reported flat sales for the third quarter dragged down by weak or shrinking sales in France and the rest of Europe. Carrefour is continuing to grow in emerging markets, particularly in Latin America and China, but those gains only barely offset a poor showing in Europe, where fears of a recession and a ballooning sovereign debt crisis have hit consumer spending.

A reflection of this decreasing demand was felt in the second half of the year by the Indian garment export industry with orders for S/S 2012 coming in very late, mostly post Diwali (October), even the orders that have come in are smaller in batch size and at very sharp prices. Both the buying offices and the exporters reported decline in orders. While some peg the decline in orders at around 20-30 per cent from the three major markets – the US, EU and Canada – some others claim that the decline has been around 50 per cent and many factories are without work or are working only to keep their factories running.

The impact on the industry has been hard as Spring/Summer has been a traditional stronghold for Indian exporters and many factories work almost exclusively for the season, manufacturing dresses, blouses, shirts, beachwear in cotton and lightweight manmade fabrics like georgette, chiffon, voile, etc. With this season being almost a disaster, exporters are worried. The trend is also to buy lesser style and fabric options, as brands do not want quantities distributed across more style and fabric options rather they want to consolidate and meet their budgets.

The mood in Europe is not to buy too much since the brands are not taking risks and carrying very limited stocks. In the US, orders are very slow moving as the larger customers who are known for volumes have

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taken a back seat. Even for those buying offices where orders were on target the fear is that the way the markets in the West are behaving will impact business next year and a major decrease in business will happen for fall 2012.

Interestingly, the boutique customers and high-end stores are still rather active. After two difficult years reflecting a decline valued at€ 17 billion in 2011, primarily because of the impact of the US sub- prime crisis, the global luxury goods market is set to grow 8 per cent to £ 185 billion in 2012. LVMH, the world’s largest luxury goodsgroup, has reported bumper sales with like-for-likes up 15 per cent in the third quarter. This growth is led by what is now being commonly termed in the US as ‘the one per cent’ denoting the uneven distribution of wealth in the country with 99 per cent in crisis. It is this 99 per cent that are the real drivers of growth.

Looking for growth is not easy in these times… plan well, execute well, take calculated risk and it should help you move ahead…

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Growth in Domestic Retail Creates Opportunities for Garment Manufacturers…Even as Indian garment industry looks to develop new markets it cannot ignore the fact that most market research agencies have placed India among the top 5 emerging retail destinations. With rising disposable incomes, expansion of stores and supporting economic factors, India’s retail sector is expected to grow to about $ 900 billion by 2014, according to a report recently released by global consultancy and research firm PricewaterhouseCoopers. The report suggests that retail sales in India, currently estimated at about $ 500 billion, will see 3.2 per cent average annual demand growth for the next four years.

As of now, modern retail accounts for only 5 per cent of the total retail sales in India, compared to 65 per cent in the US, 55 per cent in Malaysia and 10 per cent in China. This in itself indicates the potential for growth. In its eighth annual Global Retail Development Index (GRDI), a study of retail investment attractiveness among 30 emerging markets, global management consulting firm A.T. Kearney claims that India is the most attractive retail investment destination today. While slower retail sales are causing Indian retailers to delay expansion plans and restructure their operations, this has opened the window of opportunity for global retailers who are continuing their expansion plans as Indian consumers grow increasingly affluent,brand-conscience and familiar with global retail formats. Low inflation and rent reductions of up to 40 per cent in Tier-2 and Tier-3 cities since 2009 also help make India a retail haven.

Indeed the explosion of organized retail in India cannot be ignored. If experts are to be believed, India might become the world’s third largest economy by the end of 2011 by overtaking Japan in terms of gross domestic product (GDP) measured according to the domestic purchasing power of the rupee, otherwise called purchasing power parity. It stands to reason that with a vibrant economy, domestic demand for quality apparel would soar. This is seen in the expanding legion of brands occupying Malls rapidly coming up in even Tier-2cities. Reliance Trendz, Shoppers Stop, Westside, Lifestyle, Pantaloon,

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Fab India, W, Louis Phillipe, Van Heusen, John Player, Benetton, Global Desi, to name a few are now seen in places like Raipur, Patna, Guwahati, Amritsar, Jaipur, Nagpur, Indore and Dehradun. Not only the Indian brands but International giants too are eyeing the market with expectations. Already most leading brands have opened stores in the country in partnership with Indian companies. Esprit, Tommy Hilfiger, Nautica, Mango, Zara, M&S are only a few names that are sharing retail space with Indian brands.

