Pallak Seth arrived in Hong Kong in 1999 with $250,000 from his father to establish his own business, alongside the family’s garment factory in India. Keen to source new product categories from China and to serve clients introduced by his father, he set about establishing relationships with factories there, offering differentiated fashion products to retailers across Europe. Six years later, Seth teamed up with Sunny Malhotra, his first hire, and the duo never looked back.

“That was the start of PDS’s journey. We were a $50 million dollar business back then; today, we’re a couple of billion,” said Malhotra, recounting the birth of Seth’s Mumbai-listed, Hong Kong-based sourcing company PDS Limited. Together, they established Simple Approach, the group’s anchor subsidiary, of which Malhotra is managing director.

Back in 2005, apparel sourcing was dominated by intermediaries like Li & Fung, a sourcing, trading and logistics company that operates between retailers and suppliers by taking orders from the former and placing them with the latter. The colossal Hong Kong-based firm, which has been trading for over a century, expanded its global business capacity through organic growth and by acquiring factories and rivals. One such acquisition was Colby Group Holdings, which Li & Fung bought for $2.2 billion in 2000, cementing the company as the world’s largest sourcing network for global retailers.

Whilst that model worked well in the early 2000s, Seth saw an opportunity to evolve away from Li & Fung’s acquisition strategy. The ambitious New Delhi native recognised that sourcing industry vendors had highly talented salespeople with strong brand relationships but, as he saw it, weak financial incentives to grow the business.

“What [Pallak Seth and his father, PDS chairman and Pearl Global founder, Deepak Kumar Seth] made me think about, was: ‘you don’t have any equity, you’re simply an employee like everybody else’,” said Malhotra, referring to the pitch made to him on the day Seth lured him from his then employer into their partnership.

Having skin in the game

Malhotra had met Seth at a conference a year earlier when he was head of sales at SKD Pacific Ltd, a manufacturer, supplier and exporter of apparel goods whose customers included Primark.

“I had built a business within a business; I’d done really well … My relationship with [my then employer] was strong, but he had three sons. Even if he had said to me, ‘I’ll give you 5 percent [equity]’ I would have stayed; it would have meant that he felt I was important. But he never offered me that [even] when I resigned,” said Malhotra, noting that the company “doesn’t exist” anymore.

By offering employees of rival sourcing companies, suppliers or brands the opportunity to become better-compensated entrepreneurs, PDS has grown to become a multinational publicly listed company with hundreds of fashion brands relying on its services, including the design, sourcing, manufacturing and distribution of goods. Subsidiaries of the group work with vendors who supply for the likes of Zara, Levi’s, Gap, Target, M&S, Ralph Lauren and PVH, the owner of Calvin Klein and Tommy Hilfiger.

Today, the group oversees production of one million pieces of clothing per day, according to Seth, from over 600 vendors in more than 10 countries including China, Cambodia, Pakistan and Turkey, in addition to the group’s owned, inhouse factories in Sri Lanka and Bangladesh.

“PDS is a holding company, essentially, driven by around 50 entrepreneurs with their own [subsidiary business] and P&L to manage, and their own customer relationships,” explained Seth, who serves as executive vice chairman.

The entrepreneurs each part-own the subsidiary business with a minority equity stake typically ranging from 10-25 percent. Despite the equity split with the parent company, Malhotra asserts that “each business is independent within PDS – we [the entrepreneurs] are the decision-makers.”

“As long as we’re meeting our budgets and financial [targets], nobody gets involved [and] we run [the businesses] as if we own them 100%. That’s a big advantage and it’s why nobody wants to leave,” Malhotra asserts.

Seth revealed in a Harvard Business Study in 2020 that 80 percent of the subsidiary businesses had been successful, with the other 20 percent (15 companies) closing down after 2 to 3 years. The losses were absorbed by the parent company.

The company’s multiple subsidiaries had caused some difficulties and duplication, but Seth says he strengthened the platform as a unified yet decentralised business in 2017. The “beauty” of the current platform, he adds, is that it ensures rigorous on-boarding of vendors (textile and garment factories) through unified standards, auditing, ESG compliance and stringent financial management and reporting.

“If you look at the difference between us and Li & Fung they have gone out and acquired companies which has actually been their downfall, because they’ve given an earn-out to the presidents and, once they leave, the [retailer] relationship leaves, and that’s why those companies decline,” claims Malhotra.

