of International Apparel Industry - Ministry of Textile ... Survey of International... · of...

Trend Survey of

International Apparel Industry

November 2016

Hideaki ShimizuJICA Expert

All Rights Reserved ©2016. JICA, Public Private Partnership Task Force (Marketing Strategy) 1

The Project for Skills Development and Market Diversificationof Garment Industry in Pakistan

Public Private Partnership Task Force<Marketing Strategy>

Contents:

1. Introduction2. World Apparel Market3. Analysis of Major Export Countries4. Analysis of Major Apparel Companies5. Global Value Chain in the Apparel Industry6. Business Trend of Apparel Industry7. Status of Pakistan’s Textile and Apparel Industry8. Conclusion

2All Rights Reserved ©2016. JICA, Public Private Partnership Task Force (Marketing Strategy)

1. Introduction


4

1‐1 The Issues with Pakistan's Apparel Industry (1/2)

POSITIVE SIDE

Raw Cotton, Textile, and the Apparel industry of Pakistan aremajor contributors to the national economy in terms ofexports and employment.

World’s 4th largest cotton producer and the 3rd largest consumerin the world.

Contributes nearly one‐fourth to the industrial value‐addedproducts, provides employment to about 40 percent ofindustrial labor force.

All Rights Reserved ©2016. JICA, Public Private Partnership Task Force (Marketing Strategy)

5

1‐1 The Issues with Pakistan's Apparel Industry (2/2)

NEGATIVE SIDE Pakistan‐ Less competitive in the world apparel market India, Vietnam showing high growth rate (left) Pakistan still focuses on low value added goods→major player in raw material

industry but ranked 12th in global clothing export. (right)

-1.38%

51.28%

4.89%

12.48%

47.10%

1.03%

9.13%

23.42%

36.42%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00Cotton Yarn export Value in 2012 &

13 in billion US dollars

2012

38.6

25.6

5.10 3.7 3.7 3.3

1.7 1.3 1.1 1 11

6

11

16

21

26

31

36

0

20

40

60

80

100

120

140

160

Sharein global exports

Export value in m

illion dollars

Countries

Global Clothing Exports (US$)

2013 in billion of dollars (Total Value)

2013 (Percentage of Global Exports)


2. World Apparel Market


7

2‐1 Apparel Exports (1/6)

Apparel Export in the World (Unit: million US)

2010 2011 2012 2013 2014

World Total 354,493 419,206 419,518 459,662 483,280

Asia 2010 2011 2012 2013 2014

China 129,820 153,774 159,610 177,414 186,607

Hong Kong 24,049 24,505 22,573 21,922 20,510

Indonesia 6,820 8,045 7,524 7,692 7,670

Viet Nam 10,390 13,149 14,443 17,148 19,544

Thailand 4,300 4,561 4,275 4,100 4,129

Cambodia 3,041 3,995 4,294 5,025 5,969

India 11,229 14,672 13,928 15,542 17,742

Bangladesh 14,855 19,214 19,788 23,501 24,584

Pakistan 3,930 4,550 4,214 4,549 4,992

Europe EU 28countries 100,695 117,407 109,853 118,639 126,587

Turkey 12,760 13,948 14,290 15,393 16,680

US USA 4,692 5,241 5,606 5,862 6,109

Mexico 4,363 4,638 4,449 4,530 4,618Source: WTO

Apparel Export in the World


8

80

100

120

140

160

180

200

2010 2011 2012 2013 2014

World's Main Transition in Apparel Export Index for the recent 5 years (2010‐2014: 2010=100)

Viet Nam

Bangladesh

India

China

Pakistan

0:=2010


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2010 2011 2012 2013 2014

Main Apparel Export Countriesin Apparel Export Value

for the recent 5 years (2010‐2014)

Pakistan

Viet Nam

India

Bangladesh

EU 28countries

China

Unit:Mil. USD


9

China42%

EU 28countries28%

Hong Kong5%

Bangladesh6%

Turkey4%

India4%

Viet Nam4%

Indonesia2%

USA1%

Mexico1% Thailand

1%

Pakistan1%

Cambodia1%

The Share of Apparel Export Value in 2014 (%)by Export Countries


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2010 2011 2012 2013 2014

World's Transition in Apparel Export Valuefor the recent 5 years (2010‐2014)

Mexico

USA

Turkey

EU 28countries

Pakistan

Bangladesh

India

Cambodia

Viet Nam

Indonesia

Hong Kong

China

Unit: Mil. USD



10


Europe20%

North America15%

Asia19%

Middle East4%Oceania

2%

Others40%

China (2014)

Europe17%

North America52%

Asia31%

Middle East0%

Viet Nam (2014)