More and more garment exporters are looking at domestic retail either with their own brands or as manufacturers. In Ludhiana, literally all factories are now working for domestic market and most arenot keen on exports. Same can be seen in Jaipur, Vapi, Kandla and Tarapur. In Bangalore too, one can see increasing number of factories doing domestic production. Even large players like Gokaldas Images, Gokaldas Exports, Orient Craft, Shahi are assigning units for domestic production. Companies in the market with own brands includeBL International, Celebrity Fashions, Mayur Overseas, Viraj Exports, Indian Design, TCNS to name a few with many more already moving in the direction. It cannot be denied that Indian exporters definitely have a role to play in Indian domestic retail, be it Indian brands or international brands and for garment exporters it is an opportunity to balance their capacities so that the downfall in one market does notresult in loss of business and empty factories.

Adding fuel to the retail growth is debate as to whether the Government should allow multi-brand stores in India through the FDI route. Some feel that as far as apparels are concerned, the garment manufacturing industry will definitely get a boost with international retailers coming in and the exporter who is already manufacturing for the likes of Walmart and Carrefour will in all possibility continue to do so with greater involvement.

The common apprehension that Chinese goods will flood the Indian market is offset by the fact that China is now not a cheaper alternate, but is a just volume market and Indian retail will not require garments in huge volumes in the short term, and as the retailers grow, the industry too will grow building capacities to meet the volumeneeds. Despite all the fear that with the opening of the market for Bangladeshi garments, local manufacturing will be affected, as Bangladesh is much cheaper, the impact so far has been negligible, and Indian garment manufacturers continue to grow.

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Retail goes ‘Hi-tech’ with Multi-channel Options…One of the biggest trends noticed on the international retail platform was the increasing use of technology and multi-media to give retaila multi-pronged approach to increase sales. From times when retail was only restricted to brick-n-mortar stores for generating footfalls, business today has become multi-channel allowing the consumer to purchase when and where he wants to, which includes e-commerce, m-commerce (mobile), f-commerce (facebook), s-commerce (social) and v-commerce (video-enabled). According to reports almost 82 per cent of retailers now operate an online catalogue, which includes the biggest names in international retail ranging from high fashion brands like Burberry, Banana Republic, Gucci, Armani, Chanel; fast fashion brands such as Zara, Mango, Forever 21, New Look, Next, H&M and supermarkets like Sainsbury, Tesco, Walmart and Target.

What started with the pickup of internet as a part of a layman.’s life has seen more and more consumers turning to e-retailing, which from showing small positive growth at the beginning of the year has now developed into one of the most profitable and unavoidable ways of generating sales in the fashion apparel industry. Projections claim that US online retail will grow at a 10 per cent compound annual growth rate (CAGR) over the next three years to reach nearly $ 249 billion by 2014, while online retail within the largest European Union nationsin Western Europe will grow at an 11 per cent CAGR over the same period, hitting € 114 billion by 2014. According to latest figures, in the UK, shoppers spent more than £ 5 billion online in the first quarter of 2011, representing a 14 per cent jump in the same period in 2010.Showing a similar growth even the Russian e-commerce market has reached 315 billion rubles ($ 10 billion) in 2011, an increase ofnearly 30 per cent from 2010, while e-commerce spending in China is estimated to reach 2 trillion yuan (US $ 315 billion) by 2015, a 320 per cent increase from 476 billion yuan (US $ 75 billion) in 2010.

Hardcore e-retailers have seen continuous growth. Asos, which targets web-savvy 16 to 34-year-old women looking to emulate the designer looks of celebrities but at a fraction of the price, continued to benefit from the migration of spending from the high street to the internet. The online fashion retailer reported a 15 per cent increase in

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UK retail sales to £ 44.6 million in the three months till June 30 2011. Asos’s international business performed strongly, helping group retail sales to rise 69 per cent to£ 104.2 million in the three months to June 30. International sales jumped 160 per cent to £ 59.6 million, driven by last year’s launch of United States, French and German websites and now make up 57 per cent of the sales mix. Nick Robertson, the Chief Executive said:“The new financial year has started well and we remain positive in our outlook for 2012, with progress to date in line with expectations.”

