Talking trade in a downturn

Even as the trade committee of the European Parliament has emphasised the importance of expediting a trade pact with India, another committee of Members of European Parliament (MEP) has submitted a report which has the potential to derail the negotiations for such an agreement. The MEP report has called for bringing human rights and environmental issues into the parleys on the Comprehensive Economic Partnership Agreement (CEPA) between India and the EU, an agreement which hinges on the duty-free movement of goods and services, and the free flow of investment. The issues specifically mentioned by MEP are wholly unrelated to bilateral trade, such as ‘extra-judicial killings’ in Jammu and Kashmir, smuggling of tiger skins to Tibet and the observance of legally-binding social and environmental standards. This kind of add-on loading reflects the social and political concerns in some sections of European opinion, but is untenable; India’s logical position is that trade pacts should contain only trade issues. The MEP needs to realise that other fora are available for discussing such issues, and that raising them in a trade context can prove counter-productive.

Even without this latest hiccup, the going has not been smooth for the Indo-EU negotiations on CEPA, ever since they began in 2007. India has several concerns which are yet to be suitably addressed. The lack of harmonisation of regulatory procedures in individual member-states of the EU is one of the most important, as it prevents Indian exporters from fully penetrating what is supposed to be a unified EU market. Where agro-exports are concerned, these are severely constrained by the lack of uniformity in microbiological standards, costly certification processes for fruits, and cumbersome conformity procedures laid down by the European Commission. In the case of services, the biggest problem is the hindrances in the movement of professionals, as this is often confused with immigration at the EU end. The negotiations on tariffs, too, are unlikely to be hassle-free because of the difference in the average applied rates. These now stand at 14.5 per cent in India, against 4.1 per cent in the EU. Besides, India has a long list of sensitive items where reduction, leave alone elimination, of tariffs may not be acceptable.

Notwithstanding these hurdles, the fact remains that CEPA will be beneficial for both parties, even if the degree of advantage accruing to each may vary. The EU is India’s largest trading partner, accounting for some 21 per cent of total merchandise exports. This level can rise appreciably, post-CEPA. For the EU, though India is only a minor trade partner, there is considerable scope for the expansion of trade. Going by the EU’s reckoning, a CEPA can push up the total volume of bilateral trade from 70.7 billion euros in 2010 to 160.6 billion euros by 2015.

The real problem is the fact that the talks are being held at the worst possible time; the European economy will shrink this year, and there is growing unemployment. India too is feeling the pain of a sharp downturn, and its exports have collapsed in recent months. These circumstances do not encourage the give-and-take that is required for trade negotiations to succeed—precisely the problem facing the multilateral Doha Round negotiations. The danger, if anything, is that protectionist walls will go up; given the discipline imposed by the World Trade Organisation, the new barriers are likely to be non-tariff in nature and will come up in the form of technical and environmental issues. India has to learn how to deal with these, even as it presses on with the trade talks.

Source: business-standard

Online fashion battle to heat up as sales boom

LONDON (Reuters) - Competition in the online fashion industry is set to intensify as store groups, hit by sliding sales in the economic downturn, try to grab a slice of one of the few strongly growing retail markets.

Better online payment and delivery systems, innovative Web sites that allow consumers to try on clothes virtually and even shop together, and the rising purchasing power of the first generation to grow up with the internet mean online fashion will continue to defy the recession, analysts say.

These factors will attract store groups that have shied away from selling clothes online, like Europe's No.1 fashion retailer Inditex, as well as more department stores and grocers.

That will pose a challenge to pure-play pioneers of the industry, like Britain's ASOS and Italy's YOOX Group, which are currently enjoying sales growth of up to 100 percent.

However, if they take their cue from pure-play success stories in other sectors -- like Amazon.com in entertainment -- and act as a brand-neutral home for the maximum number of products, they can still flourish, analysts think.

"If ASOS is to succeed as a pure-play, it needs to do something fundamentally different and that has got to be down the (brand) aggregator route and the service proposition," ASOS Chief Executive Nick Robertson told Reuters in an interview.

Online sales account for only a small part of Europe's clothing market, which is worth about 300 billion euros ($386 billion) a year, according to retail researchers Verdict.

Victoria Bracewell-Lewis, senior analyst at e-commerce consultancy Forrester, estimates the proportion at between 3 and 5 percent, depending on the country, but thinks this is set to increase markedly.

"As more customers shop online, more retailers will go online and you get a virtuous circle," she said, adding sales figures understate the importance of the internet as shoppers are also using Web sites to research before buying in store.

