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CRISIL: FY23, Apparel retailers to clock 21-23% revenue growth

12 August 2022, Mumbai:

What is apparel retail industry

The apparel retailing industry broadly entails comprises businesses/enterprises engaged in the business of selling viz women's, men's, children's, and infant's apparel constituting categories such as formal wear, activewear, evening & nightwear, athleisure, beachwear, celebration, ethnic wear, casual wear, outerwear & so and so forth.

Operating margin1 to expand, but inflation to limit it below pre-pandemic levels.

A combination of strong same-store sales, new store launches, and higher contribution from online channels will sew 21-23% revenue growth for apparel retailers this fiscal, or ~500 basis points (bps) more than the pre-pandemic (fiscal 2020) level, despite elevated inflation impacting discretionary demand.

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CRISIL REPORT OUTLINES

Operating margin will improve 175-200 bps on year to 7.75-8%, supported by an increase in scale leading to better fixed-cost absorption, price hikes, and a greater share of private labels. However, higher input prices will cap the operating margin 50-70 bps below the pre-pandemic level. Among the key inputs, domestic prices of cotton almost doubled between April 2020 and May 2022.

Despite some moderation since June 2022, they are expected to remain higher than what it was before the pandemic.

A study of 46 CRISIL-rated apparel retailers, which account for more than a third of the organised sector’s revenue of ~Rs 90,000 crore, indicates as much.

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Garment and Retailers

Says Naveen Vaidyanathan, Director, CRISIL Ratings, “Revenue growth of apparel retailers will be driven by better same-store sales and higher contribution from new stores set up in the past 2-3 fiscals. These had contributed sub-optimally during the pandemic.

Additionally, rising average selling price and transaction size are helping offset in-store footfalls that continue to trail pre-pandemic levels amid high inflation".

CRISIL Ratings expects large apparel retailers to grow faster at 25-30% this fiscal, compared with 10-15% by their small and mid-sized counterparts2. This would be on a relatively lower base as the large ones, being predominantly situated in malls and high streets, were impacted more by the pandemic-related lockdowns.

 

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Role Of FDI

Clothing retailers and brands

They will also lead the improvement in operating margins with ~250-300 bps expansion this fiscal. Because of higher fixed costs, their operating margins were more negatively impacted during the pandemic. That situation will now reverse. Moreover, they typically have stronger and well-established brands that command higher gross margins compared with mid-sized apparel retailers.

CAPEX

Capex by apparel retailers is set to rise over 30% on year this fiscal because of the improvement in demand. Apart from store expansions, the addition of warehousing space and investment towards brand acquisitions, a significant part of the spending would be to augment tech platforms and online offerings. The share of online channels in the overall revenue of apparel retailers is expected to cross 15% this fiscal vs ~5% in fiscal 2020.

 

Fashion retailers by revenue

Says Shounak Chakravarty, Associate Director, CRISIL Ratings, “The expected improvement in cash accrual, which will largely fund CAPEX, will strengthen the credit profiles of apparel retailers this fiscal. Debt metrics are seen comfortable with gearing below 0.5 time and interest coverage set to improve to over 10 times this fiscal, compared with ~6 times last fiscal. Balance sheets are already sound with several apparel retailers having raised equity even during the pandemic".

Summing-Up

In the road ahead, further waves of the pandemic, resultant lockdowns and mobility restrictions, and higher-than-expected input cost inflation that could lead to downtrading and ultimately affect profitability would bear watching.

Apparel retail companies in India.

1 Operating margins are calculated on a pre-IndAS basis, with lease payments treated as an operational expense

2 Large retailers’ revenue is typically more than Rs 1,000 crore, with a pan-India presence.

(CRISIL report) The article has not been edited by DFU Publications staff

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CRISIL: FY23, Apparel retailers to clock 21-23% revenue growth

Textile Sector: Investment V/s. Job Creation

05 August 2022, Mumbai:

Outlines

The textile industry is the only sector in India that offers skilled and unskilled laborers a significant amount of employment.

