Financial Times

Sri Lankan garment exporters have been asked to speed up delivery and be more flexible, to gain market share in Germany.

Sri Lankan apparel has been losing ground in Germany, which was traditionally a strong market even before the expiry of quotas in December 2004. However, the industry is hoping that the concessionary trade scheme from the European Union – the GSP+ (Generalised System of Preferences Plus) – will give Sri Lanka a chance to regain lost ground. As a result, Germany is one of the countries targeted to market development by the Joint Apparel Association Forum (JAAF), to grow Sri Lanka’s market share in the EU.

However, the peculiarities of the German buying habits make it difficult for Sri Lankan companies to stay in the market.

For instance German garment buyers place smaller orders compared to the US and UK buyers but have very high quality standards. But experts in the German clothing sector say Sri Lanka can survive in Germany and increase its market share provided Sri Lankan companies are able to make adjustments.

“Sri Lankan companies must be prepared to deliver small order quantities and you must not expect German buyers to place orders over night. German buyers are looking for strategic alliances,” said Ralf Schulte, a consultant from the International Trade Centre brought down through the EU-Sri Lanka Trade Development Programme to advise companies on the German market.

Schulte points out that German clothing retailers have optimised their buying patterns in post quota competition. These companies are now putting their money in supplier countries that offer the fastest and most flexible services. One aspect of this change is the habit of placing smaller order quantities to test German consumer reaction.

German clothing companies have developed test shops and test catalogues and are testing small quantities on the Internet before risking large orders, while companies are also relying heavily on high tech systems to predict demand patters and are changing their clothing designs much faster. This calls for faster delivery from suppliers and countries that are suppliers are faced with shorter lead times and must be able to make product changes faster.

“Most companies in Germany have been evaluating their supplier frame. Suppliers not fulfilling the requirements have been dropped. Strategic alliances have been made. In most cases 20 percent of their suppliers account for 80 percent of the turnover,” explained Schulte.

Being less flexible on quantities than other supplier countries, long lead times, problems with punctuality and quality and low creativity have pushed Sri Lankan suppliers away from the German buying chain, said the consultant. At the moment the biggest suppliers to Germany are countries like Turkey, Bangladesh, China, India, Greece and Morocco.

Spotting opportunities

Unable to hold its market share, Germany is still one of the top markets for clothing in the world and is home to some of the largest clothing brands. Some of the big buyers in Germany include the sportswear brand Adidas that had a turnover of over 2 billion in 2004, Esprit, the ladies and men’s clothing brand that had a turnover of over 1.6 billion and Boss, that sold over 1.5 billion worth of its clothing.

Other well known brands like the sportswear brand Puma recorded sales of 416 million, the Escada Group for ladies clothing sold over 625 million worth of goods and companies like the Naf Naf Group and Gas saw turnover of over 100 million in 2004.

The German clothing retail market also includes many different types of clothing retailers. These range from high-end retail outlets to multinational retail chains to national retail chains. Hyper stores, discount stores, mail order companies and home teevision retailers also hold a share of the retail market.

Schulte says Sri Lankan garment manufacturers can target some of these buyer segments depending on supply capabilities.

“National retail chains in Germany are coming up very fast. The product is in the medium range but is very successful. Some of these companies buy only from Turkey and China currently and might be happy to have some back up in Sri Lanka,” said Schulte.

“I see a good chance for Sri Lanka with multinational and national retails chains and mail order companies,” he said.

Under the JAAF market development programme Sri Lankan garment producers will have the chance of establishing contact with suitable German partners. The German market development programme will continue over a period of two years to allow companies to enter the German market and establish themselves. JAAF is currently signing up interested parties but Sri Lankan companies are advised to stock up on patience and resilience to succeed with German buyers.