Europe20%

North America50%

Asia21%

Middle East4%

Oceania2%

Others3%

Indonesia (2014)

Europe + North America = 35% Europe + North America = 69% Europe + North America = 70%

Export Destination Details of Major Asian Exporting Countries(1/2)


11


Europe42%

North America21%

Asia5%

Middle East17%

Oceania1% Others

14%

India (2014)

Europe62%

North America26%

Asia5%

Middle East3%

Oceania2%

Others2%

Bangladesh (2014)

Europe55%

North America36%

Asia2%

Middle East3%

Oceania1% Others

3%

Pakistan (2014)

Europe + North America = 63% Europe + North America = 88% Europe + North America = 91%

Export Destination Details of Major Asian Exporting Countries(2/2)


12


★　Data are from 2015. Bangladesh 2015/16. Indonesia, Cambodia, Vietnam are 2014. Export Capability is ranked in order of Value.[Source] UN Comtrade, Bangladesh Export Reconstruction Agencｙ

World Tariff, JETRO

Pakistan India Bangladesh Sri Lanka Indonesia Cambodia Vietnam China

185 230 100 143 250 162 185 424

Cotton Yarn/Cotton Cloth(HS52)

B A D E F G C S

SyntheticTextiles(54-56)

D A E F B G C S

Knit Wear (61) G C A F E D B SReady- MadeClothes (62）

E C A F D G B S

Home Textile(63)

B A D F E G C S

CottonProduction

○ ◎ ◎

Tariff 0% Europe JapanJapan/Europe

JapanJapan/Europe

Japan

Items

Average Monthly Wages($)

ExportCapability

Special

Evaluation of Asian Countries Related to TextilesThe Table below (made by JETRO) is the rankings of the Export Capability per item by relative evaluation based on their export amount ; 8 major Asian Countries with most Exports of Textiles.

13

2‐2 Apparel Imports (1/2)

80

100

120

140

160

180

200

220

240

260

2010 2011 2012 2013 2014

World's Main Transition in Apparel Import Index for the recent 5 years (2010‐2014: 2010=100)

China

Korea

UAE

EU 28countries

Japan

USA

Hong Kong

0

100,000

200,000

300,000

400,000

500,000

600,000

2010 2011 2012 2013 2014

World Total of Apparel Import


14

2‐2 Apparel Imports (2/2)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2010 2011 2012 2013 2014

Major Import Countries in Apparel Import Value for the recent 5 years (2010‐2014)

Others

Russia

Canada

Hong Kong

Japan

USA

EU 28countries

Unit:Mil. USD

EU 28countries

51%

USA24%

Japan8%

Hong Kong4%

Canada3%

Russia2%

Others8%

The Share of Apparel Import Value in 2014


3. Analysis of Major Export Countries


16

3‐1 Country Profile – China (1/3)


Apparel Export of China

(Unit: Million USD)

2010 2011 2012 2013 2014

Total 129,820 153,774 159,610 177,414 186,607

Europe20%

North Americ

a15%

Asia19%

Middle East4%

Oceania2%

Others40%

China (2014)

Export Destination Details

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2010 2011 2012 2013 2014

Apparel Export of China

Total

17

3‐1 Country Profile – China (2/3)

World’s largest exporter of textile and apparel.

China is highly competitive in its goods sector due to its large supplyof low‐cost labor and raw materials, all which have enabled the sectorto attract foreign direct investment.

Major strength of China: the textile and apparel sector of Chinaencompasses all segments of the supply chain.

Industry has the ability to produce any type of textiles and apparelproducts at varying quality levels.


18

3‐1 Country Profile ‐ China (3/3)

China has significant competitive advantages in apparel productionincluding high labor productivity and access to local supplies of rawmaterials.

It remains attractive for US buyer to import from China because Chinesefirms tend to offer more value added services, react faster to changesin fashion and retailer demands, and meet customer productstandards better than producers in other parts of the world.

China has few internationally recognized brand names and fewexperienced apparel designers. China is starting to participate moreactively in design and innovation.


19

3‐2 Country Profile – Bangladesh (1/3)


Apparel Export of Bangladesh

(Unit: Million USD)

2010 2011 2012 2013 2014

Total 14,855 19,214 29,788 23,501 24,584


Europe62%

North America26%

Asia5%

Middle East3%

Oceania2%

Others2%

Bangladesh (2014)

0

5,000

10,000

15,000

20,000

25,000

2010 2011 2012 2013 2014

Total Apparel Export of Bangladesh

Total

20


Bangladesh is the second largest garment supplier of the world market, afterChina

As global demand for cheap clothing rises rapidly, Bangladesh’s position asthe second biggest of textile and garments export in the world continues tohold strong, due to its large population and low labor costs.

