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Retrospect 2012

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Year 2012 has been slightly turbulent for the domestic textile and apparel market. While there was significant demand in the initial part of the year, demand slowed down in the latter half. Domestic sales for key apparel brands have, on average, grown by nine per cent in value terms during the first half of 2012. Year-over-year sales growth was higher in the first quarter (15 per cent), while in the second quarter growth slowed down to 4 per cent. One of the primary drivers of value growth in the first quarter was the 10-15 per cent increase in prices implemented by many retailers in the latter half of 2011. However, demand shrank in the second quarter due to weak consumer sentiments on the back of the global economic slowdown. Sales growth has been higher in large format multi-brand outlets compared to exclusive brand outlets, suggesting that consumers are giving more importance to product variety than brands.

In terms of profitability, operating margins have reduced by an average of seven per cent compared to last year for the key listed apparel brands and retailers. One of the main reasons for this is the surge in raw material prices in 2012 compared to 2011. Also, many retailers opted for early end-of-season sales this year due to reduced sales of summer stock – itself a result of an extended winter. This, along with promotional tactics of brands, has dented bottom lines in the second quarter. With rising raw material prices, the pressure on margins is further expected to increase.

In terms of categories, women’s westernwear has continued to increase in sales, with many brands increasing their focus on womenswear. Formal or semi-formalwear and innerwear categories have also grown while there has been slower growth in casualwear. Non-denims have scored over denims this year especially in women’s segment. Also, an extended winter in the north meant higher sales for winterwear and lower growth for casualwear.

Expanding International brands

International brands continue to be attracted by India especially in the super premium or luxury segment. Many brands have entered India through partnerships with Indian franchisees or retailers. With relaxation in FDI norms, more international brands and retailers are expected to enter the country.

Several Indian companies have also increased their focus on the domestic market and have expanded their presence, primarily through partnerships with foreign labels.

Growth of online apparel retail

With the increasing maturity of e-commerce in India, online apparel retailing is also being accepted by consumers. Many companies have upped their presence and focus is now on online channels. Online retail has grown especially in smaller cities and towns, where larger brands are not yet available through physical stores. Many online apparel stores have come up with exclusive focus on tier II and III cities, while the more established online retailers have also scaled up aggressively and have grown significantly. With brick-and-mortar retailers branching into online retail, and with many international online apparel retailers foraying into India, this space will be interesting to watch in future.

Apart from services, the online platform is fast catching up in other product categories, including the touch-and-feel experience categories such as apparel. Platforms such as , Fashion&You.com, Zovi.com, et cetera, offer a lot of ease and convenience to customers in terms of variety of apparel, display, choice, discounts and ease of delivery. Retailers and brands such as Pantaloons, , FabIndia, Madame, et cetera, also operate a very active online sales channel and have seen a tremendous increase in the number of orders placed online. Customers can browse through more variety and can easily compare price and quality of merchandise online.

Impact on exports

For the fiscal 2011-12, the textile and apparel exports of India stood at US $34.3 billion and accounted for around 11 per cent of the total export sales of India. The same year witnessed an overall annual growth of around 19 per cent compared to 24 per cent growth in the previous fiscal. India’s textiles exports contributed US$ 20.6 billion with a growth of 20 per cent in FY 2011-12, while apparel exports totaled US$ 13.7 billion with a growth of 18 per cent in that year.

The increasing demand for non-cotton fibres from major importing nations was a noticeable trend in FY 2011-12. Exports of cotton clothing grew at a moderate rate of 12 per cent whereas the figures for man-made fibres and non-cotton vegetable fibres were 47 per cent and 31 per cent respectively during the same duration.

The EU was the largest exports market for Indian textiles and apparel, followed by the U.S., U.A.E. and China. However, the export share of EU and the U.S. has been reducing over the years. In 2008-09, the combined share of the U.S. and the EU was more than 57 per cent; this fell to 45 per cent in FY 2011-12. Weak market confidence and dampened consumer spending has reduced the textile and apparel exports to the U.S. and the EU. On a positive note, the share of exports to China surged from 5.7 per cent in 2009-10 to 12.7 per cent in FY 2011-12. Bangladesh, Turkey, Brazil, Saudi Arabia, Sri Lanka, Hong Kong and South Korea are other important exports markets for India.

For the first six months (April-September) of the fiscal year 2012-13, cumulative apparel exports have decreased by 10.2 per cent over the exports of US$ 6.9 billion in the prior-year period. But, due to the rupee’s deprecation, the value of exports has increased by 8.5 per cent in the same period. If the demand in the exports market continues to remain low, it will be difficult to achieve the targeted exports of US$ 40 billion set by the Ministry of Textiles for the financial year, 2012-13.

Slow manufacturing growth

Textile and apparel manufacturing lost momentum after financial year, 2010-11, despite a growth in financial year, 2011-12. In 2011-12, yarn production volumes increased by 7.5 per cent but fabric production dipped by a moderate 0.7 per cent. While domestic market growth has contributed positively to the manufacturing sector, the fluctuation in raw material prices and slowing demand from export markets has had a negative impact on manufacturing.

ABOUT THE AUTHOR

is currently working as the Senior Vice President, Apparel Operations at Technopak. He has over 14 years of experience in apparel manufacturing. His key skills include operations consulting with domain expertise in apparel operations, with on-the-ground experience in India, Sri Lanka, Bangladesh, Pakistan and China.