INTRODUCTION

Are you already exporting to the EU, but do you want to enlarge your exports to the EU? Or, if you are not yet exporting to the EU, should your company start exporting to the EU ?

Which (new) target market(s) should you aim for and which key product(s) should you choose? Which trade channel fits your company best and how do you promote yourselves to EU buyers? These are common concerns of exporters in developing countries (DCs) who want to enlarge their exports to the EU or who consider to start exporting to the EU but are not sure if it is right for them. That is what these export guidelines are all about to help you to evaluate whether or not to get involved in the EU market or how to improve your approach to the EU market.

From survey to success: these guidelines are a practical add-on to the CBI market surveys for outerwear. If you have not yet consulted the CBI market survey ‘The outerwear market in the EU’, you are advised to do so before continuing with these guidelines. The guidelines are adapted to the specific challenges in the outerwear industry and contain many practical suggestions, which will help you in making decisions.

First, you are advised to define whether or not your company is ready to export. Chapter 1 helps you to answer this question. Then, if the answer to this question is positive, it is time to prioritise. Chapter 2 guides you through a process of country and product selection, which helps you to focus your export efforts. Once you have defined a target country in the EU and some priority products, you will have to choose the right entry strategy and the appropriate sales channel. Chapter 3 deals with this sales channel assessment. Chapter 4 gives you a range of practical suggestions for your marketing tools and chapter 5 discusses the financial part of exporting.

These guidelines are an addition to related CBI information which covers the general theory of exporting, like the CBI export manual ‘Export Planner’ and the CBI export tool ‘EMP Builder’. The market surveys, export manuals and export tools are available at http://www.cbi.eu/ marketinfo

Although these guidelines have been developed in particular for exporters, Business Support Organisations (BSOs) could also very well make use of them. Staff of BSOs in developing countries can use this document to support and advise their members about exporting to the EU.

EXPORT: YES OR NO?

Exporters in DCs who have read the CBI market survey ‘The outerwear market in the EU’ can see that there are a number of opportunities to attempt to access the EU. There are several reasons like growth, continuity and competitiveness, which support the decision to export. In any case, the decision should always be taken after export market research has been carried out and when customers have been identified, i.e. those who sufficiently appreciate some elements of a company’s product to consider buying it.

The total value of garments consists of material (fabrics, trim etc.) + design + production (sewing, knitting, finishing etc.) + logistics + marketing. Profits can be obtained wherever value is added to the chain. So the position of the added value in that chain has to be singled out. Finding out where the highest added value is can be determined by answering questions like, does the company have:

• easy and economic access to fabrics and trim?
• a design department?
• efficient production facilities and low labour costs?
• logistical advantages to reach markets?
• a brand identity?

In addition to chapter 2 of the CBI Market Survey ‘The market for outerwear in the EU’, outerwear producers can be classified by:

• CMT or OPT producers
• FOB producers
• Producers of private labels
• Producer of own design, mainly using brand trademark

Eventually, based on an internal analysis, exporters can recognize which type they represent. A short description of these various producer types is given below. Another classification used for producers, besides producing their own branded products is: full service, normal service and 0-service factories. Full service can be compared more or less with the private label supplier; the normal service factory is comparable to the FOB producer, while the 0-service factory is most likely working on a CM or CMT basis.

Characteristics of CM, CMT or OPT producers:

• often unable to produce more than a limited number of orders at one time(averages five or fewer styles per month);
• capacity is filled by a limited number of customers;
• customer supplies fabric and trim;
• efficieny is high when producing a basic product;
• cannot deal with changes in order (colour or size assortment) or design modifications;
• little investment is made in capital equipment and the factory operates using semi-skilled or unskilled workers.
• situated at a far distance from the EU, the factory enjoys a direct-cost advantage due only to labour cost.

Characteristics of FOB producers:

• able to operate with short lead times and operate best, when specialising in simple products such as pants and Tshirts;
• capable of producing a decent sample after the first or second attempt;
• depending on the relative abilities of buyer and factory and the style’s degree of difficulty, the buyer provides either a sample with pattern or a detailed sketch with a spec sheet (giving size measurements) and tech sheet (giving seam types, allowances etc.);
• as a rule, better-organised importers will provide patterns to less sophisticated factories, unless the
orders involve staple goods.