The rise of the readymade garments sector (RMG) creates about 4.2 millionemployment opportunities for the locals, and contributes significantly to theGDP.

RMG of Bangladesh is powered by young, urbanized workers, where most ofthem are women.


21


Woven garments dominate the export earnings of the country. From BGMEAwebsite it is seen that, production of knitted items is increasing (about 40%export earnings has achieved from knitted products.)

The Cost effective strategy entails Cost reduction strategy and Laborproductivity improvement. More than wages, improvement in laborproductivity is the primary revenue generating factor .

In order to survive in the world’s most competitive RMG market, a countrymust develop new product items with a lot of variations.

Vietnam, which is expected to grow fervently once the Trans Pacific Partnership(TPP) is ratified sometime next year, might threaten Bangladesh’s currentglobal ranking.


22

3‐3 Country Profile – Vietnam (1/3)


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2010 2011 2012 2013 2014

Total Apparel Export of Vietnam

Apparel Export of Vietnam

(Unit: Million USD)

2010 2011 2012 2013 2014

Total 9,469 13,149 14,443 17,148 19,544

Europe17%

North Americ

a52%

Asia31%

Middle East0%

Vietnam (2014)


23


Vietnam has been seen as one of the fastest growing counties inapparel and textile exports during the last decade.

One of the major challenges of Vietnams is in exploiting benefits fromthe Free Trade Agreements like TPP, EU Vietnam FTA that areexpected to be adopted in coming time.

Vietnam is highly appreciated for its political and social stability andfor being an attractive market trading area for foreign investors.

Strength of Vietnamese apparel industry is the large pool of laborforce.


24


Labor costs for textile and apparel industry are low in Vietnam, whileskills are highly appreciated.

Having the potential to excel in the global apparel industry lies in itsability to build close relationships with its importers and largeconsumption corporations around the world.

Vietnam’s commitment to economic reform and development hascreated attractiveness to investors, and opened up new markets andnew partnerships.

Foreign Direct Investment in Vietnam’s textile and apparel industrycontinues to increase.


4. Analysis of Major Apparel Companies


4-1 World Top 10 Apparel Companies

26

Name of Enterprise Headquarters

Apparel Sales of 2015 Fiscal Year(million US$)※

1. H&M Hennes & Mauritz AB Sweden 24,5532. Industrias de Diseño Textil, S.A.（Inditex） Spain 22,763 3. Gap Inc. U.S. 15,797 4. Fast Retailing Co., Ltd. Japan 14,0605. Associated British Foods plc (Primark) U.K. 7,813 6. NEXT plc U.K. 6,103 7. SHIMAMURA Co., Ltd. Japan 4,565 8. American Eagle Outfitters, Inc. U.S. 3,522 9. Abercrombie & Fitch Co., U.S. 3,519

10. Express, Inc. U.S. 2,350 1 US Dollar ＝ 119.61yen

1 Euro＝130.27yen

1 British Pound ＝174.78yen

1 Swedish Krone =13.99yen

※Apparel Sales of 2015 fiscal year(million yen) has been calculated by using the exchange rate as of 30th of December 2015.


4-2 H&M (1/3)

27

1. Cooperate Profile

Headquarters Mäster Samuelsgatan 46A SE-106 38 Stockholm SWEDEN

C.E.O Karl –Johan Persson Established 1947

Business contentManufacturing and retailing of clothing and fashion goods

Employee Number(November 2015)

104,634

Main BrandsH&M, COS, Monki, Weekday,Cheap Monkey

Annual Turnover(November 2015)

209,921（1,000,000SEK）


2. Global Sales／Global Store Numbers

Fiscal term

Sales Year-on-Year

ElongationRate

mSEK ％％

2013/11 150,090 － 100.0

2014/11 176,620 117.7 117.7

2015/11 209,921 118.9 139.9

Fiscal term

Store Number Countries

Year-on-Year

Elongation Rate

store country ％％

2013/11 3,132 53 － 100.0 2014/11 3,511 55 112.1 112.1 2015/11 3,924 61 111.8 125.3

4-2 H&M (2/3)

28

3. Sales by Category

Fiscal Term Women’s Men’s Baby/Kids Fashion Goods

2015/11 45％ 35％ 5％ 15％


4. Production Base by Region

Region/Type of FactoryManufacturing Factory

Processing Factory Tier 2 Factory Total

Asia (11 countries) 1,220 1,103 241 2,564

Europe (16 countries) 474 214 60 748

Africa (5 countries) 19 8 － 27 U.S. 2 －－ 2

Total(33 countries) 1,715 1,325 301 3,341

4-2 H&M (3/3)

29

5. Target Country for Production Base1. In 2016, e‐commerce is starting in 11 countries such as Canada, Japan, South Korea,

and also opening of stores in Puerto Rico which is a US commonwealth, New Zealand and Cyprus are planned, as well as Columbia in 2017.

