Exporters target high-end retail markets by focusing on Peru's locally produced, quality textiles

 

Home to high-quality materials such as pima cotton, alpaca and vicuña wools, among others, Peru has long been a competitive producer of clothes for both local and international markets.

According to the National Society of Industries (Sociedad Nacional de Industrias, SNI), the clothing segment accounts for around 5% of the country’s manufacturing production and provides employment to around 500,000 people, as well as approximately 1.2m indirect jobs.

Changing Tack

Although the past few years have been challenging, with exports falling by 7% in 2016, the textiles and clothing sector is now showing tentative signs of recovery, with a slight year-on-year increase of 0.9% in exports in the first quarter of 2017, according to the Exporters Association ( Asociación de Exportadores, ADEX). A rise in US demand is key to this, as the country is still the destination for approximately half of total sector sales.

Ysabel Segura, head of manufacturing at ADEX, advises that the task for the sector now is to consolidate this nascent recovery by working to establish brands, diversify markets and, above all, to innovate. “Innovation is the challenge we face. We have excellent fibres, and that is what clients want, differentiation. Peru is targeting a segment that bets on quality, looking for different mixtures that make it feel different. All those factors, and flexibility, are what the Peruvian industry contributes,” she told local media outlets in mid-May 2017. “We are committed to greater diversification, we want to strengthen our presence in Europe, particularly in the Nordic countries, with a commitment to alpaca garments, accessories based on that fibre and alpaca textiles for the home,” she said.

Segura also said that these new niches, added to the main US market, would help with the sector’s recovery. “For example, Argentina is a market that’s growing. The baby and child sector stands out, it’s very interesting and creates a lot of interest among Argentine consumers,” she said. Segura advised companies to get to know their markets. For small companies, she noted, neighbouring markets are good starting points, given their similarities to Peru, along with preferential tariff access. According to the SNI, about 20% of Peru’s micro and small textile firms that have not yet moved into the export market were preparing to take this step in 2017.

High-End Focus

Echoing other voices in the industry pushing for a focus on quality over quantity is Igor Rojas, coordinator at the Commission for the Promotion of Peruvian Exports and Tourism (Comisión de Promoción del Perú para la Exportación y el Turismo, PROMPERU), Peru’s export and tourism promotion agency. According to Rojas, Peru’s textile sector should focus on the higher end of the market, as well as promote Peruvian brands and designers. “Our advantages as an industry are that we have the alpaca fibre, we have 80% of global production, as well as premium cotton. This positions us towards a medium- to high-end final consumer,” he told local media outlets. “In the Peruvian industry, with time the consumer has come to know the quality of our fibres. We need to point our offer towards a more exclusive segment. This is the message we want to give. So that buyers see that this market is based on quality, rather than price, and on a distinctive fibre that is not available in other production centres.” Furthermore, Rojas told the media, “What we are also trying to do is to get away from this idea that we only produce for third parties, we are looking to promote our own brands and designs.”

Cotton, Peru’s “white gold”, is prized for its exceptional durability, softness and brilliant lustre. Peruvian Pima cotton, grown on the north coast, is considered potentially the world’s finest, while Tangüis cotton, grown on the central coast, is highly regarded for producing a yarn of great regularity, from which carded and combed yarns can be produced. Both cottons are extra long, and also staple in length, making them of exceptional quality for production purposes. Efforts are under way to innovate and mix fibres to deliver even higher quality. The aim, Rojas stresses, is to ensure the brand “Made in Peru” has value on the international market. That can only come with design as well as production, he notes, and so creatives and designers need to be visible internationally, so that buyers don’t just think of Peru as a producer. Rojas told the press he expects sector exports to recover to $1.3bn-$1.4bn in 2017, in line with rising US and European demand.

Support

Another advantage for Peru’s textiles sector is the relatively good coordination between the private and public sectors in support of it. For example, Alpaca del Perú, Expotextil Perú and the Alliance of Peruvian Designers, among others, came together to simultaneously hold the annual Perú Moda & Perú Gift Show and Lima Fashion Week in April 2017, which was attended by over 5000 people.

According to Eduardo Ferreyros, the minister of foreign trade and tourism, and Efraín Salas, director of Lima Fashion Week, the idea was to take the event to the next level, thereby attracting more intense international interest. Luis Torres, exports director at PROMPERU, was projecting deals totalling approximately $80m from the event, with PROMPERU helping to match 250 local exporters with around 700 international buyers and 500 national buyers. Activities included forums on trends, techniques and technological innovation.

Policy Approach

While a focus on the highend export market will give the industry a boost, local producers are calling for support against the recent influx of low-cost products from China, as well as the arrival of fast-fashion brands in Peru. Juan Carlos Mathews, the deputy minister of production, has hinted at new tariff reforms, as well as incentives to help local cotton growers expand their production. This represents a different approach to the one called for by some in the industry, who seek more direct anti-dumping measures. There is evidence that anti-dumping measures already in place are not entirely working, with research by the Lima Chamber of Commerce suggesting some companies got round them by bringing in their goods via third countries like Chile. The Lima Chamber of Commerce says dumping is ongoing in Peru. While a new textiles sector proposal from the government is still pending, ADEX, the SNI and the National Union of Textile Companies, which point out that 500,000 jobs directly depend on the sector, are hoping their calls for a new policy approach are listened to.

 

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The Report: Peru 2017

Industry & Retail chapter from The Report: Peru 2017

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