Other exclusive online fashion stores that started small but are becoming more and more popular with the growth of e-commerce are Net-A-Porter.com, hautelook.com, zappos.com and gilt.com which are continuing to expand. The most recent example is of gilt.com based in the US, launching the first of its kind, standalone luxury retail site for men named, PARK & BOND in August 2011, and shipping solely to US customers since its launch in 2007, recentlythe company has also begunto ship to more than 90 additional countries making its operations global attracting international customers.

To tap the expanding online fashion market, even big e-commerce players such as Amazon and e-Bay are restructuring their operations. e-Bay which did not have a strong fashion presence before, launched its first fashion outlet, a virtual US outlet mall that lets brands and designers connect directly with e-Bay customers with deals direct from more than 200 brands, including Neiman Marcus’ Last Call, BCBG, and Timberland. This digital channel is built to help brands and designers sell their inventory when they lack the physical space to do so.

Today, exceeding all expectations e-commerce is undoubtedly one of the pillars to building a modern brand and a significant monetization tool for consumer web products. While overall global apparel retail is growing some 3 per cent a year, the share sold on internet is growing much more rapidly. Projections estimate online clothing share to be around 35 per cent by 2018.

Mid 2011, sitting on the laptop to shop, also became cliché, as the youth market started shopping through their mobile phones and tablets. With smart phones and other digital gadgets such as i-pad

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becoming a norm, from e-applications to mobile applications, brands as big as Ralph Lauren, Armani, Calvin Klein, Burberry and Dior led this segment, finding creative ways to increase footfalls on eachand every medium. Developing a whole shopping experience, what brands today are trying to do is to develop the element of fun and surprise in every transaction that a customer makes, which is proving to be the real formula of success for multi channel retail.

M-commerce itself is proving to be the fastest-growing vehicle across all channels for both generating sales to mobile advertising, withan estimated 44 billion mobile app downloads projected by 2016, through which customers can now easily scroll through the latest collections of almost every possible fashion brand around the globe through their cell phones. An added advantage to the sudden push of e-retail has been also catered by the increased use of social media sites like Facebook and YouTube. According to industry reportsfacts like – 850 million plus people on Facebook, a massive boom in solutions to promote awareness with processes like e-mail marketing and mass mailing, and a drastic reduction in the cost of implementing solutions related to technology are altogether triggering this massive growth by making technology more user-friendly for people of all ages.

The most current and famous example of the same is of British design house Burberry which is continuing to flaunt its Autumn/Winter 2011 campaign through digital and print advertisements that display unique outfits from their line. One can also not ignore the fact that today nearly all brands even remotely associated with fashion have their own Facebook page and blogs, for personalized interactions with the masses, only to increase and develop a brand loyalty for the future.

According to the latest eCustomerServiceIndex (eCSI) results from eDigitalResearch and IMRG 12 per cent of social media users have been encouraged to make a purchase from a Facebook store after seeing something on the site. The results mark an incredible 8.8 per cent growth in f-Commerce in just four months as more and more retailers import their website functionality into the social networking site. The study also found that a staggering 25 per cent of online consumers now log onto Facebook more than once a day,

Today, exceeding all expectationse-commerce is undoubtedlyone of the pillars to building a modern brand and a significant monetization tool for consumer web products.Projections estimate online clothing share to be around 35 per cent by 2018.

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representing a considerable proportion of all shoppers and a massive opportunity for retailers.

Amid all this, physical stores remain to be an integral part of the retail sales mix, and smartly connecting the two a further emerging trend that will reach its peak in 2012 is the concept of ‘click and collect’ where physical stores are used by shoppers as a collection andreturn point for online purchases. Big retailers like Tesco, New Look, Sainsbury and Ted Baker have started this service to relieve their customers from waiting for the deliveries. Visa Versa, Asos and e-Bay both online retailers are foraying into brick-n-mortar store for easy pick-up of purchases.

India with its flexibility in order sizes has been a popular manufacturing base for catalogue companies and the same is now true for online sales. For vendors, the shift is not so impacting, as the only real difference is the packaging part as all other sourcing processes/steps remain the same. So while in an ordinary program for a retailer packaging is done in blister packs with a combination ofall sizes or colours in the case of solids, that part of the order which is for online shopping is finished as ‘each pack’ meaning as individual packaging ready for direct delivery to customers who order online… Working with online retailers is certainly an opportunity not to be missed in the years ahead.