2. The company’s basic policy for production is cooperative relationship based on a longterm plan, and therefore Ethiopia and Myanmar will be used as a production basefor basic clothes, while clothing such as jackets with high added value for Europeanmarket is expected to start in Bangladesh.

3. As of January 2016, the company has more than 1,700 garment factories in over 33 countries factories, and after the fire at a garment factory in Bangladesh in 2013, safety has become an urgent issue alongside working conditions and obeying minimum wages.

4. The rise of labor cost in Asian countries has been decreasing the profit margin, and in such situation Africa has become an important base for cheaper production. This has led to consideration of production in South Africa.


4-3 Inditex (1/3)

30

1. Cooperate ProfileHeadquarters Edificio Inditex Av. Diputación s/h 15143 – Arteixo A Coruña ‐ Spain

C.E.O Pablo Isra (Chairman and CEO) Established 1985

Business content

Manufacturing and retailing of clothing andfashion goods

Employee Number(January 2016)

152,854

Main BrandsZara、Pulll & Bear、Massimo Dutti、Bershka、Stradivarius、OYSHO、Zara home、UTERQUE

Annual Turnover(January 2016)

20,900 （million€）


Fiscal term

Sales Year-on-Year

Elongation Rate

m€ ％％

2014/1 16,724 － 100.0 2015/1 18,117 108.3 108.3 2016/1 20,900 115.4 125.0

Fiscal term Store Number

Countries

Year-on-Year

Elongation Rate


2014/1 6,340 88 － 100.0 2015/1 6,683 88 105.4 105.4 2016/1 7,013 88 104.9 110.6

2. Global Sales/Global Store Numbers

4-3 Inditex (2/3)

31

3. Sales by CategoryFiscal Term Women’s Men’s Baby/Kids Fashion Goods・Home

Furnishing Products

2016/1 55％ 35％ 5％ 10％

The company mainly focuses on women with “Zara”, “Massimi Dutti”, “Bershka” and women’s sale account for over 50%.


RegionNumber

of Supplier

Number of Production

Factory

EU 491 1,858Non EU 160 1,042Asia 759 1,816Africa 135 307Americas 80 359Total (50country) 1,625 5,382

Major Production Country

(91% of all production)

Number of

Supplier

Number of Production

Factory

Number of Material

Processing Factory

Spain 229 208 118Portugal 156 856 394Morocco 116 219 30Turkey 158 610 416India 129 151 100Bangladesh 83 92 108South East Asia 9 152 42China 300 849 257Argentina 60 65 68Brazil 49 117 85

4. Production Base(Production Country)

4-3 Inditex (3/3)

32

• The company already holds stores in 88 countries world wide, and from 2016 it aims to strengthen its e‐commerce

→It plans to open an online website for Denmark, Ireland, Italy, Luxembourg, Poland, Romania and Sweden in April, and by the end ofthe year to start online retailing for all products of the company’s brands in every country in Europe.

• As for production, the company’s policy is to conduct production and procurement of materials in countries close to big markets.

• Also, by conducting designing, procurement of materials, manufacturing of mainly the season’s collections all in Spain, and delivering them by air to stores world wide, the company is trying to image itself as a Spanish brand.

• Additionally, it accepts factory inspections on unfavorable labor conditions positively, and seems reluctant to switch production sites for the sake of cheap labor.

5. Future Country for Production Base


4-4 Gap Inc. (1/3)

33

1. Cooperate Profile

Headquarters 2 Folsom St. San Francisco, CA94105 USA

C.E.O Art Peck (Chief Executive Officer) Established 1969

Business content

Designing, manufacturing and retailing of clothingand fashion goods

Employee Number(January 2016)

approx. 141,000

Main Brands Gap、Old Navy、Banana Republic、Atheta、Intermix Annual Turnover(January 2016)

15,797(million US$)


2. Global Sales/Global Store Numbers

Fiscal term

Sales Year-on-Year

Elongation Rate

mUS$ ％％

2014/1 16,148 － 100.0

2015/1 16,435 101.8 101.8

2016/1 15,797 96.1 97.8

Fiscal term

Number of Stores (including

FC)

Country(including

FC)

Year-on-Year

ElongationRate


2014/1 3,539 approx. 50 － 100.0

2015/1 3,709 approx. 50 104.8 104.8

2016/1 3,721 approx. 50 100.3 105.1

4-4 Gap Inc. (2/3)


Fiscal Term Women’s Men’s Baby/Kids Fashion Goods/Shoes etc.