Characteristics of private label producers:

• need thorough in-house technological expertise, production experience and the ability to access special trim or machinery, also grading of fabrics;
• greatest scheduling advantage is flexibility: in lead times, in production (modular teams), in minimum orders (for important customers);
• customers can make changes not only in size assortments, but even from one style to another, up to the moment the fabric has physically been spread on the cutting table;
• number of orders produced is limited only by the size of the operation. A large factory is capable of producing over 50-400 styles per month.

Characteristics of own design (brand trademarks) producers: In higher segments or selected parts of the
outerwear market, brand trademarks are an important sales argument. Branding promises a special design, quality and exclusivity and it appeals to the consumer’s personal style. Branding can also help differentiate products, establish consumer loyalty and secure a price premium for products. Producers who want to work with their own brand have to fulfil several requirements:

• need thorough in-house technological expertise, production experience and the ability to access special trim or machinery, also grading of fabrics;
• they need a technological knowledge of designing, pattern-making, grading of fabrics, distribution, and should be able to produce constantly highquality outerwear;
• it may be appropriate to employ designers; sometimes they may work with free-lance designers. They need to be up-to-date on fashion developments;
• high level of marketing expertise is necessary and acquiring this expertise is essential for building and
maintaining brands successfully.

However, it is not necessarily a straightforward proposal to start exporting to the EU. There is a number of important requirements that DCs exporters have to meet before they should seriously consider to export. If your company is not able to meet these requirements, if not immediately, but not even certainly in the foreseeable future, then exporting may not be for you.

The key requirements are:

COMPLY WITH EUROPEAN MARKET ACCESS REQUIREMENTS

Despite EU harmonisation, which enables free trade between EU member states, individual markets have different requirements regarding quality, materials, garment types, sizes, colours etc. A number of requirements is important in the supply of outerwear.

• There is no EU quality standard for outerwear. Most of the importers work with certain minimum requirements. In this respect, they have formulated and stipulated minimum quality requirements, relating to both materials and make. The technical committee of the European Clothing Association (ECLA) published an example of recommendations concerning characteristics and faults in woven and
knitted fabrics used for clothing, in which a distinction is made between:

o Recommendations, limited to the characteristics of fabrics, which are detectable, by an experienced person with or without the aid of instruments in general use. A fault is considered if the irregularity is evident in the fabrics as delivered or is detrimental to the final garment;

o Recommendations, limited to the characteristics of fabrics, which can only be detected with the aid of suitable equipment. Each characteristic described comprises: definition, method of testing and minimum quality standards and as far it occurs: possible allowable tolerances compared with the values of the sample and eventual commercial implications.

• Methods of testing fabrics and/or garments are mainly based on ISO standards and otherwise on European norms (EN) or national standards (DIN, NEN or BS, respectively for Germany, The Netherlands and UK), like:

o care labelling (ISO 3758);

o dimensional stability aspects, like steaming (DIN 53894), fusing (DIN 54311), washing/tumbling (ISO 3759, 5077 and 6330), dry cleaning (ISO 3175);

o mechanical and physical properties like tensile strength strip (ISO 5081), tensile strength grab (ISO 5082), tear strength (ISO 9290), seam slippage (BS 3320), abrasion resistance (EN 22313), crease tendency/recovery (ISO 9867), pilling tendency (BS 5811), fibre penetration (SIS 650047), spray
test (EN 24920) etc.;

o colour fastness to several aspects like washing, light, water etc. (ISO 105).

A number of other requirements is important in the supply of outerwear:

• Packaging. All imported packaging must comply with European standards (be either re-usable, recyclable, energy recoverable or compostable); have the minimum volume and weight to maintain necessary levels of safety, hygiene and acceptance by the consumer; contain no more than minimum levels of heavy metals and other hazardous substances. There are also maximum quantity levels for packaging, and specific regulations on wood packaging.
• Anti-dumping. Import restrictions have been imposed on certain countries, designed to protect the EU apparel industry and prevent large-scale dumping of products on the EU market, causing a distortion of the normal operation of the market.
• Competitive prices, which are expected from retailers or distributors when buying from a DC. While price is very important, it is equally important that you should not be perceived purely as a source of a low cost product.

