UK’s Tesco to increase garment buying from Sri Lanka

Tesco, the leading retail outlet in the UK, says it plans to increase its purchases from Sri Lanka, focusing on higher value garments. Tesco’s garment buying from Sri Lanka increased by nearly 60% this year and the company is considering the possibility of expanding its purchases to include food items like tea, pineapple and processed fish.

“The growth target is a minimum of 40% year-on-year. This year there was exceptional growth of nearly 60%. Sri Lanka’s contribution to Tesco this year is around £120 million - £ 140 million in retail value. For the next 3 years we plan to grow by 40% on average,” Christophe Roussel, Tesco’s International Sourcing and Logistics Director told reporters on Thursday.

Although Tesco is better known for its food, right now the company only buys garments from Sri Lanka. The international retail chain does not maintain manufacturing facilities in the island, but instead, buys garments from about 30 garment factories that it feels is compliant with its values and standards.

The UK based company is the third largest retailer in the world. In 2005 the company recorded sales of £ 43 billion – inclusive of food, clothing and other items. These goods are sold in 2,700 Tesco retail outlets in 13 countries.

With UK companies like Marks & Spencer and Tesco buying up Sri Lankan clothing to sell in their retail outlets, the UK is Sri Lanka’s second largest export market for ready-made garments, behind the US. Last year exports to the UK came to around US$ 607 million.

Like many large buyers of clothing, Tesco buys ready-made garments from 5 different countries, including Sri Lanka, to spread its risk. “In business we split the risk. The clothing business is split roughly 20% between 5 countries. A lot of companies put all their business in China and regret this now because quotas have been re-imposed on specific categories of clothing from China,” said Roussel.

Sri Lanka’s biggest attraction for Tesco is the speed in delivering goods to the UK. This is possible because shipping lines servicing the Colombo Port can make a straight course to the UK, without stopping to call on other ports on the way. “It is about 13 days to ship from Colombo to the UK. This is the fastest time in all Asia. It takes around 3 weeks to ship from China and about the same time to ship from India and Bangladesh,” he said.

Cost cutting the shopping list
Tesco is now looking at changing its buying patterns from Sri Lanka. The company will in future focus on buying higher-value garments to bypass higher costs of production in Sri Lanka.

“The price comparison for apparel is slightly more expensive in Sri Lanka but from now on we will use Sri Lanka for the better and best ranges of clothing that have more added value,” Roussel said.

The company is also considering the possibility of expanding its shopping list from Sri Lanka to include non-garment items but did not make any commitments.