Digital-first disruptors

Unsurprisingly, Li & Fung group CEO and executive director Joseph Phi characterises things differently, describing the company as having “a unified structure [with an] ‘all of Li & Fung’ approach, versus silos.” Phi says he joined the company in 2020 to steer the strategic restructure of “the world’s largest sourcing company [by volume]” across apparel, home and footwear products.

But before Phi came on board, Li & Fung did go on a $7 billion acquisition spree between 2006 and 2012, its final acquisition year. At the time, the South China Morning Post reported that “anticipated synergies from its acquisitions had failed to materialise,” concluding that “Li & Fung’s own business model may be dying.” The company lost 95% of its market value in the decade to 2020 and was then delisted from the Hong Kong Stock Exchange and re-privatised.

Phi explains that while Li & Fung’s 116-year history means its origins were inevitably analogue, today the business is also digital, offering “data-driven design, 3D modelling, product development, ESG consulting, sourcing, warehousing and more.” The company has a vendor network spanning more than 50 countries and serves more than 250 brands and retailers including Walmart, Inditex and Primark.

The company’s greatest advantages against the competition, according to Phi, include its ability to offer stand-alone services, such as logistics, as well as the ability to shift production orders between vendors immediately when supply chain disruptions occur such as the shipping delays caused by the Red Sea crisis.

Phi also highlights the company’s “home court advantage” in China — the world’s largest apparel exporter and manufacturing nexus — where it has a front row seat to the newest and most competitive business models, like those of Temu and Shein. “Using generative-AI [for product design] has enabled us to grow [the business] despite the challenges in the global economy,” Phi maintains.

Experts suggest that Li & Fung and PDS have more in common than meets the eye. “I think [they] are quite similar in terms of what they do [but] Li & Fung has been out-marketed by PDS,” says WhichPLM Consulting founder Mark Harrop, a futurist who advises global brands, retailers and other firms, including Li & Fung, on future technologies in fashion.

Harrop says that Li & Fung “has [digital solutions] like their competitors [including TAL Apparel, MAS Holdings and PDS but] they’re just not [shouting about it] like some of the others are.” In contrast, “PDS has come out fighting [with its] ‘digital-first’ approach.”

Moin Golam, an ex-Li & Fung employee, is one of PDS’s more recent converts, having jumped ship in 2020. Today he is executive director of the group’s recently established subsidiary PDS Fashions USA, based in Dhaka, Bangladesh.

“I was responsible for a P&L at Li & Fung but in PDS you are the one running the show,” explains Golam, who took a minority equity stake in the venture he set up at the group.

Golam concedes he was initially reluctant to leave the sourcing giant. “I was [at Li & Fung] for almost 11 years and [progressed] from merchandising to regional head. I had been in a comfort zone [with] a handsome salary and other benefits [so] when I was approached by a head-hunter to join PDS, I wasn’t compelled in the beginning. I refused three times [before] agreeing to [even speak with PDS founder Seth]”.

Ultimately, Golam says, it was the incentivisation and autonomy elements of Seth’s vision that persuaded him to accept the accompanying risks. “Before I was part of a ship, but now I am the captain of a smaller ship. If you do a great job [at PDS], you see the benefit; if you don’t, you feel the worst [of it].”

Now that he is at PDS, Golam serves clients like Kohl’s, Target and athletic brand Mission, working with eight vendors including Bangladesh-based Standard Group and Eco Apparels who produce garments for major US and European fashion retailers and brands.

“Our aim is to make sourcing simple,” said Golam, adding that his quality assurance manager visits factory vendors five days per week in a sign of the firm’s dedication to brands and retailers and a key part of its value proposition.

But PDS is not alone in disrupting long-time incumbents like Li & Fung.

The innovation race

BlueKaktus, another India-based competitor, is a SaaS sourcing platform for vendors, brands and retailers spanning the entire supply chain. Founded in 2000 by New Delhi native Gunish Jain, a computer engineering graduate with 18 years’ experience running his family’s garment factory, the platform optimises efficiency at every step in the supply chain, he says. Brand clients include Jockey and Amazon, with 7000 vendor clients in 30 countries.

The platform ‘plugs into’ brand and retailer product life cycle management (PLM) software via APIs, enabling them to view factory production capacity and make fast, efficient purchase order placements with near real-time tracking of order progress — a level of visibility not typically available in other platforms.