MORE INFORMATION

• http://www.cbi.eu/marketinfo Select “outerwear” and the EU. Under “legislation” you will see the various
relevant documents which you can download. Under “non-legislation” you will find other relevant documents, such as occupational health and safety requirements or buyers’ requirements.

• http://export-help.cec.eu.int. Use this source to find additional requirements, import tariffs and Customs documents. Click, for example, on “requirements and taxes”. Go to “search” to find the HS code for your product. Select it as well as your country and the EU destination country. Depending on your product, you will find a page with specific requirements for your product, general requirements and import procedures.

• http://www.cen.eu/cenorm/index.htm. This source promotes voluntary technical harmonisation in Europe, and conformity assessment of products and their certification. Search on outerwear to find relevant documents.

MEET INDUSTRY SPECIFIC CHALLENGES

Quality demands

EU customers are looking for reliable suppliers who can supply on a regular basis with a constant quality. DCs exporters need to be able to supply this constant quality. The exporter has to possess materials, space and equipment needed to manufacture according to the formulated requirements. Knowledge of the usual methods of testing fabrics and/ or garments is also necessary.

Sometimes, the customer will send a buyer or a representative to the supplier to visit the mill where the products in question are or may be manufactured, in order to undertake a supplier’s audit and/ or a quality control audit. A supplier’s audit gives a description of the type of products, number, type and age of the knitting, cutting and sewing machines. A quality control audit implies a description of the control procedures including employees, laboratory, system, packing and storage.

Buyers in the woven sector and in the flat knitting sector are more interested in the technical infrastructure of their suppliers than buyers in the circular knitted sector. In the latter case, buyers are more concerned about the continuity and fastness of the dyeing process and the competence of the technicians. It should be noted that the latest high-tech equipment is not necessarily a guarantee for flexibility, quality or for reducing production time.

Another factor is traceability. It must be possible to trace the entire product back through the supply chain. This entails detailed record keeping and strict control procedures for the various production processes involved.

Reliability

The EU market is characterised by high logistic demands. Lead times are becoming shorter and shorter and delivery reliability is paramount. Suppliers’ flexibility should be high and the response times (time between request for quote and purchase order) must be minimal and controlled. Therefore, supplying at exactly the agreed time and date is very important. Conformity to the quality standard must be continuous. In practice, this will often mean investing in new equipment and in the education and training of personnel. Reliability is of utmost importance to DCs exporters. Entering the EU market is a difficult process and, if you cannot keep promises, you will very soon be out of business.

Professional communication

EU customers expect DCs exporters to possess good communication skills. Therefore, you should be open and clear in presentations, keep appointments, respond quickly to questions and deal with questions and problems adequately. Prepare your company to be export-ready

• Do the Export Readiness Checker at http://www.cbi.eu/tools ( ‘export checker’);
• Have a first look at the online exercise to write an Export Marketing Plan (EMP Builder) at http://www.cbi.eu/ tools ( ‘Export Marketing Plan’). Familiarize yourselves already with the demands and requirements of exports;
• CBI’s ‘Export Planner’, in particular chapter 1 and 2 (http://www.cbi.eu/ marketinfo ‘search CBI publications’ export manuals).

Do a financial analysis

Exporting involves taking risks; the financial part is certainly one of them. Chapter 5 deals with finance in more detail. The financial analysis should also be used to make the decision whether or not to export. If your profit and loss projection of the export venture is not positive, you can still decide not to export,
as the financial risks are too high.

Yes or no?

If your company is not able to meet the minimum demands mentioned, is not export-ready and/or is not able to adapt to them on the short run, it is not advisable to start exporting to the EU. On the other hand, if you feel comfortable with these demands, you could consider exporting to the EU, so continue with chapters 2-5 of these guidelines.

PRODUCT – AND COUNTRY SELECTION

Once you feel your company is exportready, it is time to choose a priority product and an EU country.