2016/1 40％ 40％ 15％ 5％

• The company’s main brand is ‘Old Navy’ which proposes casual fashion for all family members.

• The company’s percentage for Baby/Kids is around 15% and is higher in comparison with other apparel companies.


4. Production Base(Production Country)＜Manufacturing /Material Processing Factory Examined by the Company>

Region 2014/1 2015/1

China 286 308 South Asia 299 302 South East Asia 291 331 Others 143 166Total 1,019 1,107

4-4 Gap Inc. (3/3)

35

In the first quarter of 2016, all of the company’s brand saw a drop in sales.

This made the company announce to close all Old Navy stores(53 stores) in Japan and close unprofitable Banana Republic Stores.

Instead, the company decided to focus on North America, Mexico and China which are key for the development of the main brand Old Navy, and shift towards a Gap oriented strategy in Japan.



4-5 FAST RETAILING CO., LTD (1/3)

36

1. Cooperate ProfileHeadquarters 717‐1 Sayama Yamaguchi City, Yamaguchi JAPAN

C.E.O Tadashi Yanai Established May 1963

Business contentManufacturing and retailing of clothing and fashion goods

Employee Number(February 2016)

43,059

Main BrandsUNIQLO, Gu, PRINCESS TAM TAM、Theory、Contoir Des Cotonniers

Annual Turnover(August 2015)

1,681,781（million yen）


2. Global Sales/Global Store Numbers＜UNIQLO＞

Fiscal term

Sales Year-on-Year

ElongationRate

million yen ％％

2013/8 934,505 － 100.0

2014/8 1,129,298 120.8 120.8

2015/8 1,383,823 122.5 148.1

Fiscal term Number of Stores Country Year-

on-YearElongation

Rate


2013/8 1,299 14 － 100.0

2014/8 1,485 16 114.3 114.1

2015/8 1,639 16 110.4 126.1


37

Fiscal Term Women’s Men’s Baby/Kids Fashion Goods

2015/8 47.5％ 41.3％ 7.4％ 2.5％



4. Production Base (Production Country)

1. The UNIQLO brand does not own any factories and all production are done by production subcontracting.

2. Production are in China, Vietnam, Bangladesh, Indonesia and in addition, production started in Turkey in 2014 and India in January 2015.

3. The company has placed production offices in Shanghai, Ho Chi Min, Dhaka, Jakarta, Istanbul and around a total of 400 quality/production progress management staffs and “artisan team” for teaching dyeing technology has been posted.

4. The company has negotiated directly with material manufacturers around the world and has been able to maintain its “High Quality, Mass Stable Procurement, Low Cost”.

5. Especially, the company is focusing heavily on material development of their main products .

6. A good example of this is heat tech which was developed with Toray Industries, Inc.,


38

1. Despite struggles in Japan due to a warm winter in Japan, continuous

opening of stores abroad led to higher sales as a whole.

2. The company aims to increase production bases near Europe and the US.

3. Especially in Mexico and South American which are near the US where

the company is opening many new stores.



5. Global Value Chain in the Apparel Industry


40

5‐1 “Buyer‐Driven” or “Producer‐Driven”


Apparel, the end product of the value chain, has been the classic “buyer‐driven” global value chain.

Buyer driven value chains are the ones in which retailers, marketers and branded manufacturers regulate the industry by setting up production networks in certain developing countries.

In the buyer‐driven value chain, profits come from combinations of high‐value research, design, sales, marketing and financial services.

In case of producer‐driven value chains, profits come from scale, volume and technological advances.

Which type is yours?

41

5‐2 Apparel Value Chain Activities

The Global apparel value chain consists of five main stages whichdiffer in the geographical location, labor and skill requirements,technology and the scale and type of enterprises.

Following are the five stages in the global apparel value chain: Rawmaterial, Component Networks, Production Networks, ExportNetworks, Marketing Networks.

To understand how the division of work occurs and how initiative to develop the workforce in the global value chain, six distinct value‐adding activities can be identified.(Purchasing& Distribution is regarded as Logistics)


42

5‐3 Economic Upgrading (1/2)


43

5‐3 Economic Upgrading (2/2)

OEM (original Equipment Manufacturer)The supplying firm makes a productaccording to a design specified by thebuyer; product is sold under the buyer’sbrand name;

ODM(Original Design Manufacturer)ODM is a company which design andmanufactures a product which is specifiedand eventually branded by another firm forsale.

OBM (Original Brand Manufacturer)OBM is the upgrading by manufacturer fromthe production expertise of OEM to first,the design and then the sale of their ownbranded product.

Product UpgradingThe production of complex products, whichrequires increasing the capabilities of thefirm through firm “learning”. As countriesgain experience in the industry, they canmove from low‐cost commodities to highervalue‐added fashion goods that warranthigher returns as labor rates increase.