“We have reduced production lead-times to as short as four weeks, compared to the typical 13 weeks,” says Jain, who also serves as BlueKaktus’ chief executive, about the service which allows brands “to place smaller orders closer to market to better manage inventory.”

BlueKaktus’ innovations have certainly helped it to become more agile, but it is arguably PDS that is more daring when it comes to investment strategies. Not only does it operate full-service sourcing through entrepreneur-led subsidiaries, but it also invests in new technologies through its investment arm, PDS Ventures, founded in 2018.

“We co-invest [with brands] and our collaborative approach is a differentiating factor for us,” says Ankur Agarwal, head of investments at PDS Ventures. PDS’s expertise and significant volume of business with leading brands means it is well positioned to evaluate the solutions those brands need in the rapidly changing consumer, regulatory and sustainability landscape, he adds.

The venture’s investments include the regenerative cotton tech platform Materra, alongside other seed-round investors H&M and Bestseller. PDS Ventures also invested in Unspun, the creators of the ‘zero waste’ 3D weaving technology Vera, who also count Decathlon as an investor.

Besides strategic investments PDS has also begun acquiring ailing and high growth-potential brands through subsidiary companies, including The Brand Group (co-founded by Malhotra and fellow entrepreneur Damian Hopkins). The Brand Group bought a majority stake in London-based luxury brand Roksanda in 2023, with the namesake founder retaining a minority stake.

Next, PDS founder Pallak Seth has his sights on expansion through new verticals in Central America for nearshoring to the US market. But wherever he travels, Seth is always on the lookout for would-be entrepreneurs with signs of being ambitious and bold enough to take a leap outside of the predictability and security of the old guard of the sourcing world.

“[There are almost] no hard assets at PDS,” Seth explains. “The assets are the people and relationships.”

🇳🇬 Lagos Fashion Week initiatives aim to strengthen the industry value chain. Designer brands from Nigeria and the wider West Africa region presented their collections at the latest edition of the B2B event from Oct. 23-27, including Orange Culture, Imad Eduso, Lagos Space Programme, Emmy Kasbit, Maliko, Iremitide, Babayo, Kente Gentlemen, Ajabeng, Awa Meité, Boyedoe, Oshobor, Ugo Monye and Loza Maléombho. Event founder and CEO Omoyemi Akerele showed her commitment to helping designers broker deals that strengthen the value chain by partnering with the likes of Prosper Africa, an American government initiative catalysing two-way trade and investment flows between the US and countries on the continent. The biannual event, which this season featured initiatives with mentorship programme Q Rising (formerly Qasimi Rising), The Bicester Collection and the Heineken 45 CL collection, also highlighted the power of collaboration in fostering innovation, craftsmanship and responsible business objectives. [BoF Inbox]

🇧🇩 Adsum Capital Management eyes Bangladesh’s troubled giant Beximco. The Dubai-based firm is leading a consortium of investors who filed an expression of interest in buying some of the subsidiaries of Bangladesh’s largest private sector conglomerates, including its textiles and garment manufacturing division Bextex which lists Target, PVH and Zara among its clients. The troubled banking-to-pharmaceuticals multinational founded in 1972 is contesting a court order demanding that its assets be placed under receivership after it became heavily indebted and embroiled in a corruption scandal surrounding its co-founder Salman F Rahman, the firm’s vice-chairman who was a former advisor to the country’s ousted prime minister Sheikh Hasina. [Sourcing Journal]

🇮🇳 Indian gold demand expected to surge during Diwali despite high prices. According to Sachin Jain, the World Gold Council’s regional India CEO, “despite gold prices touching record highs…anecdotal feedback from industry indicates a resurgence in gold buying due to various ongoing festivals with demand largely driven by investment sentiment and wedding-related purchases. [Jewellery retailers factoring in high gold prices] have also invested in new designs and innovative usage of technology to make daily wear [and] lighter jewellery.” Dhanteras, which kicks off the festive period, falls on Oct. 29 this year and Diwali on Oct. 31 during the Hindu calendar month of Kartika which is a busy time in India’s retail calendar. [Economic Times]

