Dive Brief:

• More American retailers are looking into quality control issues of textiles manufactured by Indian supplier Welspun Global Brands. Bed Bath & Beyond, J.C. Penney and Macy’s all said they are investigating the matter and will take action depending on their findings, Reuters reports.

• The news comes days after Target said it is offering refunds to customers who had bought Welspun products purporting to be Egyptian cotton and had severed ties with the supplier. Wal-Mart confirmed it is also investigating Welspun’s merchandise. 

• Swedish furniture retailer Ikea, meanwhile, said that it would continue to do business with Welspun while the Mumbai-based textile vendor conducts its own investigation. "To our knowledge and according to our continuous verifying processes, the supplier delivers according to our agreements," Ikea said in a statement to Reuters. 

Dive Insight:

Welspun is a major supplier of many home goods sold in the U.S. “Every fifth towel sold in the U.S. is manufactured by Welspun India,” according to the textile maker's annual report. “With a distribution presence in more than 50 countries, [Welspun] is also the largest exporter of home textile products from India... During FY16 we also became the largest exporter of bed linen from India.”

But Welspun’s shares are in a tailspin ever since Target announced it was cutting ties with the company after finding that Welspun used non-Egyptian cotton in goods supposedly made with the superior stuff. The controversy is a blow not just for Welspun itself, though, but also for India’s textile manufacturing segment as a whole, which enjoys a good reputation in contrast to the less dependable expectations of quality in Chinese manufacturing.

“The Welspun issues show the whole industry in a very bad light,” Sanjiv Bhasin, executive vice president for markets at Mumbai-based brokerage India Infoline Ltd., told Bloomberg. “The overseas retailer will now be very discerning.” 

There’s been little discussion about alternatives to Welspun, but there’s certainly an opportunity for rival manufacturers in the space to supply budget cotton to a variety of international retail outlets should the verdict on Welspun determine that it’s an unreliable vendor.

The real issue, however, could be that these retailers and their suppliers (and not necessarily just Welspun) are not only selling mislabeled sheets but also, more generally, a false sales pitch — that high quality Egyptian cotton, normally a premium and expensive product, can be had by budget shoppers at a steeply discounted price.