Enhance the nation's primary industry; is necessary. It also contributes significantly to job generation, second only to India's retail industry, which accounts for more than 10% of the nation's GDP and over 8% of all employment.

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Report for IndianTextiles

More than 4.5 crore people are employed directly in the textile industry in India, while a further six crore people, primarily women and rural residents, are used in associated industries.

Both domestically and internationally, the Indian textile industry is significant. It is regarded as the second-largest industry for manufacturing fibers, yarns, and fabrics and is of great significance globally.

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Policy Interventions

The Modified Technology Upgrading Fund (ATUFS) scheme, introduced by the Indian government, is being implemented for the textile sector with a cost of $17,822 crore from 2016 to 2022 to attract $1 lakh crore in investment. By 2022, this is anticipated to produce 35.62 lakh job openings in the textile industry.

The sector can favorably impact the ecosystem with this plan and the most recent implementation of the PLI scheme for textile, which aims to attract investment of $19,000 crore for the manufacturing of high-value synthetic fibers, fabrics, garments, and technical textiles. Ministry of Textiles' concerted efforts to skill the labour force in textiles and technical textiles value chain under SAMARTH is also a right scheme in the right direction.

 

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Role Of FDI

invest India textiles

Foreign investment, retail sector expansion, private sector involvement, and global cotton demand have been some of the industry's main growth drivers. For the textile industry, the rise in the FDI limit in multi-brand retailing has benefited because it has increased competition and given consumers more choices.

Outsourcing is expected to increase as foreign companies establish themselves in the domestic market. Population expansion has been an additional important driver in the increase in employment in the sector.

According to one KPMG report," Moreover, the industry and the Government could come together for attracting investments and creating support infrastructure for emerging sectors like Textile, other job-creating sectors.

 

Job creation in India

Apart from jobs in the tech industry, job openings in nine critical sectors, such as manufacturing, IT, and financial services, have increased at an average annual rate of 3.42 percent since 2014, according to the Ministry of Labor's most recent survey on the overall picture of the employment situation in India.

According to projections based on a study of 10,900 businesses, these industries—which include manufacturing, technology, financial services, and commerce—will employ 30.8 million people by the end of June 2021, up 29% from the 23.7 million used at the end of March 2014, the last time the survey was done.

Summing-Up

Simply put, high-quality products will be made possible by intelligent R&D, more robust product standards, joint ventures and partnerships, regulatory standards, and government backing for workplace safety efforts. India's total textile exports in 2015–2016 reached $40 billion thanks to technological developments. $223 billion was predicted for the sector by 2021.

However, due to the ongoing pandemic crisis, the demand for yarns and fabrics remained muted throughout the first half of FY 2020–21.

The industry anticipates a recovery and significant employment by the second part of the 2021–22 fiscal year, with incomes normal throughout the textile value chain and recent government announcements of different programs, including PLI.

According to one ET report," Increasing investments in infrastructure development, skill upgrading, digital augmentation, job creationand MSME development could help country aligning us to the vision of current dispensation of hitting 5$ tn dollar economy.

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Textile Sector

The Fashion Industry Is All About Chic Styling!

30 July 2022, Mumbai:

The fashion business in India

Indian fashion is renowned for its colorfulness, elegance, and cultural history. It highlights the nuance and beauty that have endured for many years. It has grown over time and is not only cozy, elegant, and aesthetically pleasing.

The fashion business in India has made a dramatic entrance onto the current global scene.

It is a fusion of vibrant customs. From ethnic to western, salwar kameez to high-street design, India's fashion business has undoubtedly through several changes.

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Textile Industry: An Overview

India's fashion business benefits from having tens of thousands of years of rich heritage and knowledge behind it, as well as from the fact that the fashion for sewn clothing has existed in India since ancient times.