🇨🇳 China’s Li Ning inks joint-venture with HongShan for overseas expansion. The Beijing-based company founded in 1989 by the Olympic gymnast of the same name will hold 55 percent interest in the new British Virgin Islands-based venture through two subsidiaries, LN Co and Founder Co, while the venture capital fund formerly known as Sequoia Capital China will hold the remaining 45 percent interest through its units HongShan Venture and HongShan Motivation. The deal amounts to a total capital contribution of $20 million. [Deal Street Asia]

🇦🇺 Australia’s Mosaic Brands enters voluntary administration. The listed apparel group operating more than 760 stores and employing around 3000 staff across Australia and New Zealand said: “the board wishes to reiterate its belief to those who supported the restructure…that the business has a long-term future,” asserting that the company would continue to trade throughout Christmas. In a bid to turn around the business last month, it discontinued the Rockmans, Autograph, Crossroads, W.Lane and BeMe brands, focusing instead on core brands Millers, Noni B, Rivers and Katies and Mosaic. [Ragtrader]

🇧🇩 Post-Hasina protests cost Bangladesh garment industry $400 million. The labour unrest that followed the August 5 resignation and ousting of prime minister Sheikh Hasina have led to the production loss in the country’s ready-made garment sector. But earlier this month Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Khandoker Rafiqul Islam said: “we expect that work orders that shifted to other countries will return as normalcy is restored in the sector.” The BGMEA’s board of directors has since been dissolved by the new interim government, according to local reports. [Financial Express Bangladesh]

🇨🇳 Swiss beauty group Galderma posts sales increase amid China gains. The parent of Cetaphil said it had logged sales of $3.26 billion during the first nine months of the year, up 9.2 percent from the same period a year earlier in constant currency terms. Noting double-digit growth in the injectable aesthetics and dermatological skincare categories and robust Europe market performance, CEO Flemming Ornskov said that China was one of the fastest growing markets, also highlighting Latin America and the broader Asia Pacific region. [BoF]

🌍 Afreximbank doubles African creative sector financing including fashion. The Egypt-based financial institution officially called the African Export–Import Bank has said it will increase funding to the Creative Africa Nexus (CANEX) programme from $1 billion to $2 billion for the next three years. Bank president Benedict Oramah said: “This will enable us to support significant infrastructure investments for film production, stadia, arenas, manufacturing facilities for fashion, and training centres.” [BoF Inbox]

🇨🇳 L’Oréal Group Q3 sales miss expectations as China buys less. The group, which owns Maybelline and Lancôme among others, reported sales of €10.28 billion ($11.11 billion), a 3.4 year over year percent rise. The North Asia region, dominated by China, accounts for a quarter of group sales, but persistently weak demand in the world’s second largest economy has curbed consumer spending, with sales in North Asia declining 6.5 percent in the period, worsening from a decline of 2.4 percent in the prior three months. [BoF]

🇨🇮 Abidjan Fashion Week debuts in Côte d’Ivoire’s commercial capital. The inaugural edition of the event took place from Oct. 10-13 in Abidjan. Founded and produced by Ivorian fashion designer Elie Kuame with financial support from the culture ministry, the showcase featured an opening night at Aby Concept store followed by around 30 runway shows of predominantly local designers and brands such as Kuame and La Maison Kanty’s as well as brands from the Republic of Congo, Ghana, Benin, Nigeria, Senegal and Cameroon. [Le Monde, Semafor]

🇦🇺 Conservation experts sound the alarm over Australian sandalwood. Used in luxury fragrances, sandalwood is a coveted ingredient for beauty companies, but Richard McLellan, a researcher at Charles Sturt University, worries the native Santalum spicatum tree population in Australia is overharvested and at risk of extinction. However, this claim is contested by the likes of local producer Dutjahn Sandalwood Oils, a 50 percent Aboriginal-owned business that sells the oil to companies such as Aesop and Givaudan, the multinational that supplies the Estée Lauder group, among others. [BoF]

🇨🇳 German beauty group Beiersdorf sees sales rise despite China slump. Nivea maker Beiersdorf reported a 6.5 percent rise in group sales for the first nine months of 2024 to €7.55 billion ($8.15 billion), helped by a rebound in North America and growth in its skincare segment. The company said it expected a strong fourth quarter, despite persisting challenges in the Chinese luxury market. Sales in luxury brand La Prairie dropped by 7.3 percent in organic terms in the first three quarters, driven by the continued weakness of the Greater China region. [BoF]