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Developing New Markets Important… Do FTAs Help…With changing global economic order the traditional markets, bogged down by recessionary trends, no longer offer growth opportunities as they did earlier; in fact it is now the emerging economies like Russia, China, the United Arab Emirates, Saudi Arabia and Brazil in particular from South America which present new business opportunities. The challenge, both for the industry and the Government is to penetrate the market before it gets saturated.While the industry works as individuals and through associations to promote business in new markets, the Government at the macro-level is intensifying its efforts to enter into strategic trade agreements that will give greater edge to the industry’s attempts to get market access.

There is a strong consensus on the fact that Indian exports have to develop new markets for growth and as individuals most of theexporters have admitted undertaking efforts to explore new markets. It is estimated that these emerging markets are showing growth of 8 per cent to 10 per cent annually and their size is estimated worth US$ 2300 billion, while our current share of exports to these countries is hardly 1 per cent.

Though the non-traditional markets present an opportunity, the import duties in most of them are high and act as a deterrent to do business in some cases like South America the import duties areas high as 40 per cent. The industry is looking at the Government to give support and besides the 2 per cent Market Development Assistance that is given to develop new markets, the Government of India is taking a very proactive role at the national level in forging trade agreements to give Indian industry a competitive edge… but the critical question is just how much are these trade agreements really helping the industry…

Earlier in the year, a CEPA was signed between India and Japan. This is India’s 3rd Comprehensive Economic Partnership Agreement (after Singapore and South Korea) and India’s first with a developedcountry. The agreement is most comprehensive of all the agreements concluded by India so far as it covers more than 90 per cent of trade.

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Under the CEPA, Japan has put 87 per cent of its tariff lines under immediate reduction of tariff to zero. A large number of these items are of India’s export interest including textile products such as woven fabrics, yarns, synthetic yarn and readymade garments. Inthe FY 2010-11, exports of garments from India to Singapore stood at$ 75 million, while the exports to South Korea stood at $ 13.5 million, with potential to grow stronger.Following the agreement with Japan, India has seen an increase of business, with Indian exports to Japan in the period January-September 2011, registering an impressive increase in value of exports by 21.61 per cent over the same period last year. The volume increase was equally impressive with 22.89 per cent rise in the period under review. As of today, India’s share is a meagre 0.8 per cent in the Japanese import market that stood at $ 25 billion in 2010 with China having a lion’s share of 85 per cent in it.

Looking at Russia as a very potential market, the Government of India has initiated talks for a trade agreement. In the meanwhile, the AEPC signed a Memorandum of Understanding (MoU) with theRussian Union of Entrepreneurs of Textiles and Light Industry towards developing bilateral cooperation in the textile and clothing industries in June 2011. The bilateral cooperation will seek investment generation to promote textile manufacturing in India and Russia. In 2010, India exported about $ 120 million worth of garments to Russia, which constituted about 2 per cent of Russia’s garment imports.On the other hand the trade agreement with underdeveloped economies such as Bangladesh, which permits duty-free access for 48 apparel products, including knitwear products exported from Bangladesh under the South Asian Free Trade Agreement (SAFTA) signed in September this year has seen an increase of Indian companies and retailers placing orders to buy Bangladeshi garments in large quantities. Many apparel companies including Arvind, Aditya Birla, Madura Garments, Provogue, Zodiac Clothing, Raymonds, Vimal, Louis Philippe, Van Heusen, Arrow, Lee, Levis, Wrangler and Dockers and others reportedly are intensely communicating withthe Bangladeshi apparel manufacturers for competitive pricing. Unfortunately the garment export industry has not gained any edge with the FTA.

The industry is looking at the Government to give support and besides the2 per cent Market Development Assistance that is given to develop new markets, the Government of India is taking a very proactive role at the national level in forging trade agreements to give Indian industry a competitive edge…

The FTA with the European Union is much awaited, as among the various industries the textile and garment industry would be among the most benefited once the FTA is signed.