One of the main sectors of India's capital goods sector is the textile industry. According to a survey by the Indian Brand Equity Foundation (IBEF), India is the world's second-largest exporter of textiles.

Additionally, it is anticipated that the Indian textile and apparel sector will experience significant expansion over the next several years due to favorable demographics and rising income levels. India has a thriving fashion sector, from elaborate attire for wedding rituals to casual apparel.

 

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Heritage

Crewel, Chikhan, and Zardosi, traditional Indian embroidery techniques, have made their way to the international front of the fashion catwalk, showcasing Indo-Western attire as a synthesis of the best of East and West. In addition, India is known for its distinctive blend of cotton and silk sarees, including those from Kanjivaram, Mysore, Pochampalli, Jamdani, Blucher, Pithani, Benarasi, Bandhini, and Sambhalpuri, among others.

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In India, the fashion industry has grown by USD 100 billion, and over the next five years, the online fashion market is predicted to increase by 15%.

Offline, the industry is forecast to develop at a CAGR of 8–10%. India's fashion business is highly lucrative in scope and variety, especially for women.

The corporate appearance has been increasingly popular in today's society due to the rapid development of information technology. Still, the rebirth of the ethnocultural look has become somewhat dominating, popularising the older styles of art and craft.

 

 

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Visual Business

Visual Brand Strategy for Your Fashion

Visual branding is an important piece of the puzzle to growing brand recognition & loyalty for your .

The corporate appearance has been increasingly popular in today's society due to the rapid development of information technology. Still, the rebirth of the ethnocultural look has become somewhat dominating, popularising the older styles of art and craft. 

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Pandemic & Its Effect

The pandemic caused a significant slowdown in the fashion industry in 2020. People started investing in designer masks and comfortable clothing in place of designer clothing. The Covid-19 pandemic profoundly impacted the worldwide fashion business, causing anything from changes in consumer behavior to digital fashion weeks.

However, one positive outcome was that the fashion business became wiser regarding social and environmental responsibility. We discussed the season's hot topics of sustainability, optimism, and digitalization with famous fashion choreographer and Runway Director Jagnoor Aneja. She provided us with a list of the newest fashion trends.

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How Secular Is Trend?

The availability of clothing sizes has changed globally due to the increased knowledge of body positivity and body shape acceptance. Now they range from pregnancy to size-inclusive fashion to plus size.

In addition to using regular sizes, several designers also provide plus-size options in their collections.

Plus-size models dominate the fashion industry, from editorial shoots to ramp walks.

Curvy women have suddenly gained popularity as new fashion icons.

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Fashion

Post-Covid: How Are Indian Textile/Apparel B2B Physical Fairs Are Doing

26 July 2022, Mumbai:

Before the pandemic reached India, the garment and apparel industry had trouble surviving. Until 2019, the garment and apparel industry accounted for most of the export revenue. Textiles and apparel accounted for over 15% of total earnings.
According to KPMG, the sector employed 4.5 crores, of people, making it one of the biggest employers in the country, additionally giving insight perspective on supply chain reconfiguration and India's growing role in a diverse global market post-COVID-19.
Even before the introduction of Covid-19 in India, the industry was still a long way from its zenith.

The pandemic worsened existing issues and caused companies to deal with an unprecedented interruption in everything from production to supply networks. As a result, it raised the grave concern of whether or not the industry would survive this upheaval.

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The pandemic is expected to negatively influence exports, with second-order effects on domestic trades and exports domestic sales. The pandemic has negatively impacted the majority of India's export markets (the US and EU together account for roughly 60% of the country's total apparel exports in value terms), resulting in order cancellations and order delays that have increased inventory levels and increased working capital needs.

The last quarter of FY20 saw a dry-up in apparel orders, problems with working capital, and a lack of clarity on tariffs and incentives, mainly as exporters from Bangladesh, Sri Lanka, and Vietnam are given privileged access.