🇮🇳 Indian textile giant Siyaram’s invests $4.7 million in its Zecode brand. “We are targeting Gen-Z customers,” said Jayakar Shettigar, CEO of Zecode, and Gaurav Poddar, executive director of fabric manufacturer Siyaram’s in statement, adding that by the end of this fiscal year, the brand will use the 40 crore rupee injection to open 25 mono-brand stores around Karnataka state. The company also owns Siyaram’s Shirtings and Suitings, J. Hampstead, Oxemberg and apparel brands Mozzo, Inspiro, Tessio and Cadini. [Economic Times]

🇲🇽 Shein launches credit card with fintech Stori to aid Mexico expansion. The China-founded ultra-fast fashion giant is launching its first branded credit card worldwide to help it expand further in Latin America’s second-largest economy (where it is reportedly exploring building a factory) by making e-commerce more accessible to more Mexicans, many of whom lag in access to bank accounts and credit [Reuters]

🇮🇳 India’s Hindustan Unilever’s Q2 profit falls 4%, revenue rises 2%. The beauty, personal care and household goods major also known as HUL, whose portfolio includes brands like Lakmé, Glow & Lovely, Dove and Pond’s, recorded 2612 crore rupees ($310.5 million) in net profit and 15,319 crore rupees ($1.8 billion) in revenue from operations in the quarter ended Sep. 2024. [Economic Times]

🇦🇪 Elie Saab and Octa Properties to launch UAE branded residential project. The Lebanese couturier has partnered with the Dubai real estate developer to build 355 beachfront homes called La Mer by Elie Saab on Al Marjan Island in the United Arab Emirate of Ras Al Khaimah. The move follows Etoile by Elie Saab, the couturier’s Saudi Arabia-based branded residence project built with local property developer Dar Al Arkan. [Construction Week]

🇮🇳 India’s Zouk raises $10 million in round led by Aavishkaar Capital. The bag and luggage brand founded in 2016 by Pradeep Krishnakumar and Disha Singh has secured the funding in a Series B round led by the Mumbai-based venture capital firm with participation from existing investors Stellaris Venture Partners, Titan Capital and Winners Fund Sharrp Ventures among others. [Economic Times]

🇯🇴 Jordan’s leather and textile industry creates 1,500 new jobs. The sector that now employs more than 29,000 Jordanian workers saw the 4 percent year over year rise in jobs in the January to September 2024 period, according to Ihab Qadri, representative of the sector in the Jordan Chamber of Industry. [Fibre2Fashion]

🇮🇳 H&M India appoints Helena Kuylenstierna as director. The Swedish fast fashion giant veteran with 24 years at the firm was previously global managing director for childrenswear. H&M’s local unit, which operates 64 stores across 29 cities and partners with Myntra and Ajio online, is based in Bengaluru. [Economic Times]

🇮🇳 Indian menswear brand Rare Rabbit parent sees annual profit double. Parent company Bengaluru-based Radhamani Textiles, which also owns womenswear brand Rareism and Articale, reported net profit of 75 crore rupees ($8.9 million) during the year ended March 2024, up from 32 crore rupees the previous year. [Economic Times]

Adidas AG reached an out-of-court settlement with rapper Ye that concludes all claims connected to the sportswear maker’s decision to end their partnership two years ago.

“Both parties said we don’t need to fight anymore and withdrew all the claims,” chief executive officer Bjorn Gulden told journalists in a call. The agreement didn’t include any payments, he added.  “No one owes anybody anything anymore. So whatever was is history.”

The German company cut ties with the rapper and designer Ye, previously known as Kanye West, following a rash of offensive behaviour, including antisemitic comments. The Yeezy line accounted for about half of Adidas’s total profits before the split, according to analysts.

The sportswear company was stuck with some €1.2 billion ($1.3 billion) of unsold Yeezy shoes and merchandise after the end of the partnership, and has been gradually selling it down ever since. It expects to be done with the brand by the end of this year.

By Sonja Wind

Learn more:

Case Study | The Strategy That Brought Adidas Back From the Brink

Adidas has mounted one of the more remarkable turnarounds in recent memory after facing a crisis two years ago from the end of its Yeezy business. BoF spoke to chief executive Bjørn Gulden and other members of Adidas’ leadership to unpack how a series of bold decisions on products like its Samba sneaker, a move to refocus the brand on athletes and internal shifts brought Adidas back from the brink.