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India already has an FTA with Thailand, which has not increased business for garment exporters. If it was not for the rule of origin there is a real fear that garments from China would find an easy route of entry into India via the agreement with Thailand, since Thailand already has an FTA with China. In the meanwhile negotiations foran FTA with ASEAN countries, Chile, South Africa, MERCOSUR comprising of Brazil, Paraguay and Uruguay and Europe are under way. The FTA with the European Union is much awaited, as among the various industries the textile and garment industry would be among the most benefited once the FTA is signed.

Much has been deliberated on the pros and cons of FTAs in regard to the textile and apparel industry, and two distinct segments emerge within the ‘FTA’– one with the emerging and underdeveloped economies and the other with developed economies. The agreements with Bangladesh, Sri Lanka, Thailand, some of the developing economies, would rather hurt the industry because the Government in its thrust to pave way for other industries like power, infrastructure, engineering compromises and allows concessional entry of textile and apparel, while in the case of FTAs with developed economies, the markets are so saturated that the exports may not in fact substantially increase.

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Addressing Internal Issues Pertaining to Shortage of Labour…The shortage of labour continued to hound the garment manufacturing industry this year and the industry has been cornered into re-working strategies to retain workers at one end and recruit fresh workers at the other. It is slowly but surely coming to a point where the industry can no longer depend on migratory labour, which made them explore options to take factories to the heartland where there is labour… the villages. There are three major issue involvedin this strategy. First is the logistics of opening a factory in a faraway place, which may be convenient for the workers, but a challenge for the management. Second is the availability of skilled workers, which can produce consistently and productively, and third is the lead time and finance required to train the required workforce.

In the past two years, the major sources from where labour was coming have seen a change in the economic scenario leading to a reduced interest in moving out to search for employment. According to a study by the Bihar Institute of Economic Studies, Bihar, amajor source of workers has seen 25-30% less migration, as many are finding jobs in Bihar, either in State Government projects or in NREGA schemes. The states of Punjab and Delhi-NCR in particular have been dependent on migrant labour from Bihar for many years. However, with increased opportunities nearer home and increasing cost of living in metros has encouraged them to stay in Bihar. In a State like Tamil Nadu, a large number of people have been taken away from the labour force because of the so-called welfare measureof the Government of Tamil Nadu – like free food items, free clothing, free shelter, free schooling, etc. besides free medical treatment which is compulsory. Because of the freebies, a person needs to work only for 4-5days in a month to earn for his requirements. In fact the labour crisis has led to many garment export companies in Chennai to take their factories deeper into the outskirts.

Indeed taking factories to where the work resides is a definite trend to counter the shortage of labour in metro cities; factories in Delhi-NCR are moving to neighbouring states of Rajasthan, UP and Himachal

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Pradesh, while those in Bangalore are going towards, Hasan, Tumkur Kannakpura, Shimoga and Mysore in Karnataka itself. For Chennai, the expansion is going towards the Kerala border. Mumbai has seen an exodus long time back and most factories are now in the south. According to a StitchWorld Survey conducted this year that compares 113 locations in India on 50 different key performance indicatorsto settle on the best apparel manufacturing locations, Mahindra city SEZ, near Chennai in Tamil Nadu and Bhubaneswar in Khordha district of Orissa were considered the best locations in India formaking apparel manufacturing as they offer a good infrastructure and logistics are also taken care of.

The new region being explored which earlier had no garment industry, is Bihar. The State’s economy grew by 14 per cent in 2010- 11 and sensing an opportunity to attract investment, the Bihar Government has recently announced the Bihar Industrial Incentive Policy-2011 for accelerated Industrial Development of the State Preparation for industrial growth includes creation of necessary basic infrastructure such as roads, water, uninterrupted power supply and provision of Common Effluent Treatment in industrial areas/Estates. The policy, which came into effect from 1st July 2011, will remain in operation till 5 years.

However, taking the factories to rural and newly developed areas is not a complete solution, and among the biggest hurdles is the availability of skilled manpower that too in one place. No doubt the Government is taking skill development as a priority both in its budget allocations and in the recently announced Manufacturing Policy. The National Skill Development Policy (NSDP) under which a target was set to train 100 lakh persons by the year 2022 for the Textile and apparel industry is already in place. In the scheme, 2.56lakh workers are targeted to be trained, a majority through institutions under the Ministry of Textiles, such as Weavers Service Centres, Indian Institutes of Handloom Technology, Textile Research Associations, Apparel Training and Design Centres. As premium training centre,the ATDC has setup the SMART (Skills for Manufacturing of Apparel through Research & Training) program throughwhich already 14,000 workers have been trained.

