The local summer fabrics market is peculiar for the width of its price range. Prices of fine varieties are falling and may end up 15pc lower this year as cheaper cotton imports have reduced the cost of production.

Prices of cotton lint have followed the global trajectory of commodity prices and declined by as much as 40pc over the past one year, according to key textile players. The trend has influenced the pricing of better fabric because of the fiber-import component in its cost.

However, poor female summer fabric buyers might not benefit as much as the rich, for the price differential is expected to be higher in the finer varieties.

‘The situation works in favour of the bigger market players who have the cushion to absorb price cuts as they try to increase the reach of their brand to the middle and lower-middle classes. This will serve to drive the short-term players to the sidelines’

“The fabric for a three-piece suit priced at Rs500 is already selling for too narrow a margin. It is hard to imagine it being sold any cheaper. At best, producers may resist the temptation for an annual raise in the price line,” a textile tycoon told Dawn.

“If you look at the costing, which includes raw cloth, dying and printing, there is no way to produce the standard 7.5-8 metres of a three-piece lawn suit for less than Rs600. The varieties available for Rs500 and less use rejected material or inferior quality of dyes,” a leading textile exporter said over phone from Faisalabad.

However, the margins are fairly high for the 10 biggest players in the textile market, who have developed brands and dedicated store chains. The medium and small textile millers seem to be envious of the textile tycoons crowding them out of the market. They suggested that the big business houses tend to understate their profits and amplify the problems. They hinted that margins in textiles, like in other businesses, are proportionate to their size.

“Producers of finer fabrics and textile brand owners should slash their prices as their cost of production has come down because of cheaper lint imports. My sense is that they will lower the prices not because the production cost has gone down, but to tighten their grip on the market,” he added.

A random survey of markets in Karachi endorsed the expectation. At the lower end of the cotton fabrics market, prices are stable at last year’s level; but at the higher end, customers are clinching value deals.

Last year, the cheapest varieties of three-piece lawn suits ranged between Rs500 to Rs1,000, while the starting price of a branded suit piece was around Rs1,700 and went as high as Rs28,000. Currently, the prices of coarse cotton varieties are the same as before, but high-end brands like Sana Safinaz, Asim Jofa and Khaadi etc have scaled down their minimum prices, particularly for online deals.

On their respective websites, the minimum price of an Asim Jofa suit is quoted at Rs1,300, Sana Safinaz Rs1,500, Khaadi Rs1,650, Classic Rs1,600, Royal Rs1,700, Gul Ahmed Rs3,600, Orient Rs4,000, Katan Rs1,950, Al Karam 1,750, Muasummary Rs4,950, Firdous Rs2,496 and Junaid Jamshed’s at Rs1,985.

Some other leading groups are Nishat, Sapphire, Crescent, Sitara, Ittehad, Dawood and Five Star. It appears that Bareeze, Orient and Gul Ahmed are the priciest, while the others have introduced varieties that are within the reach of the middle classes.

“The situation works in favour of the bigger market players who have the cushion to absorb price cuts as they try to increase the reach of their brand to the middle and lower-middle classes. This will serve to drive the short-term players to the sidelines,” commented another big-wig on the condition of anonymity.

Meanwhile, businessmen accepted that their advertising budgets have increased manifold as compared to what it was a decade back. And brands are spending much more on this head than they did last year.

“A portion of the cost-savings on raw material is directed to modern marketing models as the companies invest more liberally on market research and developing capacity to handle social marketing and online sales directly and through online stores, primarily because of competition,” said a leading light of the industry.

Talking about the aggressive advertisement campaigns by textile companies, another businessman (who is not as visible in the market this year as before) viewed the spike in the ad-spend differently.

“The advertising budget tends to rise during recession as companies compete to defend and increase their share of a shrinking pie. My company is in trouble for another set of reasons, but it is a fact that an average family under economic stress must have slashed its clothing budget. The industry has the capacity, but domestic demand is rising at a pace insufficient to support all who aspire for a piece from the cake,” he insisted.

“Yes, we have invested massively in marketing our product. But the response after the launch in mid-February has been lacklustre. We are keeping our fingers crossed.”

Published in Dawn, Economic & Business, March 23rd, 2015

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