Product selection

You are advised to focus on a specific outerwear product. There is no point in putting effort into analysing the European market for all your products if you are specialized in only one product. Your priority product(s) could be, for example, your most profitable product or the one with the least up-front investment. There are many aspects to consider here. For example, can you produce branded products for specific customers, or are your products unique to yourself or your country? The EU market also plays a role,therefore analyse the EU imports and consumer demand (discussed below).

Depending on the value that a company and product adds to the chain, the choice can be made for one of the market entry modes. Differences between each mode related to added value are given in the
matrix below.

This helps to determine which type of strategic alliance may be required. Look for partners who complement your company’s core competence. For instance: if ample production capacity is available, then look for a partner with a good product to manufacture. If the added value in design is low, because there is no design capacity, look for a creative partner. If added value in logistics is low, look for a partner with a good distribution infrastructure. The process of decision making, based on external and internal analyses, will be discussed in the next chapter.

EU country selection

The EU is not a homogeneous market. There are now 27 separate member states and, although there may be similarities between some states, the differences in some cases will outweigh the similarities. For this reason it is important in the first instance to focus on just one country. Even within countries there are important differences to appreciate. For example the north of Italy is very different from the south, and in Germany there are still differences between the west and the east. The climate is very different in the north of the EU to the south. This has a significant impact on the outerwear styles which will be sold. Try to narrow down your search initially to two or three markets. You should then start an in-depth investigation into each. The following criteria can be used to make your selection.

EU imports

At least do an analysis of:

• EU imports by product (which outerwear products are imported most?);
• EU imports by country (which country is importing most?);
• Share of developing countries in these imports (the higher the share of DCs in imports, the higher the acceptance of DCs as a supplier);

What is the development of imports, arethey growing? Note the significance of outerwear shares in the figures. This can sometimes disguise the extent of cooperation between countries, or provide clues as to gaps in the market for finished products.

Sources:

• Chapter 4 of CBI’s market survey ‘The outerwear market in the EU’ (http:// www.cbi.eu/marketinfo - select ‘outer wear’ and the EU tap the box sector surveys);

• CBI market surveys on the market in EU countries (http://www.cbi.eu/ marketinfo - select ‘outerwear’ and the EU country in question tap the box sector surveys);

• EU helpdesk - http://exporthelp. cec.eu.int. Go to ‘trade statistics’ and then use ‘search’ to find the HS code for your product. Then select a reporting country and the partner country (your country or all partners).In order to determine the most interesting EU countries for your product, select at least 3 consecutive years and also click on value and/or volume. The result is a list of all imports by the EU, sorted by supplying country and by importing EU country. Use it to determine the most interesting EU countries. Also analyse the development of imports (in both quantity and value) and look at your competition: which other countries supply ‘your’ product and how do their supplies develop?

Consumption

At least try to answer the following questions:

• What is the demand for your outerwear products in each EU country?

• How has this developed? Which EU countries show the biggest growth?

• What are the most important trends and in what way do they fit your product?

The size of the market is generally measured on consumer level (retail prices including VAT) and on production level. An overview of clothing consumption in the EU countries is given in chapter of CBI’s market survey ‘The outerwear market in the EU’. These figures have been derived from national statistics as far as available and from databanks supplied by research institutes like Gfk, active in several EU countries (http://www.gfk.com), Mintel (http:// www.mintel.co.uk), Verdict (http://www.verdict.co.uk) and Key Note (http:/ /www.keynote.co.uk) and publishers like Textiles Intelligence http://www.textilesintelligence.com), Retail Intelligence (http://www.retailintelligence.ie), Textil Wirtschaft (http://www.twnetwork.de) and Journal de Textile (http://www.journaldutextile.com/
intro_en.htm)

These statistics and publications are rather expensive; availability and costs can be found on the referred sites. It should be noted that official trade statistics can vary considerably in products or product groups, in volume denominators (weight and/or units), or absence of figures (secrecy) for competitive reasons.

Another means to obtain insight into a market is measuring on production level. The local market situation (apparent consumption) in a country is equal to production (at invoice value) plus imports minus exports and eventually plus or minus changes in stocks. The availability of production figures concerning
products or product groups is very limited and varies considerably per country.