 

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The closure of all of India is also having an impact on domestic consumption. Due to the availability of clothing for the next summer season, new store openings have ceased, and even domestic retailers are experiencing an inventory build-up.

Furthermore, domestic pricing may suffer if exporters dump their stocks on the domestic market, resulting in even smaller margins. This could cause short-term blips like lower spending and casual labor employment. 

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If the crisis persists and there is a statewide lockdown, it would negatively affect consumer sentiment because stores and malls will be closed while maintaining social distance, safety, and health. The length of the recovery cycle would be directly impacted by the outbreak's scope and the lockdown.

The CITI has asked the government to swiftly announce a relief package for the textile and apparel sector to lessen the crisis the capital- and labor-intensive textile industry is now experiencing in the wake of the coronavirus outbreak.

 

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Since apparel is one of life's necessities, the online textile business saw a surge in sales even under lockdown. Because the online textile sector operates entirely online with no opportunity for physical or human touch, the lockdown had no adverse effects on it.

Due to its independence from offline businesses like wholesalers, semi-wholesalers, retailers, intermediaries, etc., the online textile industry even saw a surge in sales. 

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Retailers with an online presence have a great chance of becoming unicorns (a company worth over $1 billion) of the New Age India because of the growing trend in the online textile industry. The pandemic was in full-fledged effect when the lockdown was implemented, and it was the summer shopping season.

Due to all these advancements, businesses in the online retail sector saw a rise in revenue sheets. The Indian online textile market is fully justified in creating new unicorns. Most customers were pleased with their online buying experiences while the store was under lockdown.

 

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Way Forward: To integrate the textile value chain
After pressing hard on the pause pedal due to the pandemic, mega physical B2B fairs are coming back in fashion/apparel. Indian textile & apparel exhibition organisers are gradually commencing operations.
Albeit India's textile and apparel industry is quite certainly undergoing structural changes to retain, consolidate & expand network/distribution channels through physical B2B trade fairs and exhibitions.

In accordance with the empirical evidence in summary the foregone conclusion is that this physicality tool is here to stay.

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Exhibition

Why Price Inflation Is Adverse To Apparel Industry Prospects

05 August 2022, Mumbai:

Spiraling Prices

As per Investopedia's definition," Price inflation is an increase in the price of a standardized good/service or a basket of goods/services over a specific period of time (usually one year)".

A historical period of drops in online retail prices has now been followed by an unprecedented 15 months of price increases, according to a new study from Adobe Digital Insights. According to the research, pet items, non-prescription medications, apparel/clothes, furniture, and floral arrangements are among the areas affected by inflation.

The trade pundits are increasingly getting convinced by now given the hardening of inflationary trends playing out in the background & semblance it is very likely to result in disruptions in the apparel global supply chains and escalate volatility in the global trade including the apparel market.

As per the KPMG study," Our analysis found that global inflation could average between 4.5%-7.7% this year and between 2.9%-4.3% in 2023".

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Existing Pie

E-commerce transactions are expected to represent soon about $1 of every $5 spent by Americans, up from $1 of every $6 in 2017, according to Adobe, due to the industry-wide surge in digital sticker prices.

The economy index maintained by Adobe Digital Insights keeps track of more than 100 million products across 18 categories and more than 1 trillion visits to U.S. retail websites.

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Pain Points

The apparel/garment business is currently dealing with inflation, which has only been this severe in the last 15 years. After a decade of widespread deflation, retail garment prices are again under pressure to rise.

According to one KPMG report," Many retailers have engaged in fierce price competition, which now means that customers are rarely willing to buy clothes/apparel at full price anymore".

Since 1997, the apparel/garment business has not seen inflation. In December 2007, garment/clothing costs increased. Prices for yarns and threads, greige fabrics, industrial textile products, and completed fabrics increased by 1.3 percent, 0.7 percent, 1.0 percent, and 0.9 percent, respectively."

