India’s apparel exports are estimated to have declined by 17 per cent in the first quarter of FY19 due to a slowdown in demand from developed countries following weak economic activity there.
Data compiled by the apex industry body, the Clothing Manufacturers’ Association of India (CMAI), showed India’s apparel exports at $1.35 billion and $1.34 billion in April and May 2018, a decline of 23 per cent and 17 per cent respectively. During FY18, apparel exports from India fell by 4 per cent to $16.72 billion.
Starting in June 2017, after the goods and services tax (GST) was implemented, and resulted in the blockage of working capital due to delay in refund of state levies and other mandatory refundable taxes, the slowdown in overseas pick continued till the first quarter of the current fiscal.
“India’s overall apparel exports are estimated to have declined by 17 per cent in the quarter between April – June 2018 due to depressed economic conditions-led lower demand and growth. Consequently, Indian domestic market performed better during the first quarter of the current fiscal than the largest consumption regions like United States (23 per cent share in India’s overall apparel exports), European Union (38.4 per cent share) and Japan (1.1 per cent share),” said Rahul Mehta, President, CMAI, while announcing the 67th National Garment Fair, India’s largest apparel trade show, which was held between July 16-19.
In the face of deteriorating consumer sentiment, malls are finding it difficult to attract footfalls and occupancy rate is also slow. With dipping sales figures, retailers’ profits have gone down by over 35% as compared to previous years. Even during the festive season from October-December, when consumers loosen their purse-strings, products usually in high demand have not seen enough takers. Cheaper items are selling more as compared to expensive items. Same-store sales have contracted. Retailers are scaling down expansion plans or shelving them temporarily to minimize immediate capital-intensive ventures.
So rather than open more stores, retailers have shifted their focus to consolidate and improve operations by enhancing efficiency and profitability through effective supply chain management, to save inventory and logistic cost and check on wastage. To build up customer loyalty, renewed efforts are being made to undertake intensive relationship marketing and improve in-store service. Retailers are also pushing private labels to protect their profit margins while promoting sales by offering special discounts or other value-for-money schemes.
Fashion Retail Chains Filing For Bankruptcy
We all know and have heard about the recent reported bankruptcy filing of Forever 21 amidst other retail chains globally. Even the well-known infant and children’s clothing brand Gymboree which is currently operating in more than 900 stores in the US and Canada, is preparing for its second Chapter 11 filing. In India, apparel exporters can face heavy loss due to weak condition of the brand and so put their shipments on hold. Li & Fung, which manages San Francisco-based Gymboree in India, has so far issued no official communication to the Indian exporters.
Here is a look at some of the most recent fashion-related filings:
- August 2019 – Barneys New York
- April 2019 – Roberto Cavalli
- March 2019 – Diesel
- April 2018 – Nine West
- March 2018 – Claire’s Stores
- March 2017 – BCBG Max Azria
- January 2017 – Bibhu Mohapatra
- November 2016 – Nasty Gal
- May 2016 – Aeropostale
And many more…
It’s important to note that bankruptcy doesn’t always result in the death of a company; many retailers have used bankruptcies to restructure internally with positive outcomes. However, some of the companies to go bankrupt this year are on their second bankruptcy.
Future Prospects And Effects On The Fashion Industry
The next two months will be crucial for the government in terms of reviving the Indian economy. A mix of policy decisions and demand dynamics could decide whether India will be able to withstand the economic storm or face a prolonged slowdown. While we talk about the future of the Indian economy in fashion, we can’t help but wonder how it’s going to look like as a big picture. With the subsequent revival of the boom period, growth of organized retail and consumption is expected to take a higher trajectory. Consumers presently conditioned into sparing behavior will eventually unleash their pent-up demand for preferred brands. So, the present phase can be favorably construed as an opportunity for the retail industry to realign its operational structure, study consumer behavior and build consumer-centric strategies.
From the IKF Desk on Impact Of Economic Slowdown On The Indian Fashion Industry
As the macroeconomic landscape shifts, we expect companies will seek to protect themselves from slower growth by implementing “shock proofing” measures. These will primarily be aimed at boosting productivity through greater efficiency and cutting costs. To ensure these interventions deliver sustainable benefits over the longer term, fashion players should seek to couple productivity enhancements with necessary innovation efforts, such as automation of production, analytics-driven decision making, a review of the omnichannel footprint, and reorganization for better agility. Those that are successful are most likely to reap rewards with regard to outsize performance.