Global vs Local brands: Price gap is thinning

Domestic garment manufacturers are facing a double-whammy

of spiraling cotton prices and the 10 per cent excise duty levy on their branded products. This has narrowed the gap between brands manufactured in India and those imported, giving the foreign brands a big advantage as this could also lead to urban shoppers shifting from local brands to foreign marquees as prices become more competitive in the premium segment.

Domestic garment manufacturers and retailers such as Pantaloons, SKNL and Arvind Brands have hiked or are looking to raise prices of their products by 10 to 18 per cent to offset costs. Cotton prices, too, have increased nearly 40 per cent in the last two months. Interestingly, the excise duty levy comes at a time when several international brands are making a beeline for India. Many are tweaking their pricing strategies to attract consumers.

Darshan Mehta, President and CEO, Reliance Brands, which retails brands like Diesel, Paul & Shark, Quiksilver, Marks and Spencer, points out his advantage. In their case the impact of excise duty would be negligible as most of the garments are made-to-order and imported. A certain amount of import duty is already paid on it. Hence, they will not bear the brunt.

But it is a cause for concern for others. Ashish Dikshit, President, Madura Fashion and Lifestyle, says if raw material prices continue to rise they could hike prices by another 10-12 per cent in the winters. This could result in a 30 per cent effective hike in retail prices. It could also push people towards value brands.

Moreover consumers with a preference for international brands would find the price gap between them and Indian ones narrowing. So they’d much rather opt for a global brand instead.