ded garment makers and retailers been facing a rough time this year. No wonder they have asked the government to cut excise duty from the existing 10 per cent to one per cent in the forthcoming Budget. The impact of excise duty coupled with
weak demand, high raw material costs and poor festive season has resulted in a sharp drop in sales over the last fiscal. Prices have gone up by almost 20 per cent no wonder shop shelves are piled up with inventories.
The
poor scenario can be gauged from the fact that the industry, despite advancing and prolonging discount offers to offload existing stocks, continue to be plagued by Rs 1,400 crore worth of inventory piling up till date. For instance, Trent’s inventory went up to Rs 210.5 crores in September compared to Rs 130.6 crores in March last year, and Shoppers Stop’s inventory rose to Rs 652.4 crores compared to Rs 514 crores in March last year. In fact, Shoppers Stop, in its last quarter results has reported an overall sales volume drop of 9 per cent and for the full year, it saw a volume drop of 6 per cent. Even other leading retail chains witnessed a loss in sales volume in the last one year. Large retail chains have been the worst hit as apparel as a category constitutes nearly 60-70 per cent of their total sales. Besides, they enjoy better margins on apparel and any sales decline in this category would affect their overall numbers. It was a double whammy for retailers as well as manufacturers and retailers of brands such as Color Plus or Arrow. According to Hemant Kalbag, partner, head of retail and consumers at consulting company AT Kearney, the excise duty came like a bolt from the blue causing a shift in the cost structure of these companies. Even their same store sales remain flat.
Sales have been flat for makers and retailers of shirt brands, too. However, they claim they have done better than big retail chains as they deal only in apparel through their stand-alone stores. Since all the efforts and initiatives to pull the crowds back are failing, retailers are now pinning their hopes on the Budget for getting an exemption from excise duty on branded apparel.
Experts suggest retailers must find ways to deal with the situation and learn consumer behaviour during such hard times. For example, men and women responded differently to a price increase in apparels. Surprisingly, while men were quick to postpone shopping for clothes, resulting in a steep decline in volume sales, women shoppers showed resilience. Apparel prices for both men and women witnessed a considerable hike but women continued to spend, especially on western clothing. So while the volume growth in women’s apparel was marginal, the value growth hit a double digit mark.
Interestingly, a Boston Consulting Group and Confederation of Indian Industry study predicts tremendous growth in apparel sales in the next 10 years with an estimated consumption expenditure of $225 billion by 2020. But to turn this into reality branded apparel industry should learn to turn the losing battle into a win-win situation by keeping an eye on the potential growth areas.