 

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Cascading Effect

While greige materials increased by 2.8 percent, industrial textile products by 2.2 percent, and completed fabrics by 2.3 percent in January 2008, yarns and threads increased by 4.9 percent.

One of the KPMG reports, very clearly articulates that," The adverse scenario with higher discounting rates and similar inflation rates is likely to lead to different results and conclusions than the previous stress".

 

Facing significant economic and geopolitical challenges

There is a very occasional time for the sector and exporters because it entails a double whammy of rising pay demands and input costs. However, many prosperous and developing economies worldwide also feel the pressure, not only the Indian sector.

China's official consumer price inflation rate has risen from 3 percent a year ago to an all-time high of 8.5 percent.

The global recession is also hitting/hurting the textile industry very badly.

In fact, by mid-summer, inflation rates in five of the ten largest rising nations may reach 10% or higher. Then, double-digit inflation may be a problem for two-thirds of humanity.

Will this result in a decrease in the demand for and consumption of clothing or the industry's profit margins?

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ApparelRetailer

What Plagues Indian Textile Industry the Most

30 July 2022, Mumbai:

Indian textile industry an overview

The consumer social point of view dominates discussions in the textile business, ignoring its effects on other industries, the Indian export dilemma, and the environment.

India is one of the biggest producers of textiles, employing 68 million people indirectly and 51 million directly. Significant issues are emerging in the textile business due to shifting government policy at the state and federal levels. The threat of rising interest rates, labor costs, and worker pay is another significant one.

The centers of India's textile and apparel industries are located in cities like Bangalore, Mumbai, Tirupur, and New Delhi.

These producers can produce the full selection of knitwear and woven clothing at affordable prices without sacrificing quality. The Indian textile sector has its drawbacks, such as limited access to cutting-edge technology and a failure to adhere to international standards in a fiercely competitive market.

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Raw material shortage:

Due to environmental concerns, specific units in China and Europe have been shut down, which has led to an increase in the price of primary raw materials. There are also many other factors, such as weather, which are affecting the raw material supply.

The cost of raw materials has increased due to unpredictable market conditions, weather, policies, and other factors.

 

Environmental issues:

Environmental compliance isn't always the priority for importers of textiles and apparel. Infrastructure bottlenecks:

India's infrastructure remains to be of a poorer condition than that of many other Asian nations.

 

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Indian textile industry analysis

The textile sector is attempting to concentrate on alternatives and plan its return to normalcy during this lockdown while the world battles the ongoing outbreak of the terrible COVID-19 virus.

This situation has hampered the economic forecasts, and several sectors' business models have also been altered. Following the shutdown, all industries and textile organizations will implement new on-site safety measures and sanitization procedures. 

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Indian textile industry opportunities challenges, and suggestions

The Indian apparel market, anticipated to generate USD 74 billion in 2020, is now predicted to decline by roughly 10 to 15 percent. It significantly impacts employment; it was expected that the textile industry would lose approximately one crore jobs.

Diversification of apparel and textiles beyond cotton and forays into the artificial fiber & synthetics sector could represent a significant turn in the Indian textile industry.

With 3.5 crore employees, the textile industry is the second-largest employer after the agricultural sector. India is now China's rival even in terms of overall production.

More foreign purchasers like Walmart, Gap, and other retailers are visiting India due to the country's minimum wage increase, child labor reduction, and worker security measures in compliance with international norms. 

100% FDI is allowed in the textile sector under the automatic route. As per one KPMG report, "Importance of joint ventures in the Indian context has been highlighted for setting up infrastructure for high-value functional products".

 

 

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Skill Set Issue:

The cotton textile industry is frequently plagued by labour problems. In fact, a low level of skill formation required of the labour force is normal.

There is a critical scarcity of skilled labor. Designers aware of the needs of western clients are hard to find. The productivity, even among industry workers, is appallingly poor.

If an American worker's productivity is 100, an Indian worker's productivity is merely 13. Textile is a poor place to invest because of strikes and union hooliganism.

