Wal-Mart, Gap look to India as yuan may rise
(bloomberg)
Updated: 2005-07-12 09:26

Gap

Gap Inc., the largest U.S. clothing chain, has increased purchases in India, said Vivek Hinduja, chief operating officer for marketing for Gokaldas Exports Ltd., an apparel supplier in Bangalore, India. The company's sales rose 34 percent to US$165 million in the year ended March 31. Gap, its largest customer, makes up more than a third of sales.

"India is an important market for us and will continue to be," said Kris Marubio, a spokeswoman for San Francisco-based Gap. "Diversification of our sourcing base is important. It helps reduce the risk of local disruptions and it increases your speed to market."

Robert Ulrich, chief executive of Minneapolis-based Target Corp., said on a May 12 conference call that the retailer is importing goods from India, Pakistan and Vietnam. "So if there is inflation (in China), it's possible some programs would move," he said.

Chico's, which operates 700 women's apparel stores, has been increasing its purchases from India, said spokesman Michael Smith. Chico's gets about 12 percent of its apparel from India and almost half from China.

'Protect Ourselves'

"We like to diversify our sourcing portfolio to protect ourselves," he said.

Shares of Wal-Mart fell 10 cents to US$49.80 at 4 p.m. in New York Stock Exchange composite trading, and before today had fallen 4.4 percent in the past year. Gap dropped 3 cents to US$20.94, Target rose 28 cents to US$57.21 and Chico's increased 63 cents to $38.62.

Cherma's Exquisite Ltd., an apparel maker in India, landed its first contract with Wal-Mart this year to supply 100,000 floral Jordache blouses and is bidding on an additional 15 clothing styles for Wal-Mart.

"We're trying to get as much business as possible" from Wal-Mart, said marketing director Maniza Pestonji at Hyderabad- based Cherma's Exquisite, whose sales to the retailer may jump 50 percent in 2006.

'Overprotection, Red Tape'

India, which has the fourth largest economy in Asia, doesn't have China's capacity to make a broad range of consumer products including toys, shoes and ceiling fans.

"India has underdeveloped industries, though they are ramping up rapidly," said Kenneth Harris, partner with Cannondale Associates, a consumer-products consultant in Evanston, Illinois.

Some Indian exports are more expensive than their Chinese counterparts, said Chiquan Guo, international business professor at The University of Texas-Pan American.

"One thing that pulls India back in global competition is their extensive labor laws that are believed to be biased toward employees," Guo said. "Overprotection, red tape and bureaucracy make India's work force less manageable, less disciplined and thus less competitive than it could be."

Wal-Mart last year bought $1.2 billion in Indian goods, mostly clothing.

"We've had a great experience with our India suppliers and are continuing to identify new opportunities," Wal-Mart's Menzer said in an e-mail. "We would anticipate both expanding the volume and product lines this year."

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