Buyers, suppliers need to find midway: Apparel exporters

05 Apr '20

7 min read

Pic: Shutterstock

Apparel manufacturers and exporters in India feel that they should keep talking with buyers and vendors and find midway solutions during the ongoing Covid-19 pandemic. A few apparel exporters Fibre2Fashion spoke to said they will be working with the buyers to cover the losses due to cancellation of orders, non-placement of news orders, and other challenges.

Currently, everything is on a standstill globally due to coronavirus. Since all stores are closed, retailers are unable to sell their merchandise. This leaves them with no alternative but to come back to the sourcing people to cancel the orders, feels HKL Magu, CEO of New Delhi-based Jyoti Apparels.

Besides cancelling orders, some buyers have put their orders on hold, "which is a nice way of saying no," according to Magu.

Even if the orders are not cancelled, the next quarter will be bad because "the customers will lose business which will affect our business. So, current financial year 2020-21 is going to be a bad year; there will be a contraction. Only way to survive is to keep our heads above water. Not only there will be orders cancelled, there will be serious payment issues and other challenges," Anil Buchasia, director of Kolkata-based Amrit Exports Pvt Ltd told Fibre2Fashion.

There is no textbook solution for retailers and manufacturers for the current unprecedented situation, says V Elangovan, director of Tiruppur-based SNQS International. "Under the current scenario, there have been grim reactions from western retailers, because shops are closed in all the countries in which they operate. They all are sitting with a lot of stock in the warehouses with nothing to sell. They have their own difficulties and as suppliers we have our own difficulties. We have to pay salaries to the workers."

However, KM Subramanian of KM Knitwear is optimistic that the retailers will place their orders back once the stores reopen.

When asked about what buyers should do in the current situation, Buchasia said, "We are into workwear. We do business with the industry in the US and Europe, and the importers there. My suggestion for them will be – support the suppliers in this difficult time, keep giving them orders and not to stop them altogether. Of course, they can reduce orders gradually. They have to keep supporting the suppliers because this is a labour-intensive job, and if we don’t get orders, then the workers are going to suffer, we won’t be able to give salaries to them. This will lead to a huge socio-economic problem in countries like India and the developing countries."

Elangovan suggested that there should be no naming and shaming of buyers. "We have to work along with the retailers, because tomorrow a vaccine may be announced, and the situation can turn around. As a buying agent, we have to build better bridges and not burn them. We have to keep talking to both the vendors as well as the buyers, put everybody at a comfort level. This is the most we can do now."

"We are talking to the top management of our buyers' organisation, discussing better terms, taking out the stock. They say that instead of paying out in 30 days, they want better terms like paying in 100 days to 180 days. Of course, we need to help them at this stage. Some of our buyers are working with us for last 30 years, so we need to reciprocate them. My supplier base is also very cooperative. So, we are working out a solution," he added.

In the same spirit, Subramanian said, "We will work mutually with the retailers and cover the losses."

Ramu Raju, director of RR Sons Fashion Knits, Tiruppur, also feels that a mid-way should be found. "If buyers can defer the orders, instead of cancelling them, the new terms should be decided between the buyer and the seller."

Explaining that the time ahead is not going to be easy, Magu said: "Now is the peak time of exports of RMG, but we are held up. It is not going to be before December that we reach the peak season once again, because the cycle is so big that even if we have everything in place and work very hard, the cycle of manufacturing and then booking the orders, then placing the orders and all that, at least we will be losing 8 months."

According to him, it is now the opportune time for the government to come forward and help apparel exporters. "The Government of Bangladesh has given a Tk 5,000 crore package to the textile industry. In the UK, 80 per cent of the salary of the workers will be paid by the government. The Indian government has waived off ESIC/PF for companies having strength of less than 100. But even a small garment company doing an export of ₹5-10 crore will have a greater number of workers, making it inapplicable to the industry. Our government should reduce the GST by maybe 50 per cent. It can make reductions in the electricity bill, house tax etc."

While the government has announced that the wages for the lockdown period are to be paid to the workers, it is not clear where the money will come from. "For our shipment which has gone out two months back and buyers have already received, now they have excused themselves regarding payments saying everything is closed. And if the buyers are not making payment and we have borrowed from the banks, all our limits will be exhausted. Not only worker’s salaries, we have to pay for the electricity bills, PF/ESIC, insurance etc. Hence, the government has to come forward with some stimulus package so that the industry also feels confident," Magu told Fibre2Fashion.

Pointing out another problem, he said that around 70-80 per cent of Indian apparel industry consists of MSMEs, and many of them have invested their own money instead of borrowing from the bank. "How will banks give them money unless they have collaterals with them? So how are these MSMEs going to pay their workers when money is not coming from the buyers?"

Buchasia is also of the opinion that the government should come out with some kind of package for the labour-intensive garment industry, which brings foreign exchange for the country. "In addition to deferment of interest, there should be a waiver of interest, waiver of statutory dues, which normally the government and the banks take from us. We are partners with the banks and government. Ultimately, they take 35 per cent of what we earn. So, in difficult times, they should support us."

The government can help the industry by waving off PF to be paid by the employer. It can also give ESIC waiver and reduce the power tariffs for the next couple of months, according to Elangovan. "Already some states have announced reduction in power tariffs," he mentions.

"If we pay 2-month salary to workers, our capital will get exhausted. So, we are waiting for the government to take some steps, including lowering of interest rates. The Bangladesh government has taken good steps in this direction. It is paying 3-month salary with only minimal deduction in some fees, which can be paid back in 2 years," adds Raju.

Subramanian suggests that the textiles ministry should speak with the brands "to continue working with India and maintain trading relations".

Fibre2Fashion News Desk (RKS)

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