Forrester forecasts online apparel sales in Britain and Germany will grow by more than 50 percent to 7.1 billion pounds ($9.9 billion) and 6 billion euros respectively by 2014, while sales in France will almost double to 3.5 billion euros.

ASOS's Robertson is also confident the internet will continue to rapidly increase share of the total clothing market.

"Can I see 10 percent of clothes being bought online? Yes, and I can see that two to three years away," he said.

MULTI-CHANNEL VS PURE-PLAY

Soaring online sales are putting pressure on the big store groups to accelerate their expansion onto the internet.

"Inditex is increasingly missing out on a growth market and if it doesn't get online it is going to ultimately restrict its maximum growth potential," said Exane analyst Phil Rudman.

Setting up online is neither cheap, nor easy, as firms have to organise payment systems, distribution and returns.

But a growing number are making it work, creating a powerful "multi-channel" offering where shoppers can buy online and collect in store, or try on goods in store and order at home.

Britain's John Lewis and Debenhams are among the store groups reporting strong online fashion sales, and many others are following suit.

British supermarket giant Tesco plans to launch a Web site this autumn to sell its own-brand clothes, and many analysts think it will eventually expand into brands.

Bernstein analyst Luca Solca thinks the arrival online of major shopping street brands will be decisive.

"It's the High Street brands that are going to drive internet adoption and are going to be generating traffic in the end," he said.

Others, however, think there is a big role for pure-play online fashion firms as they can offer more choice than single-brand retailers and a better customer experience than the department stores and supermarkets.

"It's about choice," said ASOS's Robertson. "In a provincial high street store you might have the choice of eight dresses and in the flagship store it might be 200."

"If you go to ASOS today there are 2,000 dresses."

ASOS, which sells over 19,400 branded and own-label products and is expanding into Europe, is also launching a social networking site, The Community, and plans an Amazon-style marketplace for members to sell their own goods online.

YOOX Group is going a slightly different route. It has signed deals to design and manage online stores for major brands like Marni, Diesel and Bally, which run alongside its own multi-brand websites and stock different products.

Founder and Chief Executive Federico Marchetti told Reuters that YOOX expects to add another six major fashion brands to its existing 12 partnerships by the end of this year.

But will any of this prevent pure-play online fashion retailers from being crushed by the store group heavyweights?

"That remains to be seen. But I will say that because pure-play tends to be more flexible and nimbler, they are more likely to be able to move with the trend and capture that trend very quickly," said Forrester's Bracewell-Lewis.

Source: reuters

American Apparel gets $80 million investment

NEW YORK (Reuters) - American Apparel Inc (APP.A) said on Friday that it received about $80 million in financing from British private equity firm Lion Capital LLP, and the clothing maker's shares soared 30 percent.

American Apparel, which is known for brightly colored basics, pro-labor policies and racy marketing, said the deal with Lion Capital involved secured second lien notes maturing December 31, 2013. Lion Capital also received warrants which, if exercised, would give it about an 18 percent stake in the company.

American Apparel said it planned to use the loan to repay outstanding amounts on an existing second lien credit facility with an affiliate of MSD Capital. It also plans to reduce the balance of its revolving credit facility, repay a portion of a shareholder note, pay fees and expenses related to the deal, and fund its working capital needs.

American Apparel, which manufactures its clothes in downtown Los Angeles, has been growing rapidly, with stores in 19 countries.

"This investment provides us with a long-term solution for our capital structure and an enhanced ability to grow our brand both domestically and internationally over the coming years," Chief Executive Dov Charney said in a statement.

Analyst Todd Slater of Lazard Capital said he estimates the new capital -- which has alleviated recent liquidity concerns --can fund the company for the next five years.

"The free cash flow generated by American Apparel over the next five years, even as it self-funds its own growth, should be more than enough to pay down all outstanding debt and allow for excess cash on the balance sheet," he added.

Under the deal, Lion Capital received warrants for 16 million shares of American Apparel stock with a strike price of $2 a share, or a 5 percent premium to their trailing 30-day average.

Exercising the warrants would translate to about an 18 percent stake in the company, whose shares closed at $1.49 on Thursday on the American Stock Exchange. The shares were up 45 cents at $1.94 after rising to $2.04 on the American Stock Exchange on Friday morning.

In addition, Lion Capital's Neil Richardson and Jacob Capps intend to join American Apparel's board.

That may help boost investor confidence about corporate governance at the company, Slater said.