Another vital piece of information, besides knowing the size of the market, is the projected market development for the coming years. When analysing these criteria, please be aware that the biggest (importing) EU market does not always have to be the most interesting country for you. Although Germany is by far the biggest market in the EU in terms of value and volume, it may, for example, turn out that –based on growth rates and/or interest in your country- another country is far more interesting for your product. The other important point is the extent of domestic production in a particular country. Is it strong, or vulnerable to outside competition? Much of the initial information about market size and developments can further be gathered by using websites of:

• Trade fair organisers, in particular the site of the German CPD: http:// www.cpd.de, for other sites see the country surveys.

• Trade press; to gather information about fashion shows, fabrics, designs etc. and to obtain inspiration, in particular from designers.

• Trade organisations.

• Some providers of general information also have specific descriptions of outerwear markets in some EU countries, like http://www. Intra cen.org; http://www.marketsearchdir.com; https://www. uktradeinvest.
gov.uk/ukti/appmanager/ukti/splash

• Finally, limited but essential information gathered from world-wide publications is delivered free by
http://www.just-style.com and http:/ /bharattextile.com, while paid membership gives even more
information.

Sources:

• Chapter 1 of CBI’s market survey ‘The outerwear market in the EU’;
• Industry associations and (other) trade journals in EU countries (can be found in CBI market surveys on the outerwear market in individual EU countries).

Primary research

Apart from Internet research, you are advised to do your own primary research. This requires you to talk to experts who are specialists in the outerwear market in the EU. They can provide you with extremely valuable first-hand information, which can inform your decision-making. Try to interview importers, industry specialists and other experts. In general, such information can best be gathered by talking to people (at trade fairs, or by phone).

Sources:

• CBI’s ‘Your guide to market research’ (chapter 2.2.3) (http://www.cbi.eu/marketinfo ‘search CBI
publications’ export manuals).

• Industry and/or trade associations in the EU (can be found in CBI market surveys on the individual countries).

Competitor analysis

Look at your competition and learn from them. What can you find out about their strengths, success factors, price level, materials, finishing level of products and/ or added value? Do not forget that competitors can be found in your own country, in other DCs and also in the EU. You can use chapter 4 of the CBI market survey (or chapter 3 of the individual country surveys) for a competitor analysis. This contains a table giving leading suppliers to most EU countries. The market surveys also discuss the development of imports from developing countries per product group. You can also use the CBI market surveys to identify the EU competition. They discuss production (developments) and the most important players per country. Visit their websites!

Sources:

• Industry associations in the EU, look for member lists to identify EU competitors (can be found in CBI
market surveys on the market in individual EU countries); • CBI’s ‘Export planner’ (chapter 2.5.4
and 3.3);
• CBI’s ‘Your guide to market research’ (chapter 3.1.7);
• CBI’s ‘EMP Builder’ (chapter 3);
• List of exhibitors on trade fairs or, even better, visiting trade fairs.

Common sense

Never underestimate the importance of common sense, and your own instincts for what is the right decision.

Priority

The consumer demand trends in the outerwear market are very important. The future trends for consumer products are as important as statistics on what has happened in the past. While the statistics give you a good indication of the nature of the supply structure, this is always subject to change. The opinion of industry experts is very important; they provide first-hand information, which you can use to make choices for your target countries and products.

More information

Please also read the following:

• CBI’s ‘Exporting to the EU’ (Chapter 1 – the EU as an export market, chapter 2.1, 2.2 and 2.3, particularly the consumers trends 2.3.3 – 2.3.7) (http://www.cbi.eu/marketinfo ‘search CBI publications’ export manuals);

• CBI’s ‘Digging for gold - Internet as a source for marketing information’ (techniques to do internet research, many useful websites) (http://www.cbi.eu/marketinfo ‘search CBI publications’ export manuals);

• CBI’s ‘Your guide to market research’ (http://www.cbi.eu/marketinfo‘search CBI publications’ export manuals);

• CBI’s ‘Export Planner’ (chapter 3.1) (http://www.cbi.eu/marketinfo‘search CBI publications’ export manuals);

• CBI’s export tool ‘EMP Builder’ at http://www.cbi.eu/tools ( ‘Export Marketing Plan’).

To be continued in the next issue