Weak consumer demand harm India sourcing

India - Timberland is the latest global apparel retailer to pull its US$30 million sourcing operation out of India, as it grapples with weak consumer demand worldwide.

Timberland's decision follows a similar move by UK retailer Next, which closed its operations from Bangalore earlier this year. Liz Clairborne is reportedly also considering closing an Indian sourcing operation believed to be worth approximately US$100 million.

The latest development marks a complete break away from the Indian sourcing boom that came along with the rapid expansion of the country's retail sector. It has been blamed on volatile US currency fluctuations that have shaken the India sourcing industry.

"The sourcing division has several hidden costs, especially in a market like India which is getting expensive. The companies are factoring in the overhead costs of a sourcing establishment," R Kirshnakumar, CEO, Integra Apparels, part of Ashok Piramal Group told the Economic Times.

However, retailers like Wal-Mart, JC Penney, Target, Tesco and H&M have been scaling up direct sourcing operations, helped along by their economies of scale, the newspaper reported.