In October, I moved to Hong Kong and have spent the last seven months studying what is going on in China’s textile industry, specifically in denim and jeans. China dominates global textiles and I wanted to see for myself what dominance looks like, touring textile mills throughout the country. China produces 2.4 billion yards of denim per year and in 2010 ranked as the largest exporter of jeans and casual pants to the USA supplying 192 million jeans. That is 31.3% of the all jeans apparel to the USA.
Summarizing what I have witnessed, the first word that comes to mind is “backtrack”.
Beijing government officials told me in March that 10% of China’s textile industry will close in 2010. That number might not sound astonishing but what if that number continues in 2011, and 2012? That would actually mean that within 1000 days, China’s textile industry would shrink by 33%. I am not predicting this, rather I am taking one year’s data and postulating. Why would it not shrink? Few textile mills made money before the cotton crisis.
Undeniably, the Chinese economy has come an incredible distance in a short time — during my professional lifetime.
While domestic statistics are not exactly always accurate, it is general knowledge that in 1978 250 million people in China were living in poverty while today 14 million are classified as being in that status.
As any economy flourishes, labour costs naturally increase and since our industry (jeans or textiles) does really require a very sophisticated labour force, China’s workforce, even their 120 million migrant workers, have become “expensive” when it compared to global labour costs.
India, the world’s largest democracy, is in a perfect position to chip away at China’s dominance in textiles and the jean’s industry specifically – if she wishes or if she is able to execute this potential desire.
India currently has various advantages, cotton being the largest. Cotton is simply less expensive in India than in China. Spinning is cheaper in India than in China. Garment workers cost less in India than in China. India is located beside Bangladesh,a country who currently has both the most cost competitive labour force and large scale sewing industry.
In the late 1980’s, when Korea was exporting massive quantities of shirts and assorted garments I met an executive from Pangrim, the dominant cotton mill in the country. I introduced myself to this gentleman and then informed him of the respect I had for his factory and their accomplishments. At the time they were producing about 10 million yards of cotton fabrics a month. He was far from humble. He said,
“Because of us, because of excellent, reliable, cost competitive, well designed textiles –our textiles — we have allowed the domestic garment industry to succeed globally. We are the reason cotton apparel is being shipped from Korea to the USA.”
This makes me think of India and how the textile mills, the denim mills specifically have the opportunity to do and say what Pangrim’s executive once told me thirty years ago. Large scale garment exports can only be successfully and continually supplied to any foreign market with masterful textile production.
Competitiveness
“is the ability, under present conditions, of a country’s producers to command world markets”.
It’s almost unbelievable to comprehend how India only supplied the USA 5.8 million jeans in 2010 or less than 1% of America’s denim imported product. India has the most state of the art denim mills yet shipped less jeans to America than countries like Jordan who have no denim production, Indonesia whose denim fabric production is old and outdated, than Vietnam or Cambodia who also have no denim production.
India produces 650 milllion yards of denim. It’s a country that has both arms around technology, know how and the American culture.
Under the current global conditions, India has entered the moment of massive competitiveness and potential. There are of course obstacles, access to qualified labour being one, speed to market being another but no moment lasts forever and it would seem this is India’s moment in the jeans industry.
The long-term future is additionally interesting for India. Cotton production will increase as farmers develop higher yields. India’s current yields per hectare are enormously lower than the USA or China. Increasing these, will give the Indian textile industry more access to well priced good quality cotton and can be counted on to grant India the most important strategic advantage of all.
The singularly most important element to India’s potential dominance in the jean’s apparel will be the investment they decide to make in “product intelligence”.
Having the best kitchen and bountiful access to ingredients does not make one a good chef. Food like jeans, need to be prepared by people who know what they are doing, know how to please their customers.
One must never forget that we are all in the fashion industry. The most profits are always enjoyed by those who are most in tune with the consumer. Apple computers proves this on a daily basis. Giving consumers what they want allows you not only to sell in abundance but to charge the best price.
About : Andrew Olah is the CEO of the Olah Inc – a company involved in textile and fashion business in US for over 35 years . Besides many other activities, Olah represents key denim companies like Kurabo from Japan for over 15 years and other companies like Legler in the past. They also hold the Kingpins Denim Show – a boutique denim supply chain show – which is coming to India for the first time .
(Source: www.denimsandjeans.com )