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Discounting, commoditisation & inventory—fashion retail’s top 3 challenges

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These three challenges affect margins and profitability say industry experts speaking at the India Fashion Forum (IFF) 2024

Bengaluru: The challenges facing fashion businesses in India currently are discounting, commoditization, and high inventory levels, which result in a substantial capital drain, according to industry leaders speaking on the day 1 of India Fashion Forum (IFF) 2024 held at the Hotel Conrad on Wednesday.

IFF Chairman Shailesh Chaturvedi who is also the managing director and chief executive officer of Arvind Fashions, emphasised that discounting poses a significant challenge for businesses, while commoditization exacerbates this issue by driving down margins. He highlighted that in a commodity-driven market, pricing becomes the sole avenue for differentiation.

Speaking about discounting in the industry, Suparna Mitra, the Chief Executive Officer of Titan Watches & Wearables, said that with most of the consumption driven by Gen Z and millennials, there’s a constant demand for new merchandise. However, when brands invest heavily in large-scale production, a significant portion often goes unsold, making it imperative to sell excess inventory at discounted prices.

According to Mitra the solution could lie in improving one’s understanding of the consumer. “Consumer desires have undergone significant evolution over the past five years. While fashion was once considered essential, it has now transcended mere aesthetics. Instead, it has become intricately tied to self-image and personal identity,” she said.

Mitra highlighted that the industry has undergone significant fundamental changes, fostering a thriving direct-to-consumer (D2C) startup environment. She pointed out examples such as Sugar, a beauty retailer, Mokobara, a bag brand, and Wake.fit, a mattress brand. Suparna emphasised that similar to these emerging brands, established companies must prioritise understanding consumer needs to remain competitive in the evolving market landscape.

L-R: Gopal Asthana, Tata CLiQ; Suparna Mitra, Titan Co. Ltd; Rohit Ramesh, BCG; Vishak Kumar, Madura Fashion and Lifestyle – ABFRL; Shailesh Chaturvedi, Arvind Fashions; Vineet Gautam, Bestseller India

According to Gopal Asthana, chief executive officer of Tata CliQ, the key solution to industry challenges lies in fostering consumer loyalty. “Businesses should cultivate loyalty by creating valuable content around their products and disseminating it widely across various platforms. By consistently delivering engaging content, brands can build trust among consumers, encouraging them to eagerly anticipate new merchandise,” he said.

Rohit Ramesh, managing director of the global consulting firm BCG, emphasised the importance of value creation. He highlighted that while revenue growth is significant, true value creation emerges from the combination of margin growth and sustained capital efficiency alongside revenue growth.

The leaders were part of the session titled “Let’s Make Fashion Business Great Again,” which also saw the participation of Vineet Gautam, chief executive officer of Bestseller India and Vishak Kumar, chief executive officer of Madura Fashion and Lifestyle – ABFRL.

 

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