Producers forced to sell at low margins to keep wheels running

16 Jun '09

2 min read

The textile and garment sector has been hit hard due to the recessionary trends prevailing in global markets. But it has taken a worse hit at a place which hurts the most; profit margins. Increasing cost of raw materials and at the same time domestic as well as overseas buyers demanding lower prices, the manufacturer is squeezed from both sides. Fibre2fashion spoke to a few companies in India and Pakistan to find out how much the current crisis has impacted the industry players. We spoke to Mr Zeeshan Sattar, Director of Pakistan based Towellers Ltd and Mr Ajay Agarwal, Director of P.S Apparels in India.

We began by asking as to what was the main reason for shrinking margins to which Mr Agarwal said, “The customers due to global recession are looking at cheaper garments whereas our cost of production in India especially the labour cost has been going up, while Mr Sattar replied by saying, “Main reason being liquidity crunch due to which consumer spending has reduced considerably and retailers have to markdown the merchandise to sell. This result in surplus goods with stores having high inventory so less new demands and manufacturers in order to keep the production busy are pushed to sell at lower or even no margins”.

Next we asked them to comment on the actual hit in margins the industry has taken to which Mr Sattar said, “Any where from 10% to 20% depending on the item”. To conclude the interview we asked them as to when they foresee this crisis to end to which Mr Agarwal said, “There has been a substantial reduction in production capacity overall in the last 2 years which should hopefully swing the sourcing in favour of the vendors once the market demand picks up and Mr Sattar winded up the interview by giving a short and sweet answer “By end of 2010”.

Fibre2fashion News Desk - India

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