H & M cautious about India entry, SME norm is the hurdle

Textiles News by  2 yrs ago


The $19 billion Swedish clothing retail company, Hennes & Mauritz (H&M), known for its fast-fashion clothing offerings, is taking a cautious approach about entering India. Earlier the company had expressed interest in opening stores in Inda. Fashion Media reports say that the company, present in 43 countries with 2500 stores,  is studying  the  norms put forth by the government while approving up to 100 per cent FDI in single brand retail.

Riders like mandatory 30 per cent local sourcing from SMEs with revenues not exceeding Rs 5 crore has been a major cause of concern for many multinational giants, including H & M, informed sources report.

While India is interested in boosting domestic manufacturing, the global majors are sceptical and are not actively speeding up to enter the market on their own.

While H&M already sources finished goods worth around Rs 2,200 crores from Bombay Rayon and Rs 1,100 crores from Gokaldas Exports, the size of manufacturers (Rs 5 crore) that these companies are now expected to work with is a major hurdle to their entry.

Keeping the size of their operations in mind, compulsory 30 per cent sourcing from SMEs having initial investment of up to Rs 5 crore in plant and machinery was not viable, as they would not be able to handle the large requirements. And if they plan to source the requirement by working with numerous SMEs, uniform quality standards would be an issue of concern, industry analysts say.

In other countries, primarily China, the US and the UK, Bulgaria, Latvia, Malaysia and Thailand, H&M plans to add 275 new stores this year. According to the company statement, H & M’s design team in Sweden controls the steps of production from merchandise planning to establishing specifications. Production is outsourced to approximately 800 factories in Europe and Asia. These facilities are used for horizontal division of labor rather than being integrated

Founded in 1947 in Sweden, H&M  is ranked the second largest global clothing retailer, just behind Spain-based Inditex (parent company of ZARA), and leads over the third largest global clothing retailer, the US-based GAP Inc.

The company has other brands such as Monki, Weekday and Cheap Monday and H&M Home, besides H&M.

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