Expresses disappointment over 700% tax increase in 2016 Budget on apparel exporters supplying to local market
Downgrades its growth percentile as duty increases
Plans to double the number of outlets in India
Sees promising growth from the online clothing platform launched in India
Agreement to be signed on with a franchise to launch new stores in Mumbai
By Shehana Dain
Home grown apparel brand, Timex Garments, under its brand name Avirate has been compelled to bring down growth projections next year due to tax revisions under the budget.
Timex Garments Managing Director Arshad Sattar told the Daily FT that the increase of the duty from Rs. 25 to Rs. 200 imposed on local apparel exporters who supply to the local market is unfair, as it will thereby give incentives to global brands.
“We need help from the Government. They need to give incentives for brands that have gone abroad. As for my knowledge only two brands from Sri Lanka have gone global. One is the lifestyle brand Avirate and the other is a lingerie brand that brings foreign exchange to the country,” he said.
“Currently 70%-80% of what we produce in Sri Lanka goes to India. We should be given incentives so we can touch more international markets. You can have duty on foreign brands because that’s what takes money away from the country; we are bringing foreign exchange into the country and giving employment to locals. It’s unfair for the Government to take a decision like this,” Sattar said.
He noted that the Government hasn’t fully understood the value of the local brands that are trying to make it international. «We need the Government to open up and help us expand. There are a lot of new brands mushrooming in Sri Lanka and they need guidance but if the Government doesn’t promote and help the cause it’s not going to change the current situation,” he said.
When asked his sentiments on the Government’s decision to make Sri Lanka a shopping paradise and a hub of brands. He commented: “I heard that the Government is trying to make Sri Lanka a hub of brands. How will they do it? In India, Paris and USA you find a lot of brands. Why would they come to Colombo specifically for this purpose? You can’t just say we have 5000 brands in Sri Lanka and expect people to come and buy. It should be functional and scalable at the same time.”
Sattar also went on to say that this move will discourage apparel exporters who wish to add value to their conventional practices with home grown brands.
“Apparel exporters in Sri Lanka give very little thought on how to make Sri Lanka a high value addition exporter. When we make cloths for customers worldwide we import our supplies from China or Korea and our value addition is only about 40%-50%. So we only sell labour and we don’t design or think beyond that. To grow brands like Avirate, we started a digital printing plant here signing a Rs. 500 million joint venture with a Korean partner and increased our value addition by 80% now only 20% goes out as foreign exchange. Now even global brands like Zara are talking to us to get involved in their manufacturing process for fast fashion,” he added.
Avirate CEO Asim Younoos said: “We aimed at a 15% growth until the Government slashed a duty on us. So I think we now will have to re-look at pricing. We personally don’t want to increase the prices from our customers. We want to make sure Sri Lankan brands go global. Annually, a large number of Indian tourists come to Sri Lanka and purchase clothes because it’s cheaper here, but if our prices are also as expensive as it is in India then we will lose that market.”
With prospects under threat in Sri Lanka, Timex is getting aggressive in neighbouring giant market India. The company said it has launched an aggressive expansion for brand Avirate in India where it aims to double its store outlet numbers.
The luxury brand will be doubling its store capacity from the current number of 40 to 80 by 2016 and will be signing an agreement by 1 January with a franchise, to open 10 stores in Mumbai. Timex officials were tight lipped about revealing the identity of the franchise and the value of the investment.
Timex Garments Managing Director Arshad Sattar said: “To grow in India we have to touch region by region because in India it’s a whole different country every 100 km. We are planning to sign an agreement with a franchise on 1 January to have 10 stores in Mumbai. If that happens the investment we have to put in will be less.”
Avirate currently earns approximately $ 3.5 million from sales in Sri Lanka and approximately $ 10 million in India. Sattar noted that with new expansion plans in India the company aims to hit $ 35 million next year.
He also highlighted that Avirate wants to expand to the European and Western regions and has started online sales but growth has been slow due to a prevailing recession.
Timex has also launched an online platform named A-dress in India and has seen positive results within a month since its inception. A-dress is more focused towards the bigger market and is price driven unlike Avirate. Online sales for A-dress is around 100 dresses per day exceeding expectations of 60 before the portal kicked off.
Speaking about the online portal Avirate CEO Asim Younoos said: “In that web portal a dress would be Rs. 2,000 or maximum Rs. 2,800. It’s more towards a market where we can give value for money.”
Additionally Yunoos also commented on Avirate’s expansion plans in Sri Lanka; “We are hoping to launch A-dress in Sri Lanka most probably during April festival season if not in the spring/summer season which would be in June or July. We are also waiting for malls to be open I think in 2017 and 2018 in places like Shangrila, Havelock City and others. Right now there isn’t a suitable location which we feel will fit in locally. We are hoping to expand in other ODEL outlets we are already in the Town Hall outlet and we see lot of opportunity in the Wattala, Ja-Ela and Battaramulla,” he added.