Taking the factories to rural and newly developed areas is not a complete solution, and among the biggest hurdles is the availability of skilled manpower that too in one place.

It has been an uphill task for training agencies,as with increasing opportunities in IT, infrastructure, automobile and retail industries it is becoming really hard to convince the new trainees, even in remote villages to enter the garment trade.

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Under the NSDP, only 0.36 lakh persons are projected for training through PPP mode with the help of Industry Associations, NGOs, and Agencies with the requisite expertise in conducting large scale training programmes like IL&FS and Tecknopak, both of which are already actively involved in training for the industry. IL&FS under its SEAM has trained around 1 Lakh candidates till date of which 87,000 have been already placed.

Adding further weight to efforts for training the National Manufacturing Policy passed by Parliament in October 2011, aims to create 100 million jobs and increase the share of manufacturing in India’s GDP to 25 per cent by 2022, from 16 per cent now. The policy is based on the principle of industrial growth in partnership with the states. But it has been an uphill task for training agencies, as with increasing opportunities in IT, infrastructure, automobile and retail industries it is becoming really hard to convince the new trainees, even in remote villages to enter the garment trade, which is considered a tough and less rewarding option by the fresh labour force looking to move away from agriculture.

In the meanwhile, the industry has come to terms with the shortage of labour and with the dual impact of labour shortage and rising wages, the thrust is on labour saving technology to cut down on the dependency of labour. In 2012, companies will continue to search for solutions and the migration of factories to places like Bihar could be a reality with many leading exporters already investing in the State. From the Government perspective it is important the infrastructures like schools, hospitals, shopping facilities, etc. are put in place before the factories come in so that the reallocation is smoother.

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Sustainability Continues to Gain MomentumSustainability is perhaps one trend which has for the last few years consistently found a place in our final top 10 trends for the year… the movement just seems to get bigger by the day. What started witha concern for the environment and the concept of ‘carbon credits’, has widened its scope to engulf issues of social concerns and even economic viability. The textile and apparel industry too is not untouched by the phenomenon, and what began as a whisper in the middle of the last decade is today a strong movement with the consumer, buyer and supplier well aware of the importance to conduct business in a sustainable way for long-term progress.Much has been written about natural resources and how the human race has unwittingly depleted them through excessive wastages and unplanned use, creating a real fear that the subsequent generations may have little or no natural resources like water, clean air or trees to enjoy and live with! But, sustainability is not only about preserving natural resources for the future… the term is much wider and deeper than what most think.

Way back in 2002, when the world was still struggling to define the concept, the University of Michigan, US developed a sustainability chart defining the three spheres of sustainability – environmental, social and economic with overlapping areas of application. While environment sustainability engulfs natural resources – air, water and land and how to manage these resources to prevent wastage and pollution, social sustainability is about providing equal opportunities to people, improving standard of living, upgrading education and community support so that everyone in the human cycle of need is benefited from growth. Additionally, it has been recognized that true sustainability can only be achieved through economic sustainability of businesses and communities.

With these three basic areas of core importance at the forefront, companies, NGOs, individuals and communities are determined to change the way they live and do business to be sustainable.But it is easier said than done… and the garment industry is an interesting case study on how sustainability has changed the way the

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supply chain operates at all levels. Consumers are demanding that products sourced from around the world are ethically made, from sustainable sources and with least carbon footprints. Buyers have taken a step forward and actively become involved in the countries and communities they work with, while suppliers have moved away from the shadow of the buyers to implement innovative ways to be sustainable from saving energy to improving working conditions at factories.

Like compliances in the late 1990s, the sustainability concerns, at first linked with the environment were initially pushed by buyers who were under sever media glare to conduct business in the right way.Interestingly, the larger concept of sustainability has been more easily accepted than compliances and companies are themselves taking the sustainable route, convinced that this is the only way forward. In fact, initially looked upon as a cost, the fruits of sustainable growth has started to come in and savings in economic terms are actually happening. In the meanwhile all big retailers like H&M, Walmart, GAP, Levis, M&S, Tesco, Nike, Monsoon to name just a few have aggressively taken the sustainable route in all aspects of their business.

