Hopes of getting the cash registers ringing this festive season remain slim as high prices might deter consumers from indulging on clothes.
The festival season is already upon us but apparel retailers hardly look enthused. There is apprehension in the industry that consumer spending on apparel may take a hit despite the festive sentiment ringing in the air. Apparel sales in the country have been in a slump by about 20% since March, forcing many brands to start end-of-season discount sales a fortnight earlier than usual. Companies attribute the fall in demand and lower apparel sales due to soaring cotton prices and the mandatory 10% excise duty hike on branded garments that was introduced in this year’s Union Budget. Although cotton prices have softened to Rs 45,000 a candy (one candy is equal to 356 kg) from Rs 64,000 earlier, the change will not reflect in the retail price during the festive season as companies placed their orders six months ago. “The merchandise to be sold during this festive season was crafted when cotton price was at its peak. Besides, the excise duty levy announced in the Budget will play itself out in the market now,” says Atul Chand, CEO, ITC Wills Lifestyle. To offset higher raw material prices, Chand says that garment makers will have to increase apparel prices by 10-15% over the next two months. Echoing similar apprehensions, India’s largest listed retailer, Pantaloon Retail, warns that rising cotton prices and input costs are likely to lead to an 18% price hike on fashion labels next season, and that inflation will continue to be a permanent reality. “We may see sluggish apparel sales for high-priced garments in the coming months,” says Kailash Bhatia, CEO, Pantaloon Retail.
The festival season is crucial for the business of apparel retailers as it contributes around 60% of its sales and dictates the buying pattern of firms. Retailers who have already ordered inventory for the coming festive season will in a scenario of falling volumes be forced to sell the extra inventory at marked down prices later on, which will obviously reduce margins and profits for the year. To cut down their losses, many retailers have postponed fresh supplies and reduced further orders. Others are closely scrutinising fresh store openings as same-store sales growth for many retailers has decelerated to single digit in recent months. “Volumes have dipped dramatically at fashion retailers and this is unusual for an industry that’s used to value and volume growth,” says Nikhil Chaturvedi, MD of Provogue (India). In order to cope with the challenges, many retailers are turning their focus to managing inventories and preventing a build-up in costs.
However, there are quite a few retailers as well who are looking forward to the festive season to bring in fresh cheer. Harkirat Singh, MD, Woodland, says: “For us sales have been buoyant over the past four-to-five months and the sentiment looks good. We in Woodland have always believed in giving something extra to our customer and this festival season will be no exception.” According to Confederation of Indian Textile Industry (CITI), the apparel industry is expecting a higher sales growth of 25% in both value and volume terms, during the festival season this year, between September and December. Sales during the festival season — which typically starts with Onam in Kerala — account for almost 35-40% of the annual revenue of a company. So players like Wills Lifestyle from the stable of ITC are planning to increase their retail presence from 77 stores to 90 stores by this year. Not to be left behind, Pantaloon is rolling out three more stores during the festival season. Similarly, Shoppers Stop is focusing on the eastern market by rolling out special festival campaign for the north-eastern cities. Monica Oswal, Executive Director, Oswal Woollen Mills, says: “Depending upon the festival we would be doing different promotional activities across various states as the festival season also marks the beginning of winter and a very busy time for our brand Monte Carlo.”
For more articles, Click on IIPM ArticleThe festival season is already upon us but apparel retailers hardly look enthused. There is apprehension in the industry that consumer spending on apparel may take a hit despite the festive sentiment ringing in the air. Apparel sales in the country have been in a slump by about 20% since March, forcing many brands to start end-of-season discount sales a fortnight earlier than usual. Companies attribute the fall in demand and lower apparel sales due to soaring cotton prices and the mandatory 10% excise duty hike on branded garments that was introduced in this year’s Union Budget. Although cotton prices have softened to Rs 45,000 a candy (one candy is equal to 356 kg) from Rs 64,000 earlier, the change will not reflect in the retail price during the festive season as companies placed their orders six months ago. “The merchandise to be sold during this festive season was crafted when cotton price was at its peak. Besides, the excise duty levy announced in the Budget will play itself out in the market now,” says Atul Chand, CEO, ITC Wills Lifestyle. To offset higher raw material prices, Chand says that garment makers will have to increase apparel prices by 10-15% over the next two months. Echoing similar apprehensions, India’s largest listed retailer, Pantaloon Retail, warns that rising cotton prices and input costs are likely to lead to an 18% price hike on fashion labels next season, and that inflation will continue to be a permanent reality. “We may see sluggish apparel sales for high-priced garments in the coming months,” says Kailash Bhatia, CEO, Pantaloon Retail.
The festival season is crucial for the business of apparel retailers as it contributes around 60% of its sales and dictates the buying pattern of firms. Retailers who have already ordered inventory for the coming festive season will in a scenario of falling volumes be forced to sell the extra inventory at marked down prices later on, which will obviously reduce margins and profits for the year. To cut down their losses, many retailers have postponed fresh supplies and reduced further orders. Others are closely scrutinising fresh store openings as same-store sales growth for many retailers has decelerated to single digit in recent months. “Volumes have dipped dramatically at fashion retailers and this is unusual for an industry that’s used to value and volume growth,” says Nikhil Chaturvedi, MD of Provogue (India). In order to cope with the challenges, many retailers are turning their focus to managing inventories and preventing a build-up in costs.
However, there are quite a few retailers as well who are looking forward to the festive season to bring in fresh cheer. Harkirat Singh, MD, Woodland, says: “For us sales have been buoyant over the past four-to-five months and the sentiment looks good. We in Woodland have always believed in giving something extra to our customer and this festival season will be no exception.” According to Confederation of Indian Textile Industry (CITI), the apparel industry is expecting a higher sales growth of 25% in both value and volume terms, during the festival season this year, between September and December. Sales during the festival season — which typically starts with Onam in Kerala — account for almost 35-40% of the annual revenue of a company. So players like Wills Lifestyle from the stable of ITC are planning to increase their retail presence from 77 stores to 90 stores by this year. Not to be left behind, Pantaloon is rolling out three more stores during the festival season. Similarly, Shoppers Stop is focusing on the eastern market by rolling out special festival campaign for the north-eastern cities. Monica Oswal, Executive Director, Oswal Woollen Mills, says: “Depending upon the festival we would be doing different promotional activities across various states as the festival season also marks the beginning of winter and a very busy time for our brand Monte Carlo.”
Source : IIPM Editorial, 2011.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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