The Indian apparel industry has been going through some hard times of late. While retailers and brands are still trying to get over slow summer sales, now it’s the suppliers who are finding their orders shrinking. Reason: inventory levels with
retailers have not come down as fast as expected. So a vendor who would deliver, say, 50,000 articles of clothing every month to a store finds his order dropping to some 20,000 articles. This is double wammy for suppliers, as their businesses from overseas markets too have slowed down due to economic uncertainties in the US and Europe. It may be noted that even during the 2008 recession, Indian suppliers to retailers like Wal-Mart, Target and Gap had felt the heat. They found new orders difficult to come by and retailers wanted them to sell at lower prices as well. Though cotton prices have started falling but most fabric makers had procured their stocks when prices were high. Despite a 50 per cent fall in cotton prices in recent weeks, new procurement will start only after three to four months, when new cotton comes into the market. During that time, they will have to get rid of old stocks.
Almost
all manufacturers and retailers have raised apparel prices by 10 to 20 per cent due to a sharp rise in cotton prices and the imposition of 10 per cent excise duty on branded garments. Rising prices have had a spiraling affect on demand and sales slowed down. Facing huge inventory pile-ups, retailers are giving additional discounts or extending the season sale. In fact, higher inventories and lower offtake has caused shops to offer steeper sales this season. The ongoing monsoon end-of-sales season for garments and apparel is better compared to last year with steeper discounts. Garment makers are also seeing a slowdown in orders from international buyers who have now adopted a wait-and-watch policy as the prices of raw materials are on the slide worldwide pushing outsourcing agents to rethink about the prices they would offer. Buyers of all brands are waiting to see where the prices of cotton and yarn reach, because prices of basic raw materials are on the decline following a slide in demand in the manufacturing countries.
The Rs 3.15 lakh crores fashion and apparel retail segment in India is undertaking a slew of measures including smart pricing, efficient marketing and a revamped product mix to counter the slowdown in demand. Retailers may have to take a hit on margins and price their products smartly. They are betting on impulsive buying from youth to arrest any demand slump. Also they believe buyers of premium apparel don’t mind a Rs 300 change in the price of a garment. A trend that’s being noticed is that minor changes in product prices do not bog down well among young consumers. With fashion and lifestyle trends changing frequently, consumers are exhibiting changes in buying behavior, but buying does not stop.