The sustainable concept that has really taken roots in India is ‘organic cotton’. Today, there are 407 GOTS and 323 OE certified textile/ garment companies in India. In fact, the rapid speed at which Indian farmers are taking to organic cultivation has amazed international watchers, today farmers are enjoying a lower cost of as much as30-35 per cent on inputs, while earning a premium of 10-15 per cent on the certified cotton. Organic farming is being done through organic projects, which involve many villages and farmers. The bulk of organic cotton occurs in Gujarat, Madhya Pradesh, Maharashtra,Orissa and Andhra Pradesh. These projects are either funded through cooperatives or private initiatives. There are 11 active projects currently involving more than 40,000 farmers across the country.The largest projects are Pratibha Syntex, EcoFarms, Maikaal BioRe, Chetna Organics and Agrocel. The demand is so large that most of the production from these projects is committed well in advance.

However, a setback for many Indian suppliers using organic cotton as a sustainable initiative is the increasing global voices questioning the authenticity of the organic cotton that is flooding the market,

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especially with the use of Genetically Modified Cotton Seeds. This year the noise was louder and many exporters shared that buyers are being very strict on the traceability factor. Many fear that thiscould put a break on India’s increasing clout in the organic cotton market.

In the meanwhile, TASMA, an organization that represents textile spinning mills in Tamil Nadu is the pioneer in transporting the concept of Carbon Credit to India by bringing together a large number of textile companies to take advantage of windmills to generate energy, thereby cutting down on carbon dioxide (CO2)

emission by these units, directly and indirectly. Some apparel companies participating in the project are SP Apparels, Eastman Apparels, KPR Knits, Centwin Textiles, Gangotri Textiles and SCM. Other textile companies that are working to reduce carbon footprints are Malwa Industries, Trident, Nahar Industries, Vardhman and JCT. Rajshree Mills, Gupta Exim and Renuga Textiles are three companies that have already installed bio-gas plants and many others are on the floor. It is estimated that more than 130 MW of Green energy is being consumed by the textile garment industries.

There is also focus on water cleaning and recycling and factories that are having washing units, have individual ETP plants or have collectively installed the same. Tirupur faced one of its worst criseswith the shutdown of its processing units as the Government of Tamil Nadu stuck to its norm of zero discharge for ETP plants. While the industry is slowly coming back to its feet, the problem is far from over and many initiatives have been implemented to find a viable solution to zero discharge of which the common effluent treatment plant functioning under the Tamil Nadu Water Investment Corporation Limited (TNWIC Ltd.), at Arulpuram, to experiment with a new technology to help the units reach zero liquid discharge is considered the most promising.

Concepts like natural lighting, CFL/LED lightings, servo motors and air cooling systems have become common practices at manufacturing units. A rough estimate puts the average industry saving from energy conservation at around 25 to 20 per cent over conventional methods.Some companies even claim savings up to 40 per cent on energy and 50 per cent on water by implementing sustainable solutions. It

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has also helped that technology providers too are now introducing machines which are energy-efficient and more productive.

Taking sustainability to a higher level going in for Green factories is gaining ground. In 2010, Tirupur-based exporter SNQS International built a Green textile unit at Avinashi, which is the first garment unit in India to be silver rated under LEED (Leadership in Energy and Environmental Design). Since then Go-Go International, Bangalore has also been certified as Green factory and Orient Craft’s eco- friendly unit in Rajasthan has received a LEED Green certificate just recently. Cotton Blossom and Eastman Exports, Tirupur are in the process of the same.

As for buyers, many CSR projects are underway in India sponsored or supported by buyers. Some of the noteworthy ones include involving not only the workers in factories but their communities and even farmers. Home worker initiative by Monsoon Accessorize in Barabanki, UP, by GAP in Haryana; school projects by Mothercare, Takko Fashion, New Yorker, Ikea; community health projects byCarrefour, H&M, Walmart are but some of the better known initiatives.

In an effort to give sustainability a positive impetus, the Government of India has recently (in July 2011) introduced a National Voluntary Guidelines on Social, Environmental & Economic Responsibilitiesof Business (NVG) that are a distinct improvement over the CSR voluntary guidelines of 2009. All stakeholders were involved in the process of formulating the guidelines that are designed to be used by all business irrespective of their size, sector or location of the enterprise. The NVG, which takes into account the learning from various international and national best practices, also includes a mechanism for creditable reporting for transparent accountability to all the stakeholders.

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