For cost-crunching retailers, Bangladesh reigns supreme

Tue Jul 9, 2013 5:19pm EDT
 
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By Anupama Chandrasekaran

TIRUPUR, India (Reuters) - With knitwear exports of over $2 billion a year, India's garment manufacturing hub Tirupur has earned the nickname "Dollar City," but its allure for price-conscious global retailers obsessed by discounts of as little as one U.S. cent pales before Bangladesh.

Indian and Southeast Asian apparel manufacturers had hoped the orders would come flooding in, after the deadly collapse of a Bangladesh garment factory complex this year galvanized global brands such as Hennes & Mauritz AB (H&M) (HMb.ST: Quote) to consider relocating production.

But several industry organizations and factories contacted by Reuters in Vietnam, Cambodia, Indonesia, Sri Lanka and India - Asia's top apparel makers outside China - said international retailers were not beating a path to their door just yet. When it comes to price, Bangladesh is king.

"The reason Bangladesh went from zero to hero in the garment sector is because there is no country with such low labor and other costs," said Arvind Singhal, chairman of India-based retail consultancy Technopak Advisors.

"No buyer is in a hurry to move from Bangladesh because Western retailers are stressed about passing any retail price increases to customers," he said. "Currently, there is no substitute for Bangladesh, where manufacturers even risk operating from rickety structures to cap costs."

Wal-Mart Stores Inc (WMT.N: Quote) has stood by its Bangladesh production, saying the South Asian nation remains an important sourcing market. H&M also said its quest for alternative manufacturers was not at the expense of Bangladesh.

"We are not reducing our purchases from Bangladesh. We aspire to have long-term relations with our suppliers," H&M spokeswoman Elin Hallerby said. "We are always looking at new production capacity to support our continuous expansion."

The latest data from Bangladesh highlights its enduring appeal: garment exports in June rose 26 percent year-on-year to $2.2 billion.   Continued...

 
Employees sew clothes at the Estee garment factory in Tirupur, in the southern Indian state of Tamil Nadu June 19, 2013. REUTERS/Mansi Thapliyal