Export Basket

The export basket should be a blend of traditional and modern items. The contextual realities or the dictates of current competitive advantage indicate that in the short term Indian firms engaged in global marketing would be better off by concentrating on a few select products which are assured winners. Most of these assured winners are bound to be traditional items; only a few can be modern items. There is, indeed, a lot of wisdom in adopting such an export basket. For, the bulk of India’s exports are accounted for by traditional products like agro-products, including plantation products, marine products, and the trio of export stars, textiles and garments, gems ad jewelry and leather.

Among the modern items, computer software and other IT products are displaying the potential to become a star business. This category has registered high growth in recent years. But manufactured consumer/industrial products cannot be expected to perform a sudden miracle in the export scene. A lot of effort over a relatively longer period may be required to make modern consumer products and industrial items export winners for India. Indian firms have to go through major modernization and efficiency improvement for this to happen. An emphasis on relatively less modern items for the present can provide the required breathing space for Indian industry to bring its technology, quality and competitiveness up to world standards. And thereafter, Indian firms may devote greater attention to the export of modern products. They have to ensure the maximum possible value addition in the export of traditional products. In this article we are outlining some of the global retail majors who are sourcing a variety of low-tech consumer products from India.

US retails chains like Wal-Mart and JC Penney, and several garment makers have in recent years doubled the quantum of products they outsource from India.

Basmati rice from Ludhiana, Brass potteries from Osmanabad, Bathroom mats from Panipat and Coir mats from Kochi are all outsourced in a big way from India.

Currently these firms outsource more than $ 1 billion worth of such goods from India. While Wal-Mart and JC Penney together account for close to $ 400 million, a single American brand is sourcing $ 200 million worth of finished products. Other stores include target Stores Macy’s Dullards Stores, Wilson Inc., etc.

JC Penney Purchasing Corporation, India, says ‘India is fast emerging as a regional strength and we outsource goods to the tune of $ 130 million from India’. It was just $ 40 million three years ago.

Currently, garments constitute a major portion of the goods outsourced from India. A substantial chunk of the in-house brands of Wal-Mart, JC Penney and May Company are made in Tirupur in Tamil Nadu and Lower Parel in Mumbai.

The American firms buys fabrics at cheaper rates from China and provide them to their dedicated garment suppliers in India, mostly in Mumbai, New Delhi and Tirupur who manufacture them at a cost much below the international rates. The mark-up available for the finished product is very high and it is available for the foreign firms.

Major US manufacturers like Reebock too utilize India as a supply base for their global products. They source from India because of the competitive advantage the country enjoys in these items. Reebok international Sources Shoes from India.

The large scale outsourcing is not confined to retailers. Many MNCs are also using India as a major exporting base. For example, Reebok international of the US, the $ 4 billion sports shoe and apparel giant is souring shoes from India and marketing them under its own brand in the US.

Ninety percent of the shoes manufactured in India by Reebok are exported back to the US markets. Most styles are manufactured indigenously without any imported components; they are also labeled as ‘Made in India’.

The company which sells close to 92 million pairs of shoes annually is adding more Indian firms to its supplier list. They include Phoenix Overseas Carona, Liberty, Aero Group, the makers of the Woodland brand and Anil Plastic industries, the makers of Action shoes.

Reebok provides the technology and designs, and buys the entire production of such units. The company plans to purchase up to 500,000 pairs per manufacturer every month and between 25 million and 30 million pairs annually.

At present, Reebok has its entire production base in the Asia-Pacific region – China, South Korea, Taiwan, Indonesia, Malaysia, Thailand and the Philippines. Indonesia is the largest supplier with a production of 4 million pairs a month.

Reebok’s aim is to duplicate its Indonesian model in India and to stop production in South Korea and Taiwan where labor is no longer cheap. The plans of firms like Reebok point to India’s immense export potential in finished leather products.