Process UpgradingThis reduces the cost and improvesflexibility by improving productionmethods; it requires capital investmentand better worker skills to operate newmachinery and/or information andlogistics technology.


6. Business Trend of Apparel Industry



45

Intensification of Competition between Fast Fashion Brands

Differentiate through pursuit of low price

Differentiate through pursuit of trend

Strengthening the image as Ethical

Fashion&Sustainabiliy

• Strengthening the Collaboration with

famous designer and Celebrities

• Pursuit of comfortable fitting by

functional materials

• Small lot production of the trendy

items

• Shortening of the lead‐time from the

planning to store display

• Fashion rental service

• Strengthening the outlet store

• Increasing the frequency of sales

• Cutting the cost of opening a new

branch by strengthening the E‐

commerce

• Searching for the production base with

lower cost

• Organic , certificate of Better Cotton

Initiative

• Supporting the producing country by

fair trade

• Strive for reducing environmental

burden by factories

• Strive for improving labor

environment by cooperating with

NGO and Producer’s Cooperative

Low price with timely fashion trend is the most important part but, in Bangladesh, harsh labor environment has been picked up by media which lead to the fall of the image of the brand. Since then, major apparel clothing makers started to strengthen the image of the Ethical Fashion.

Donating part of profit for the development of educational environment and using environmentally protective materials are the ways to appeal and create the Ethical Fashion image of the brand.

The General Condition of the Fast Fashion Market

6-1

6-2 Positioning Map of Fast Fashion Brand

Pursuing scale limit and ,at the same time, proposing items and promotions with “freshness” which keeps consumers in interest.

46

Price High

Trend

Price Low

Basic

A/X

ZARA

GAP

OLDNAVY TOP SHOP

H&M

A&F

UNIQLO


6-3 H&M’s Unique Selling Proposition

The strength of H&M is creating a strategy format of“ marketing by adding values to low cost products”

47

D e s i g n a b i l i t y F u n c i t i o n a l i t y P r i c e

H&M high high low

GAP Middle-high Middle-high middle

1. Merchandising Formation clearly described

Classified standards ＝ targeted ⇒ by taste ⇒ by item・Basic Casual・Trend Casual・Mode Casual・Sport Casual・Accessory・Inner wear

It is laid out around the open ceiling space sorted by taste, and same items are set in multiple zones.


Example: Outlet in NY Men’s corner

6-4 Checkpoints of Quality control (1/2)

There will be heavier responsibilities for manufacturers to produce items with quality. It has become an era of consumers considering more about manufacturer’s responsibilities to the quality of items.

48

Company with poor quality management

Quality control of Apparel ProductsCompany with high quality management

・ Not able to take the initiative when quality is poor

・ Increase of complaints when quality is poor

・ Increase of claim management when complaints increase

・ Increase of request for discount・ Increase of request for Replacement・ Decline of the Brand Image・ No trust as a company・ Company with low-productivity

・ Able to take the initiative of the business ・ Actively address proposals as having

confidence in quality・ no discount and replacement requests・ less time spent for follow-up services・ Improve profitability・ company with high-productivity


6-4 Checkpoints of Quality control (2/2)

49

Designcolor・pattern・style・fit・

Fair price・scent

SewingWell-made・stitch・yarn・

aspect・fastener

MaterialCloth・quality・well-

matched・cost

3 Points of Quality Control

Pyramid ofQuality control


6-5 Hierarchy of Segmentation (1/2)

It is important to “know” about the consumers to captivate the Fashion industry. To “know” the customers, there is a need of developing plans by classifying customers by genres.

50

1. Skimming(5 %)have their own values and purchaseproducts with high prices.

2. Innovator (15%)watches the trend of the layer forskimming , then creates own values.

3. Follower(35%)does not take initiatives, always wish to be normal level.

4. Penetration(45%)bargain hunters who are sensitive for prices , not its values.

Penetration

Follower

Innovator

Skimming

Public Private Partnership Task Force (Marketing Strategy)All Rights Reserved ©2016. JICA, Public Private Partnership Task Force (Marketing

St t )

6-5 Hierarchy of Segmentation (2/2)

51

Penetration

Follower

Innovator

sections Group Segmentation

Sex Men Female unisex

By age Less than 14 15-19 20-24 25-29 30-34

By Group

Family Young-single DINKS Young Family

3generation Middlesingle

Elderly single

Job - - Service Finance Creative Thinktank

Class Wealth Middle Lower

View Advanced Neutral conservative

Fashion Skimming Innovator follower Penetration

Living Urban/local Station/suburbs Apartment/house

Hobby Indoor Pc/game handicraft Watching DVD

Reading books cooking

Outdoor Golf Tennis Surfing trekking skiing

Segmentation Story of Consumers


6-6 Three Elements for Branding

In fashion industry, there is a need of creating strategy with long life-cycle by developing brands with brand strength; which will lead to increase of sales.

