US retail shake-up adds to woes of textile exporters

Exporters of home textiles, whose profitability is already weakened by a hard rupee and high commodity prices (see table), are considering another potential against the implications of the ongoing transformation in the detail of the United States. the largest customers of Indian exporters, face a greater threat of e-commerce. Companies that can not resist transformation are even bankrupt. According to Nirmal Bang Institutional Equities, more than 300 retailers have gone bankrupt to date this year, a significant increase from the previous year. As a result, some Indian exporters have already reduced their supplies to retailers in difficulty. Contract renegotiations are increasingly difficult as retailers harassed by difficult market conditions are resisting price increases.

Retailers established readjustment and restructuring of their business models. But they have ramifications for suppliers. “The administration of Welspun India Ltd said that US retailers have decreased inventory by switching to weekly orders instead of monthly shipments, which has allowed to transfer working capital costs to suppliers,” said Nirmal Bang in a note. In another report, Emkay Global Financial Services Ltd. said retailers increasingly threatened with e-commerce are demanding price cuts. Of course, companies still receive demands for price reductions. But the frequency of promotions and applications for them is increasing, which of course involves costs. “The domestic textile industry is at a point where retailers are trying to find the right model in a combination of online, offline and omni-channel. There are frequent promotions in retail and it is increasing, the industry sees an accumulation of pressure, “Emkay Global said in the note.

It is true that the industry always passes these changes from time to time. The challenge lies in its implications. One of them is the impact on costs. Retailers are looking for significant cost savings in their supply chain, not just once, but as a continuous exercise. “We know we have a multi-year journey around the supply chain transformation, which will help working capital continue to browse the business,” said Target Corp., a major retailer in the US has already reduced their stocks. analysts last month. The second factor is competition from e-commerce companies, which may be afraid to put pressure on prices. We have seen a variation of this game in the Indian apparel sector, where online discounts have increased retail price trends and the accomplishments of the affected manufacturers.

Of course, retailers and exporters invest in online channels and adapt to changes in the marketplace. In addition, taking into account India’s strengths in access to raw materials and market share gains in US textile imports, processing will not significantly disrupt short-term exporters’ activities. But if e-commerce companies gain market share, competition and price pressure can put pressure on the profitability of Indian exporters in the medium and long term. “It all depends on how retailers and exporters manage the changes.” If they can make a dent in the online market or impose themselves on the Amazon market by themselves, they may not see much impact “says an analyst a national brokerage firm.

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