OPINION

Ricardo Serra is a Spanish journalist specialised in home –textiles in Europe-Asia, And he will send us regular reports reflecting the home-textile companies reality and the incoming of Asian products and its possible solutions.

“China and India: Producers, but also Consumers of European Goods”

All roads are two directional, and this is the moment to head for Asia. Over the last few years, European firms have been opening sales outlets in Hong-Kong or Peking at an incredible rate with spectacular results. For example, in 2003 Ferrari sold almost 1,000 cars (when in Spain it does not even sell 40 new vehicles a year). As for the clothing industry, Cortefiel has opened two shops. There is sales potential for European goods there, and we must decide how to penetrate the market.

Asian Demographic and Economic Data

China, India and Pakistan are the biggest producers of home textiles in Asia. The remaining Asian countries lie far behind them. Some, like Bangladesh, Korea and Taiwan, have managed to forge a reputation for certain products (tablecloths, woollen cloth, the famous made-ups etc.), but they do not hold a position of importance in the ranks.

To date, no reliable data about the Asian market is available, not even from the International Monetary Fund, whose information dates back to 2001/02, so that it acts as a guide rather than a reference.

According to economic and demographic data, China and India are the two countries that offer the greatest potential for European industry. In total, they have a population of 2,300 million inhabitants, with a middle class that accounts for 60 million people, including executives who earn between 18,000 and 80,000 euros. Fledgling engineers straight out of university earn salaries of 500 euros a month: a ridiculous but not incredibly low sum.

India has a middle class of almost 100 million people, with salaries that fluctuate between 15,000 and 35,000 euros per year. There are fewer millionaires in India than China, but according to the available data they account for some 15 million people.

If we add China’s potential to that of India, we are talking about nearly 200 million people with a market potential: a figure that represents 10% of the population, equivalent to the joint populations of Spain, Portugal, Italy and Germany.

These people have a per capita income of about 900 euros per year in China and 600 in India. Evidently, there are huge social differences and some time is still needed to narrow the gap. Chronologically-speaking demographic figures reflect an increasingly young population. Meanwhile there is also a growing demand for European goods.

The Pros and Cons of Asian Goods

With very low salaries and labour subject to a 12-hour working day, 6 days a week, all year round, the concept of a “holiday” simply does not exist. To this we must add the cheaper energy that is available in these countries and possible development aid from world organizations due to the rising price of oil (with prices shooting quite a lot higher than 50 dollars a barrel when this article was written). Imports of Asian goods are made easier by the liberalisation of import tariffs and, as if that were not enough, these countries manufacture good products with quality certificates in the case of India and the emergence of serious firms in the case of China. The scenario is not a very good one, but it will not be as easy as they try to make out. Europe has its own system and they must try and penetrate it.

If we want to manufacture goods of a European design in Asia, the idea is fine but we have to do it 100%, because raw materials and finishes are different there and European customers would not accept this kind of change.

The main weakness with Asian goods is the fact that producers wait until an order has been placed before they start manufacturing. Once a letter of credit has been opened by the buyer and the manufacturer has started on the order, at least three months are needed for the goods to reach Europe. Our customers need goods in 24 hours and, in the case of exports, we can manufacture repeat orders within one to three weeks, also accepting smaller orders than the original one. We need a stock of goods to offer an appropriate service.

What is more, if you want to get a good price in Asia, the minimum order you must place has to be a high one. You must also take into account the possibility that the purchased goods are not so commercially successful as originally expected. These things alone exclude shops and groups from buying direct from Asia, protecting internal distribution channels from outsiders. There will always be the occasional exception to the rule, but only rarely.

Leaving aside all the above, we are trend setters and we start fashions. The problem we face is to find out what proportion of our goods we should send to Asia and what share of the European market we could achieve with Asian products. There will always be a cheaper Far Eastern product.

What Can European Firms Do?

It is our duty to try and ensure the loyalty of European customers, including Eastern European ones. We must start actively thinking about an offensive against China and India. This is a unique opportunity and we must get going. Now is the time to leave behind the dinosaurs of the home textiles industry and start looking for opportunities.

21st century industries must be dynamic ones. They must be receptive to mergers and agreements, to subcontracting specialist private services, to delocation if necessary and, above all, to not relying blindly on anyone or anything. The authorities do what they can but their resources are limited.

A good solution for European medium and small companies and Asian companies:

There is a private initiative in Europe called “Home Textile Mediterráneo 2004, an exhibition presented for first time last year, the aim of the project is to focus the incoming of Asian companies in Europe. The buyer profile will be, national importers, agents, big shop chains, the interior distribution channels in the country won’t break following this way as the small shops won’t reach the exhibition. This way the Asian exhibitor is happy as all the visitors to its stand have at least the capability to buy a 22ft container.

In the first edition, during 3 days, 830 visitors from Spain and Portugal, walked the fair !!!!!

35 companies exhibit last edition, companies from India, Pakistan, China and Bangladesh, the companies feed back was absolutely positive.

For the 2005 edition, the target is to bring 2.500 buyer visitors from Spain, Portugal, France, Germany and Italy reaching in the other hand 100 exhibitors form Asia, right now 55 exhibitors are ready to exhibit.

For more info, please, visit the site: www.htmfair.com