Don’t miss the opportunity – Australia!

From 29th December 2022, India’s Free Trade Agreement (FTA) with Australia comes into existence, and hence from now on, Australia has zero import duty access to India’s textile products, which was earlier 5 per cent. So it’s high time to have more thrust on this country having an apparel retail market worth US $ 18.20 billion in 2022. The same is projected to grow annually by 3.78 per cent (CAGR) in 2022-2026 period. In 2021, the apparel imports of Australia was valued at US $ 7.40 billion and India had a share of approximately 4 per cent in it. Industry experts feel that India has the potential to more than triple apparel exports to Australia in just three years. Even Indian Government is of the view that India’s exports of textiles and apparel are expected to reach US $ 1,100 million in the next three years from the current US $ 392 million. If Indian apparel manufacturers successfully understand the Australian market, there are huge opportunities that they can unravel. This feature answers how Australia, the world’s sixth-largest country with a population of 25 million, is different from other markets and how Indian exporters can increase their share in this country.

More casual

The Australian market prefers more casual garments compared to America and Europe. They are much more relaxed in their approach to clothing. They also prefer sustainability and transparency.  ‘Value’ really matters for Australian buyers and customers. The average volume per person in the apparel market is around 56.7 pieces in a year.

Level playing field

Nearly all the stakeholders agree that this FTA will be providing Indian garment and home textile exporters a level-playing field with exports from Bangladesh, China and Vietnam. The ratings agency India Ratings and Research (Ind-Ra) is quite positive on this. Given that China accounts for almost 60 per cent of textile imports to Australia with India at 5-6 per cent, Ind-Ra expects the volume of exports to gradually increase in 2023 and thereafter increase even more based on producer capacities.

Arjun Puri, Director, KAS Group Asia asserted, “It (FTA) paves way for growth of Australian businesses operating in India, such as KAS Group Asia, in the short run. However, the fact remains that India is already a leading player in the cotton-dominant business with a large market share. To capitalise on this opportunity in the long run, businesses in India must continue to build capabilities in synthetic blends/pure synthetic fabrics, upgrade manufacturing capabilities and invest in larger capacities to compete against the likes of Bangladesh and Vietnam.”

KAS Group Asia (KGA) is an exclusive direct sourcing arm of Kmart Group that operates the retail brands Kmart Australia and Target Australia. KGA’s operations span the largest sourcing markets across Asia including China, India, Bangladesh, Pakistan, Cambodia, Indonesia and Vietnam, supporting an annual sourcing capability of US $ 2.8 billion.

Indian exporters who were recently in Australia observed that Australian buyers are also enthusiastic about this development as they will be more cost-effective.

Also Read: To harness the best potential of India-Australia ECTA, outreach programme is held

Opposite in season

The Australian market has an extremely competitive landscape but an important thing about Australia is that being in the Southern Hemisphere, it gives advantage to the Indian apparel manufacturers to work for a different season compared to EU and other core markets. Rather than just following the traditional business model, suppliers need to approach the Australia business strategically and plan for long-term gains accruing from more balanced production cycles.

Market understanding

The Australian apparel industry has local giants, global brands as well as home-grown designers. The latest report of myNZTE says that online sales in Australia is continuously growing as the share of revenue via online sales channels grew from 20 per cent in 2019 to 31 per cent in 2021. The same is expected to grow even further to 46 per cent by 2025. Stores like Kmart, Target, David Jones and Myer face increasing competition from online-only retailers like Amazon, The Iconic and global fashion conglomerates.

Like all consumer markets, the Australian market too has a variety of product preferences depending on seasonality and these products are offered at varying price points by retailers which can be categorised under multiple-tiers (higher to lower) based on the price point they offer.

With regard to specific category, women’s sustainable fashion held 5.7 per cent share of revenue in 2021 and it is expected to grow to 8.23 per cent by 2026.

Table 1: India’s apparel and made-up export to Australia

Value in US $ million
Source: Govt. of India

Top fashion, retail companies in Australia and their number of stores

• Cotton On Group (1500): Cotton On, Cotton On Kids, Cotton On Body, Factorie, Rubi, Typo, Supré
• Mosaic Brands Ltd (950):Millers, Rockmans, Noni B, Rivers, Katies, Autograph, W. Lane, Crossroads and Beme
• Super Retail Group 1,000 +: Rebel Sport, Macpac
• The Just Group (1000): Just jeans, Jay Jays, Jacqui, Portmans, Peter Alexander, Dotti and Smiggle
• Retail Apparel Group (550): Tarocash,Connor,yd, Johnny Bigg, Rockwear
• Rockmans (300)
• Sportlight Group (100+): Harris Scarfe, Mountain Designs
• Myer face (58)

Online players

• The Iconic (Global Fashion Group)
• Shona Joy

* There may be slight change in number of stores

Buying pattern

Australian buyers are more aligned with European and North American way of business. Australian retailers also work like other markets when it comes to buying patterns but value retailers offer business on a continuous basis. Mitesh Sadh, MD, Noida-based CR International shared that his Australian buyers, mostly mid-level brands and boutique buyers, place orders almost throughout the year and order size remains around 5000 pieces.

Offering slow fashion and 100 per cent linen-based womenswear garments, his company’s product price for Australia is around US $ 15-30.

Now Kmart Group Australia will have more sourcing from India as Arjun says that’s an accurate assessment. “In fact, we were working on growing sourcing volumes from India even before the FTA was formalised. We believe in the potential of India as a growing and stable economy and we will continue to further build our business in India. We are currently sourcing around US $ 200 million FOB across different product categories (soft goods, hard goods, apparel etc.) and we are hoping to take it to US $ 400 million+ in the next 3-5 years.”

Active participation in Australia

Recently concluded International Sourcing Expo in Melbourne witnessed participation of 50 Indian exporters with 52 booths in the expo. Narendra Goenka, Chairman AEPC, said, “We foresee a stronger presence in the Australian market appreciating the recently concluded Indo-Australia ECTA agreement. The FTA would open huge business opportunities for Australian clothing brands to source from India considering the strengths of the Indian garment industry in terms of variety of raw material availability right from cotton, jute, silk, viscose, nylon, acrylic with abundant in- house production.”

Reducing dependency on China

Major Australian companies are largely depending on China for sourcing like Cotton On Group, Australia’s leading fashion company, has 81 per cent sourcing from China and 17  per cent from Bangladesh, while from India, it is just 1 per cent. Similarly Country Road, one of Australia’s specialty fashion retailers with a market-leading position in the mid to upper tier of the segment, also highly depends on China, which contributes above 90 per cent of the group’s total sourcing value. Due to geopolitical issues, the group now wants to diversify its sourcing destinations for a smooth supply chain.

With a market volume of US $ 9.80 billion, women’s apparel is the market’s largest segment. With relation to total population figures, per person revenue of US $ 698.10 is expected to be generated.

Kmart offers clothing for all categories including men, women, kids and babies across knits, woven, true-knits etc. Although it is a value retailer with a significant portion of assortments falling under entry price points, it does play into other tiers as well to meet the needs of its customers in the affordable fashion segment. In terms of price points, as Kmart’s offerings are in the value segment, its volumes are higher and price points are sharp as it believes in delivering an amazing value to its customers.