Some salient points from yesterday’s discussion with a senior industry professional - with hands-on experience both on the the sourcing side and the manufacturing side in India - for large buyers and large manufacturers of infant-wear in India.
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if you are to talk about focused infant-wear players - its good to focus on the Top 4 - Jay Jay Mills, Best Corp, Kitex and First Step. There are other good players too in the Tirupur belt too notably - SP Apparels, Jupiter India, Prime-Tex - but their infant-wear segment sales/focus is smaller.
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Relationships matter, but in today’s cut-throat environment where Retailers are under tremendous pressure, what matters in the end is the Product/Costing
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In Infant wear, there’s a Volumes Market and a Fashion/Value market. It is facing the demands of fast-fashion dynamics & complexity - and demands adaptability/flexibility from Manufacturers to changing requirements.
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From a Sourcers viewpoint - Kitex and Jay Jay are better at mass volumes segment - offering the best price points. In the fashion/value but lower volume segments, Best Corp and First-Step score better.
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Anyone sourcing for EU market - Jay Jay scores heavily because of its Bangladesh subsidiary - there’s a 14.5 % advantage including duty drawback of 10%. Tesco, Mothercare are very big customers. Capacity must be much north of 100 Mn pieces annually, including the 3 subsidiaries.
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Best Corp’s advantage it is the most vertically integrated. It starts from Yarn, fabric processing, garmenting. After inner wear, infant wear is its big segment. Also supplies majorly to EU market. Capacity may be around 65-70 Mn pieces annually
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KItex strength is the mass volumes segment - it can offer the best price points there. Its fabric is also probably slightly better. It probably scores low on adaptability for lower volume/higher value product requirements. Capacity may be around 80-85 Mn pieces annually. Its difficult to know exactly because it includes fabric sales in figures (no separate figures for garments?). KItex mostly services 3 large US customers like Gerber, ToysRUs, and TCP. EU customers like Mothercare, TESCO have majorly scaled down and so have Carter and Kohl’s.
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First-Step has also scaled up consistently. Capacity should be touching 75-80 Mn garments with the latest expansion. Their advantage is the in-house designs offered. That helps knock off a few cents for the Retailer and offers choices. Besides they have a domestic brand of their own they are building up. Product quality is very good. They are also now embarking on fabric processing plant.
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Kitex US Market foray - may be a good thing. But one needs to be cautious here. Lamaze is a known brand but did very little volumes in the last many years. A fresh investor in the Brand (Kitex) would always bring fresh ideas & money. But no transformation in any brand’s fortunes happens overnight. How deep-rooted is the money? Where will it come from?
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When you play only the manufacturing game, you capture only 30% of the End Value, so it’s tempting to think there is so much more money to be made if I expand into Retail. One should not forget though that the front-end is a much tougher game with complex/fast changing dynamics, and high risks. The best retailers in the world do not have more than 10-12% Margins!!
Apart from Royalty, and Sales, Marketing, Design Team salaries & overheads - one needs to think of other costs like shelf-space booking costs at retailers, penalties for slow or lower off-takes. And then the unsold-Inventory costs - what doesn’t sell is costs padded back - its like the costs climb to 60% - you know what I mean? I don’t know the Kitex business model for Retail entry, but these are the things we should wonder about and ask questions.