52

Penetration

Follower

Innovator

3 Elements for Branding

Value

Vision Concept

Sustainability of Branding


6-7 Principle of Business Growth (1/2)

Fashion Industry seems to look new but it is actually an Industry with an old mold. In the new era, there is a necessity of creating simple strategy with clear concepts and marketing with a style which breaks the usual common sense.

53

Penetration

Follower

Innovator

Practical process of philosophy is the key for corporate planning.

Growth potential ≪actualization of idea/thought

The thing is to hold on to a principle.

Vision is the final goal(Business Objectives) and to achieve the goal there are targets to be accomplished. The setting of the target will be important. The separation of the goal and target will be the hindrance of the company growth

Vision

What is Principle

Business Objectives

Group with same goal=Company(Integration)

Target

Target●

●

●

●

●


6-7 Principle of Business Growth (2/2)

54

Penetration

Follower

Innovator

OriginalityMore unique

Community-basedGet closer

ValueCreate more

value

user-friendlinessMore convenient

Strategy

Concept

Conditions of Corporate Strategy


7. Status of Pakistan’s Textile and Apparel Industry


56

7‐1 Why is Pakistan’s textile industry failing?

4.15.2

20

24.5

11.23

8.4

4.05

-0.7-1.78

1 0.8 1.45 0.5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Years

GROWTH TREND OF PAKISTAN TEXTILE SECTOR

Growth in %age

This graph is a clear indication that Pakistan is going through one of the toughest periods in history

CAUSE (External)

• Global Recession hit the textile industry really hard.

CAUSE (Internal)

• High cost of production resulting from an instant rise in the energy cost

• Depreciation of Pakistani rupee raised the cost of imported inputs

• Double digit inflation and energy crises have affected the overall textile sector


57

7‐2 Factors Affecting the Industry (1/3)1) Cotton Production

-40

-30

-20

-10

0

10

20

30

2011‐12 2012‐13 2013‐14 2014‐15 2015‐16

Comparison of Pakistan's and World's cotton production trend of last five years

Pakistan World

• Graph shows the production trend of cotton in Pakistan over the past few years.

• Cotton production fallen by 27.8% last year is alarming.

• Increase in imports of cotton tomaintain the supply chain of to thetextile industry.

• Pakistan is losing out in three differentways because of the falling cottonproduction.

1. Loss of revenue it can earn because of theincreasing global cotton demand

2. The domestic apparel industry has toimport cotton at a higher price whichreduces its own competitive advantage

3. Loss from the cotton industry is not beingcompensated by a growing textile andapparel industry


58

7‐2 Factors Affecting the Industry (2/3)2) Labor Market

Table 2: Average Wage Rate

Countries US$ / hour

USA 8

Dominican Republic 1.15

Malaysia 1.15

Mexico 0.85

Thailand 0.65

Indonesia 0.15

India 0.2

Bangladesh 0.18

Pakistan 0.22

Pakistan still lacks in educated and skilledlabor for the textile industry.

Some of the biggest problems in Pakistan’sgarments’ industry constitute negative attitudeagainst female labor force, dangerous workingconditions, and labor rights issues.

These problems have overarching effects onproduction quantity, quality as well as themanagement of the textile industry inPakistan.

Pakistan is encountering some seriousdifficulties in finding middle management andskilled workers for textile industry


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7‐2 Factors Affecting the Industry (3/3)3) Global Apparel Market Segmentation

Pakistan’s production currentlylies in the lower section of theproduct.

There is a recommendation for thePakistan’s textile industry to shiftto higher section of the pyramidas significant chunk of revenuesgenerated by some of theprogressing Global Apparelindustries come from theexport/sales of high value addedgoods.


The structure of a typical apparel market

FeeCompany Quality Price DeliveryBiz

AttitudeQuick

ResponseStableSupply

Leadtime

Communication

A ○ △ △ △ △ ▼ X ▼B ○ X X X X - X ▼C ○ △ △ - X - X -D ○ ▼ X - - - X -E ○ - X - X - X XF △ X X X X X X XG ○ X X X X X X XH ○ ○ X ▼ X - X XI ○ - - - - - - -J 　－ - X - X - X -

Point 8 .5 -1.5 -7 -3 -6.5 -2.5 -9 -5

Symbol Evaluation Point○ Good 1△ Not so bad 0.5ー Average 0▼ Not so good -0.5X Bad -1

This survey result was based on interviews with 10 Japanese textile trading companies conducted by JICA Expert in April 2015.