In India, 35% of the overall production cost comprises raw materials, substantially more than in other nations. 

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Productivity Issue:

Despite having the most significant area dedicated to cotton production (26%), India only produces 9%.

To improve output, it is necessary to develop high-yielding cotton varieties. For producers, fluctuating prices and the unknown supply of raw materials are primary headaches.

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Indian textile industry analysis

The sector has the potential to contribute significantly to the Hon’ble Prime Minister’s vision to become a USD 5 trillion economy in the next few years owing to significant value addition across the textile value chain.

The article has tried to articulate the secular trends including trade scenario, market opportunities, key growth drivers, and the way forward.

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Textiles

Reimagine: How Future Retail Space Will Look Like

26 July 2022, Mumbai:

How is 'traditional retail' transitioning to 'consumer commerce'

Retail businesses are better described as a customer-centric approach but given the new paradigm of it transitioning to a digital business landscape connecting the critical pieces viz front, middle, and back offices help navigate the Future Consumer Commerce Retail Space.

The expansion of the organic food sector has been noted as one of the major trends in India's food retail market. The demand for natural food has evolved into a requirement over the past few years, although it was mostly a trend in the early 2010s.

According to industry predictions, India's organized food retail and grocery business will expand at a CAGR of 8% between 2021 and 2025.

The organic food industry is anticipated to grow at a CAGR of almost 20% over the same period. The statistics demonstrate the enormous influence the organic food market will have on the food business, both in terms of growth and trends.

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In the contemporary world, the retail shopping pie emanates largely in-store, online, or via mail buying. Instead, they can be integrated, combining it seamlessly by interplay/interoperability in myriad ways putting pulse by closely understanding customer shopping needs.

In India, where the demand for organic food has increased over the past few years, there has been a significant shift in consumer awareness, pricing, and transparency. Grocers and brands now need to connect every stage of the value chain to a discriminating market and governmental rules as customers become more aware and sensitive of the items they purchase.

Priorities aside, it's critical to recognize a fundamental shift: customers are seeking out better options. A noticeable change in social patterns is a significant driver of the rising demand for organic food.

 

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The sacrifice that consumers make when they choose food products that are grown and processed using chemicals is now being recognized and appreciated by consumers, which naturally affects the decisions they make when they go grocery shopping.

In today's hyperconnected digital world, digital stores are displacing physical storefronts, they also give businesses a chance to improvise with original concepts.

A powerful tool that retail establishments may use to leverage their brand is recognizing and responding to the changing requirements of their customers. The best way to adjust to the shifting needs is to combine the digital and physical worlds. 

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Even though the future of retail in the post-covid era is uncertain, anyone with a knack for improvisation can succeed and make money with their retail locations. Therefore, physical and mortar retailers won't disappear for a very long time.

This progression, combined with other factors, has caused a rise in two types of retailing: store retailers and non-store retailers like direct sales, catalogs and mailers, TV home shopping, and lastly, virtual stores or online retailing. Consumers are now considered king, and businesses are vying for their place in the hearts of consumers.

 

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Odds are stacked up against Traditional shops and businesses staring at challenging and trying conditions. The demand for physical offices and buildings has decreased due to the development of dependable, affordable remote corporate collaboration solutions like teleconference phone and video conferencing systems (like Skype).

For example, the digitally immersive store introduced by premium lifestyle brand Van Heusen helps enhance the fit and fashion experience of shoppers. 

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The retailing sector must advance along with changing consumer behavior as in Future-Ready Retail. It appears that brief internet journeys are increasing while filling the buckets with products is falling. In-store retail and technology work together to eliminate traditional central store purchases and upend the entire market.

 

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Innovation tests regular food stores by offering more than simply price breaks. Because of all the change, today's retailing leaders must develop cutting-edge, customer-focused shopping experiences to satisfy the needs and demands of contemporary consumers.

