Global Changes In

Clothing Consumption By 2020, And Their Impact On Fibre-Manufacturer

Supply Chains

Arvind Singhal Chairman, Technopak Advisors

2 Presentation Flow

• Key trends impacting global apparel market

• Impact on fiber-manufacturer supply chain

• Implications for textile and apparel producers

Key Trends Impacting Global Apparel Market

4

1: Subdued Medium Term Economic Outlook For Major Consuming Economies

-8%

-3%

2%

7%

12%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% GDP Growth

Source: IMF

China India

US UK

Germany Japan

5% GDP Growth

GDP growth rate of all major consuming economies,

except China and India, is expected to be less than 5%

5

2: Steadily Reducing Share Of Apparel & Footwear In Household Consumption In US And EU

5.5%

8.1%

6.8% 6.2%

4.5%

6.0%

5.3% 5.8%

3.5%

5.2%

4.3%

5.6%

US Germany France UK

1990

2000

2010

Source: US Census, Eurostat, Technopak Analysis

6

3: Higher (Per Capita) Apparel Consumption Growth In Developing Countries

680 690 727 647 701 729

52 119

209

19 30 46

0100200300400500600700800

2005 2010 2015

US EU China India

Per capita apparel consumption

Gap in per capita consumption

From 2010 to 2015, the per capita apparel consumption will increase by 75%

in China & 50% in India; trend is likely to continue through 2020 and beyond

US$ per capita

Source: US Census Bureau, EU CBI, NBS China, Technopak Analysis

7

720

1170

1725

2000 2010 2020

Brazil

China

India

Japan

EU

US

World

Developing Countries To Drive Growth In Apparel Consumption …

CAGR : 2010-20 Global Apparel Market Size

US$ bn 8%

2%

4%

Global apparel market expected to grow @4% ; China, India, Brazil are expected to grow at twice the global rate

Combined CAGR

Source: US Census Bureau, EU CBI, NBS China, Technopak Analysis

11%

68%

% share of market

20%

55%

29%

44%

8

Forcing Major US & EU Brands & Retailers To Explore International Even More Aggressively

Source: Company Reports, Secondary Research

3%

9%

14% 17%

20%

7%

16%

20%

35%

57%

0%

10%

20%

30%

40%

50%

60%

American Apparel Guess Ralph Lauren Urban Outfitters A & F

Overall Sales Growth in 2011

International Sales Growth in 2011

9 4: Rapid Rise Of E-Sales

Source: Company Reports, Secondary Research

36%

14%

15%

20%

30%

29%

22%

28%

8%

15%

22%

23%

A&F

Aeropostale

American EagleOutfitters

GAP

Nordstrom

Polo Ralph Lauren

Growth in online sales of selected companies

3 Yr CAGR

YoY Growthin 2011

Impact On Fibre-Manufacturer Supply Chains …

11 1: Supply Chains Getting More Complex

manufacturer

wholesaler

retailer

consumer

manufacturer

wholesaler

retailer

consumer

manufacturer

wholesaler

retailer

consumer

Past Current Future

• Re-configuration

• Further pressure on shortened delivery time

• Increasing # of SKU’s and lower order quantities per SKU

12

Collaborative supply chain

Common warehouse

Regional Consolidation Common

Logistics

Man

ufa

ctu

rin

g

E-commerce growth will necessitate requirement of collaboration between manufacturers, retailers and service providers

Data sharing

Data sharing

2: Heightened Need For More Collaboration

consumers

retail

13

3: Changing Sourcing Patterns ... More Challenges For Manufacturers

• Sourcing teams are now working on more number of seasons. Instead of two or four seasons, fashion brands and retailers have started working on 12 buying seasons a year

• Lead times have been further squeezed to have better control on raw material cost and improve responsiveness to the changing fashion needs

• No longer the manufacturers have the luxury of receiving order of greige fabric / blocking capacity in anticipation of future orders

14

4: Emergence Of New Supply Chains To Service Different Markets …

Closer to market manufacturing location for fashion products

basic products

Low cost manufacturing location for basic products

fashion products

US and EU Markets

High value, high fashion

More automation; regional and global supply chains

Developing Markets

More basic products

Regional and local supply chains

Implications For Textile & Apparel Producers …

16 1: Adaptive Manufacturing Approach

• More adaptive manufacturing approach • Multi location manufacturing (perhaps separate

manufacturing bases for Basics and Fashion)

• Making value added products in-house & outsourcing basics

• Even higher focus on improving business efficiency

17 2: More Deployment Of Technology

• More technology deployment across the entire value chain, covering: • Consumer demand and fashion trend tracking (advanced

analytics and application of Big Data processing tools)

• Product development and sampling

• Production (more automation)

• Warehousing

• Shipping

18

3: Re-look At Strategy For China, India, & Brazil’s Local Markets …

• Develop localized / regional supply chains through strategic alliances, joint-ventures, acquisitions, and / or wholly owned manufacturing and marketing subsidiaries for each of China, India, and Brazil • China : China, Vietnam, select other SE Asian countries

• India : India, Pakistan, Bangladesh, Sri Lanka, Vietnam,

select other SE Asian countries

• Brazil : Brazil, select other South American countries

Thank You !

For further dialogue, please contact :

Arvind Singhal Chairman, Technopak Advisors (India) T : (+91) 124 454 1111 E : arvind.singhal@technopak.com Web : www.technopak.com