IMPRESSIONS from a Cross-section

The RMG market has never been so dynamic in its history. A couple of decades back it was primarily an exports oriented market with little interest in domestic sales. The transition slowly engulfed the Ready to stitch (RTS) business. Currently the RMG market is poised towards growth as well as consolidation. While one set of retailers are looking at expansion in Tier II and III cities and tap its ever burgeoning middle class population, there are existing retailers who are struggling hard to meet expansion targets due to both declined top lines and liquidity challenges. Opening of FDI is opening a mixed bag of reactions from all quarters. On one hand, where it offers to provide much desired liquidity to existing players for expansion and also bring best practices from around the globe, skeptics are still worried about the difference in level playing field for small retailers. 

It’s anybody’s market now. We are witnessing some stake sales as well as total collapses. We are also witnessing new entrants both - Indian as well as international biggies. What matters is how strong your fundamentals are. A robust supply chain, right working practices and sound liquidity can play a significant part in the way this RMG market will unfold its new chapter. 

The current apparel market is pegged at about Rs. 1,710 billion. Of this, about 15% is Kids Wear valued at Rs. 300 billion. The branded Kids Wear however is minuscule at about Rs. 30 billion. The rest 90% is all unorganized. The current contribution is not much to the overall garment sector, if we consider the sheer population between ages 0-14 years. Also, given the fact that the frequency of purchase is much higher as we go down the age groups, there is large untapped potential. There isn’t much difference in value of merchandise between grown-ups and kids, as the difference in consumption of raw materials (fabric) is largely compensated by the large amount of value additions required in kids garments. 

The consumers have now become much aware, be it fashion, products or pricing. The internet penetration along with proliferation of TV and social media has increased the awareness of consumers to a new paradigm now and the state is only going up.

However, Indian consumers always keep in mind comfort as seasonality and hot weather plays a pivotal role here. We generally lag the western markets by a year. Most Indian consumers are not known for fashion innovators or early adopters. We generally fall thereafter in the fashion cycle.

Having said that, Indian consumers are still very frugal. We are a saving economy and the mind set is still evident in consumers chasing discounts. They don’t really look at the spend but focus more on how much they saved on account of offers. The declining sales growth, Y-O-Y basis, this year saw many retailers opt for early start of EOSS. This sent the sales significantly upwards, though the economy was still reeling under inflation. So, pricing is very crucial in Indian mind set and doesn’t work in isolation of fashion.     

The path to success never comes easy. Retailers are no different to this adage. There are numerous challenges in the way to success and making laundry list of it is not a herculean task. There have however been different views on key challenges to growth, profitability and sustainability. From poor Government regulations to bad infrastructure to non conducive policy to FDI, everything under the sun is mentioned. However I harbor a different view. 

One of the crucial bottleneck in delivering value to customers, top and bottom-line to the industry and taxes to the Government is in our backyards, our very own unorganized sector. Because of the working ways, taxes are not paid as per statutory norms. Results are rock bottom prices as the taxation is saved in the entire value add chain. However, in the endeavor, they are never able to become organized, which is a bottle neck in becoming a large player. They are also not able to offer good quality products. 

Safety and hygiene are a very crucial part of Children’s garments; however the unorganized sector is not able to offer these too. The potential would be aptly utilized, along with faster growth and benefit to consumers, if we are able to change this situation.

Besides this, infrastructure and differing state level policies are some of the major hurdles in cost optimization. The whole of Indian Retail industry is in very nascent stage of getting organized. We are still inventing the wheel as per our country needs and situations. All the spokes of this wheel need to work in tandem to run this wheel efficiently and also carry load.  

*******