study on how apparel exporters could compete with Chinese producers
Sri Lankan apparel exporters will be able to survive the expected
onslaught from low cost Chinese producers with the end of textile
quotas next year if they link up with top retail brands and compete
on service and quality but would have to face severe price competition.
like Sri Lanka who don't have a low cost advantage against China
will need to be more selective and successful in targeting winning
customers and brands, and out-compete on service and quality,”
said Charlie Taylor of McKinsey Consultants.
Lanka needs to target winning customers and compete on service and
quality," he said at a presentation of the findings of a study
commissioned by DHL on challenges faced by Asian exporters with
the end of quotas.
was done to help the express cargo and logistics company to better
understand future sourcing and distribution patterns of top retailers
and apparel manufacturers.
study for DHL, which serves many players and can see first hand
trends in sourcing practices, said there were concerns that competition
from China could wipe out less competitive exporting countries such
as Sri Lanka.
are expected to come down once quotas end as already seen in baby
garments and bras, following the removal of quotas where there were
"significant reductions in prices because of China's better
productivity," Taylor said.
the past two years, exports of these categories to the US increased
between 10 and 20 times, capturing a market share in the US of 40-60
percent. There was a 10-20 percent price reduction in certain categories.
"We can expect the same at the low end of other categories
coming off quotas," Taylor said.
success of a number of larger Sri Lankan exporters in supplying
leading brand owners and retailers without quota restrictions was
important for the industry and should help offset losses by smaller
manufacturers, Taylor said.
would be opportunities for exporters like Sri Lanka despite the
expected dominance of China because leading retailers and brand
owners would not want to "put all their eggs in one basket"
and would look for alternative sourcing for at least half their
the five-year strategy prepare by the apparel industry to survive
the quota-free era, among the reforms required that were particularly
important were labour market reforms and improving infrastructure.
sector firms also need to improve organisation and technology. In
the international apparel market, the share of specialised retailers
is growing, largely driven by polarisation of customer demand between
high end and low end, Taylor said. During the last decade, the share
of discount stores such as Walmart and vertically integrated speciality
stores such as Nike grew by around 10 percent and as a result they
now command almost 40 percent market share in the US and Europe.
to achieve scale among retail players had led to a decline in their
numbers so it was important to target winning customers, Taylor
said. He also said there was a "continuing trend of direct
sourcing driven by the growth in vertically integrated specialists
and retailers doing more direct sourcing to improve their margins."
need to address supply chain requirements and optimise time to markets
and logistics costs because the product lifecycle was getting shorter.
The Spanish fashion label Zara has set the benchmark by pushing
production to retail time down to four weeks.
and Nike want to reduce apparel product development lifecycle to
nine months from around 12 months." Optimising transport was
important for exporters from Sri Lanka and India given their distance
from key markets like the US, Taylor also said.
brands were moving their decision making to Asia to reduce time
frames. "Sri Lanka needs to move fast to make use of the window
of opportunity that is closing."
Omar, head of the industry outfit Joint Apparel Association Forum,
said Sri Lanka has several advantages like low import duties, a
friendly tax regime, labour compliance that was internationally
recognised and its aggressive push for signing bilateral agreements
with key buying countries.
need closer relations with customers. Previously, because of our
quotas customers had to come to us - now it's different."