London-based Lion Capital, which focuses on consumer investments, has invested in Jimmy Choo TOWBRJ.UL, Kettle Foods KETFD.UL, Orangina Schweppes and Weetabix (WEEBF.PK).

source: reuters

Gujarat Gas lowers supply to Surat textile units

In the wake of lower supply from its supplier company, Gujarat Gas has curtailed the supply of gas to textile units in Surat. The company has cut the supply to 66 per cent of the daily contracted quantity (DCQ).

“The gas supply by Gas Authority of India (GAIL) to Gujarat Gas has been brought down to around 40 per cent,” said sources. Gujarat Gas gets 2.1 million cubic meter of gas from Gas Authority of India (GAIL).

Earlier, Gujarat Gas had reduced the supplies to 72 per cent of DCQ in February. “Due to further reduction in the supply from our gas supplier(s), gas supply to your unit is reduced ...under the GSA (Gas Supply Agreement) with effect from 9 March 2009 to 66 per cent of the DCQ till further notice,” reads a letter sent by Gujarat Gas to a textile unit, which buys gas from the company.

Over 300 textile units have been adversely impacted by the decision. The company has an agreement with these units to supply 8 lakh cubic meter gas every day. “At present, only 66 per cent of the contracted quantity is being supplied,” said the owner of a textile unit in Surat.

“In case where gas supply in excess of 66 per cent is required, the units have been asked to pay Rs 25 per cubic meter gas. At present, the textile units are charged Rs 11.50 per cubic meter gas. In a way, the company has doubled the prices of gas,” said Pramod Chaudhary, president of South Gujarat Textile Processors’ Association.

Gujarat Gas’ move to curtail gas supplies has already upset textile units. “If we don’t get required gas, many units will have to be closed down. We stand to incur huge financial losses and things will further worsen as the textile industry is passing through a tough time,” said the owner of a textile unit.

Source: business-standard

India guar futures higher on export revival

MUMBAI, March 13 (Reuters) - India guar futures ended higher on a revival in export demand triggered by a falling rupee, analysts said.

"Export enquiries have increased in the past few days...Chinese and Brazilian buyers may buy about 20,000 tonnes of the commodity in March," said Subodh Punia, an exporter in Jaipur, Rajasthan.

The Indian rupee has shed about 6 percent so far during the year, and hit a record low of 52.20 per dollar last week.

A weak rupee makes Indian offerings attractive in dollar-based global trade.

India controls about 80 percent of the worldwide market for guar products, according to the government trade promotion council for the commodity.

Spot prices fell by 2 rupees to 1,568 rupees per 100 kg in Bikaner, a major trading centre.

India controls about 80 percent of the worldwide market for guar products, according to the government trade promotion council for the commodity.

Spot prices fell by 2 rupees to 1,568 rupees per 100 kg in Bikaner, a major trading centre.

Source: reuters

Appointment Events: the Next Big b2b Thing?

Trade shows may be taking a hit this year, but one kind of events programming could prove resilient, even robust, in a recessionary environment—“appointment events.” As practiced by companies like Questex-owned McLean Events, these custom gatherings host up to 100 buyers in a given industry (all paid for by sponsoring suppliers) who “speed date” with the suppliers and conduct prearranged appointments. “Appointment-based events are to trade shows as digital is to print,” says Kerry Gumas, president and CEO, Questex Media Group, which purchased McLean in early 2007. “There is a clear, measurable return on investment when you are guaranteed appointments with 20 buyers.”

A typical appointment event occurs at a luxury venue away from the typical trade show and exhibit atmosphere. Buyer and seller profiles are posted weeks before the event and specific appointments are arranged at the venue with the companies the buyers choose. In the McLean model, the second day of the event includes a speed-dating session where buyers can meet suppliers who were not on their meeting docket.

Gumas says that appointment events is one of the fastest-growing parts of his company, which publishes a range of titles in the hotel and spa verticals as well as the newly acquired FierceMarkets line of e-newsletters. As the sponsorship of trade events softens, interest in this model seems to increase, he says. “They are doing extremely well. It is purely back to ROI and performance. Compared to a large-scale trade show exhibit, a marketer can take a smaller budget and get guaranteed appointments. It is a very efficient business mode, we have found.”

“[When we purchased McLean Events two years ago,] we saw it as an event format that would do well in a down economy,” says Gumas. This is proving true, and so Questex plans to roll out the model across its portfolio of vertical publishing markets in 2009.

Questex was among the few b2b publishing companies to show overall growth in ad pages across titles in 2008, according to IMS. For more of our interview with Gumas and Questex’s recession strategy, see next week's issue of min's b2b.

Source: http://www.minonline.com/