Apparel industry players prepare for the new normal

They say fashion perishes faster than a cooked Biryani. All the industries are cut from the same cloth, and the impact of the coronavirus pandemic for the apparel manufacturing and retail industry is no different. While a timeline to ‘post-Covid-19’ is still a pyridine script, industry players have started to prepare themselves for the new norm.

Covid-19 pandemic “is truly a watershed moment in the history of Indian retail,” according to Vasanth Kumar – Managing Director, of Lifestyle International Pvt. Ltd. Whereas Sanjay Bahl, CFO, Raymond “all economic activities have come to a grinding halt across the country.”

The Retail Association of India, recently organized a webinar on the apparel industry, wherein Vineet Gautam, Chief Executive Officer, Bestseller India said, that the fashion apparel industry has a relatively little more challenge, “because the product age very quickly and especially brands which run fast fashion, are the ones who are continuously seeing the product getting older.”

Optimal utilisation

According to industry players conserving cash, taking payments on consignments, cutting down on discretionary spending and production, renegotiating rents, adapting to technology, going omnichannel, and utilizing the leftover inventory are the measures apparel industry players are taking to mitigate losses.

Raymond is deploying all tools to effectively manage the liquidity “with an increased focus on payment realization from the market,” said Bahl. The company is working on measures for cost rationalization by “cutting down all non-critical expenses and marketing spends,” he added.

Managing the cash flows and keeping the cost of the working capital low is a challenge that the industry is facing as a short term impact. Even as factories remain unoperational, supply chain remains disrupted, revenues remain nil and consumer sentiment is subdued, few costs still have to be paid.

Inventory is the heart of a business like this and a large chunk of the cash flow. According to Shailesh Chaturvedi, CEO, Tommy Hilfiger Apparels India, “Almost 50 per cent of the cheques that we write are for inventory, whether paying for insurance, freight and custom duty on imports, or paying domestic vendors.”

Upcoming season of change

The apparel industry has three main seasons spring-summer, festive-pre-fall and autumn-winter. Half of the spring and summer season is wiped out with no clarity on opening up leaving the retailers worried but players are also planning the autumn-winter collection.

The Clothing Manufacturers Association of India (CMAI) President, Rahul Mehta, said that “it is a volume game at the moment, and players need some liquidity to produce the inventory for the upcoming season,” and thus, even though deep discounting is something that players shouldn’t indulge in, “it’s better than having deadstock.”

During the webinar, Amrish Kumar, Managing Director of Ritika Pvt Ltd which sells designer Ritu Kumar label, agreed, adding that “There will be more liquidation of products than we liked, we may also not get the desired margins on the products but we will have to be smart.” In hindsight, both Chaturvedi and Kumar also said that Indian climate is such that some spring-summer collections can be used between July and September.

A source at Future Group said that it is eyeing at sales mainly from the festive season to be a sigh of relief as of now. Kumar too said that for the wedding-winter season too, they may use some of the current inventory along with “conservatively producing collections according to the trend at that time.”

At this point, it is crucial that players work closely with important stakeholders including vendors, brand partners, and mall-developers, said Lifestyle’s MD.

During the webinar, Dalpat Jain, Chief Financial Officer at Vedant Fashions Private Ltd - Manyavar said that his company was reviewing every cost element to identify bad costs that can be cut and see if some fixed costs can be made variable.

“Requesting reduction on rent, and revenue sharing are the two options we are exploring,” he said, adding that, “preserving people’s costs is something that needs to be considered in the future, too.”

Action plan

Plans drawn by players involved: allowing only a handful of customers at one point of time (from manpower perspective too), employees will be working in shifts.

Gautam said that unlike the immediate and blanket lockdown, the shops will open in phase, and gradually so will the warehouses.

Likewise, the demand too won’t be 100 per cent on the first day. About 43 per cent of those surveyed by Nielsen India said that they were likely to cut spending on discretionary items such as fashion, personal grooming, and home decor in the coming months.

Over the next few months, “a peculiar problem” needs to be addressed for brick and mortar apparel stores, said Mehta, adding that “customers will be skeptical of trying a garment at a store because of the fear.”

“Inside the store, we will have sanitizer stations and floor markers to facilitate social distancing. We will be frequently steaming garments and disinfecting surfaces such as escalators, cash counters, card machines, shopping bags, etc.,” said Vasanth Kumar of Lifestyle.

Spreading awareness about a safe and secure shopping environment must be something on the cards for all industry players, said Chaturvedi.

“We are taking adequate precautions where customer contact is involved and will be encouraging contactless payments and discontinuing services like make-overs and testers,” Lifestyle’s MD added.

This, in the hindsight, is also a great opportunity for players to ace their games in the digital world. Over 39 per cent of the respondents to Nielsen’s survey stated they intend to increase online shopping by more than 20 per cent.

Some players are already planning to scale up online. Raymond launched its online tailoring initiative, the company is planning to scale this up.

Ritu Kumar’s website is ‘under maintenance’, according to Kumar, the post-covid-19 lockdown plan will include embracing the digital world. “We’re evaluating which few parts of the businesses in the company need to move online and which need to stay with the traditional form.”

Lifestyle too is planning to go omnichannel to offer choice and comfort to customers to seamlessly transact across digital and physical stores. “We have equipped ourselves to handle higher volumes of deliveries for our e-commerce vertical and have made adequate arrangements to cater to any surge in demand,” said the MD of the company.