Comments
Brands relying on international sourcing for apparels and accessories are in for tough times as rupee continues its downward swing. Companies said that price rise on globally sourced products may have to be effected if the fall in rupee continues in the long run.
In the immediate short-term, most retailers said they will absorb the costs. Retailers currently don’t have a hedging mechanism and said they are looking to include one for future deals.
Dipping margins
Rajive Ranjan, Managing Director, s.Oliver India, said, “Our margins are on the downslide because of rupee’s continuous fluctuation. If this continues, we will have to rethink our sourcing strategy and limit sourcing.” The company currently imports about 80 per cent of its products.
Ranjan said that high-end jackets and apparels need specialised fabrics which are difficult to procure from local vendors.
The rupee has been falling against the dollar since last two months. “All the major Asian currencies were seen trading weaker against the US dollar ahead of the FOMC meet which will last for two days. We maintain our bearish view on the rupee,” said Abhishek Goenka, Founder and CEO, India Forex Advisors.
Ruchi Sally, Director, Elargir Solutions, said, “Big brands will not compromise on quality and sourcing will continue despite the fall in rupee. Higher cash outgoes for retailers will have to be necessitated by a fresh round of price hike.”
Earlier retailers used to source four-five times a year. However, with many retailers having about 8-10 collections a year to maintain the freshness in fashion, the sourcing cycle is also more frequent with little or no hedge mechanism. Retailers typically carry about 60-90 days of inventory.
“We don’t have a hedge mechanism as rupee fluctuation is usually cyclic. However, if this continues over next six-seven months, then companies may look at a price hike,” said Roasie Ahluwalia, of Genesis Luxury, which has brands such as Paul Smith, Bottega Veneta, Italian label Etro, Armani, Canali, among others.
wait-and-watch
Anil Talreja, Partner, Deloitte Haskins & Sells, said that currently retail brands are adopting a wait-and-watch approach. “It is too early to assess the impact for companies. However, they are looking at hedging their risks by having a Letter of Credit (LC) with a bank to prevent rupee fluctuation.”
Ankur Bisen, V-P, Retail, Technopak, notes that high fashion categories which operate on smaller inventories will be forced to look into the domestic market. “However, even this may take a while as establishing a new vendor base is a long-winding process.”
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.