7‐3 Feedbacks from Buyers1) Japanese Buyers’ Feedback on Textile Import from Pakistan

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Strategy)60

• Quality is good and acceptable.• Price is not a big negative factor.

(Although still considered high due to import duties.)

• Slow responses, delivery not on time,and long lead time→ Frustrated problem

• Timing of business is very important in JapanMissing timing of season or business is a big

loss.

Business Management must be improved more!

Rank Evaluated items Point1 Quality 8.02 Price -1.53 Satble Supply -2.54 Biz Attitude -3.05 Communication -5.06 Quick Response -6.57 Delivery -7.08 Lead Time -9.0

Sorted List of the Above Evaluated Items with Order of High Points

7‐3 Feedbacks from Buyers2) Major Comments on Japanese Buyer’s Feedback


Strategy)61

7‐3 Feedbacks from Buyers3) Other Notable Comments from Japanese Buyers

Advantage: good quality of cotton raw material with stable cotton supply and vertically integrated production.

Should have brand image strategy for better image to foreign buyers.

It takes 2 months to receive the product after placing order while Chinese suppliers can do it in 1 week.

Had a bad experience of late delivery from Pakistani supplier and they missed timing of selling the products.

They do inspection by themselves visiting Pakistani supplier’s factory since worrying about inspection quality of the supplier.

Their Pakistani supplier could not supply the same quality of products stably and continuously.


Strategy)62

8. Conclusion


64

8‐1 Attribution of The Successful Nation

The successful nations have the following attributes:

1. They invest heavily in their workforce through skill development and

subsidized education.

2. They follow the global policies and norms to avoid any conflict from

international agencies.

3. They encourage the movement from OEM to ODM and OBM through

policies, trade zones and other incentives.

4. They work hard to ensure domestic security and stability in order to attract

investments.

5. They work towards building and leveraging their relationships with other

countries to score better trade agreements and MoU’s.


65

8‐2 Attribution of the Global Apparel Companies

The major global apparel companies have the following attributes:

1. They invest in the R&D department which helps in maintaining flexibility in

terms of responding to market demands and innovative solutions to the

prevailing challenges.

2. They work towards building a brand name by focusing on the quality and design

rather than competing solely on price.

3. They follow global policies and practices to ensure a positive image and to

ensure a distance from scandals for instance.

4. They invest in sustainable practices, ensure employee safety standards, have

strong quality checks in place and so on.


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8‐3

1. Pakistan needs to focus on developing its apparel sector in order torise from number 12 in terms of export revenue from textile andapparel products.

2. Pakistan needs to invest in their workforce more through skilldevelopment and management development to improve theirperformance on productivity and quality.

3. Since Pakistan relying on a handful of consumer markets for both lowand relatively high value added textile goods has been provenharmful, expanding into a diverse market & product would be aprudent national strategy.


What Pakistan needs to do for Apparel Sector

67

8‐4 Way Forward for Pakistan

1. As globalization strategy and diversification of global value chain,Pakistani firms could invest in overseas countries more that are closeto the large target markets. Bangladesh or some African countries arealso candidates for investment because of its tariff advantages.

2. Identify and develop its superiority and differentiation to compete inthe global market.

3. Pakistani firms could also explore niches in the large developingcountry markets that are becoming more open under the WTO regime.

4. The industry could also conceivably lead the way in the sphere ofeducation by further raising the standards of the Textile Institute toimprove its workforce skills in both operator and middle managementlevel.


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8‐5

Political Stability &Infrastructure in Pakistan• Reducing the possibility of terrorism and riot• Securing safety of foreigners (non‐Muslims)• Stable operation of the factory

Differentiate through pursuit of trends

Differentiate through pursuit of

low price

Strengthening the image as Ethical Fashion &Sustainability

Strengthening the brand of

“MADE IN PAKISTAN”

• Achieving high yarn spinning, cotton production, dyeing and sewing technique

• Efficiency of the producing line • Development of the functional fiber

• Strengthening the traceability of the material (cotton)• Attestation of Better Cotton Initiative(BCI), production of color cotton

branding of cotton• Cooperation with government, local NGO, Producer’s Cooperative and Apparel Company

• Cordial reception to tariff and local cooperation in tax system

• Strengthening the price competitiveness by increasing the productivity

• Decreasing the cost by increasing the producing efficiency

Requirement for the future development

69

The Project for Skills Development and Market Diversification (PSDMD)

of Garment Industry in Pakistan

Public Private Partnership Task Force<Marketing Strategy>

THANK YOU

This Presentation material is made based on research reports of Carnelian and Fuji Keizai respectively which were originally made

upon request of this project(PSDMD).


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