The most likely scenario is that offline retail will remain the mainstay and mainstream channel, but how space is leveraged will likely change.

The layouts of today's stores do not meet the needs of today's customers. Future stores must have a variety of customer-focused features.

 

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SmartRetail

Is It Time For Retailers To Set Up Dark Stores

27 July 2022, Mumbai:

Dark stores are often located off the high street yet close to high-demand communities. Other industries, including apparel and durables, might as well be located outside the city. They are modest-sized neighborhood warehouses for receiving, processing, and storing orders. They are simpler to automate and were created to make choosing rapid and affordable.

Within a specified service time commitment, they can handle click and collect services and last-mile deliveries for various online buying platforms. Dark storefronts might be the best combination to experiment with as merchants battle for customer acquisition and retention based on speed and cost.

Merchants were battling issues with profitability and growth even before COVID-19 prompted retailers in India and around the world to reconsider their operating strategies. Then COVID-19 arrived, with no sign of foot traffic and increasing online customer demand for new categories every day.

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For over a decade, retailers have experimented with back-end or dark stores, often without the tag. Why are we talking about them now, given this?

The solution can be found in the shrinking retail margins, intense competition, and soaring customer expectations. Last but not least, the COVID-19 pandemic has accelerated the use of dark storefronts.

Customers have registered on retailers' websites in record numbers thanks to the lockdown, which has kept them indoors. India has become more favorable for the expansion of e-commerce due to the recent embrace of digital technology.

 

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By 2020, there will be over 550 million Internet users in India, giving 41% of the population access to online shopping sites. With more than one-third of the population having used one or more of India's more than 50 wallet providers, the landscape of digital payments is also evolving.

Customers now find it simpler to shop online because of all of this. All of those mentioned above, along with changes in consumer buying habits during the present lockdown, have opened the door for a business model centered on dark businesses that can satisfy customers' expectations for online shopping and affordable, quick delivery. 

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Dark stores are becoming more and more popular among participants worldwide in various industries, including food, fashion, footwear, consumer durables, etc. Multiple chains of supermarkets served as the early adopters of the approach, which gained traction in the U.K. in an organized fashion.

The idea quickly attracted the interest of some of the top international merchants in the US and then in Europe, East Asia, and Australia. Several well-known supermarket chains worldwide operate or are experimenting with dark stores.

 

 

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The bulk of these stores are more significant than 100,000 square feet and have specialized in-house equipment, including food processing, cold press systems, butchering lines, etc. 

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As an example, Wendy's, Chick-fil-A, and other fast-food chains have established "ghost" kitchens that function just to handle delivery orders - no dining room or carryout - allowing businesses to enter markets where they do not run physical stores. According to Wendy's, ghost kitchens will be a key component of its expansion plan, even in markets where it doesn't have any physical locations. In order to reach a wider audience, some brands also use shared retail or "ghost kitchen" sites.

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How Secular Is Trend?

As per the KPMG report," Increasingly, more and more players across the globe are adopting dark stores across sectors, including grocery, apparel, footwear, consumer durables, etc. Today multiple globally known supermarket chains are running or experimenting with dark stores with the majority of them spread over more than 100,000 sq.-ft with in-house specialized capabilities. Internal estimates by some of the companies using dark stores globally suggest that adoption of dark stores adds three to four percent to the bottom line through a mix of higher customer orders and lower costs".

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EShopping

D2C brands: Transforming Retail Scenario

26 July 2022, Mumbai:

Emerging retail paradigm driving retailers to reimagine 

Consumers across the globe adapted online shopping during the COVID period. They began trusting the e-commerce market that exploded with delivery platforms and marketplaces witnessing new-user growth of 50%.
Today's millennial consumer is informed, picky & needs research underpinning, and is outcome-driven. With macro-economic factors undergoing a sea change in recent years.

The dynamic consumers in the face of continuous disruption are the key drivers transforming the trade landscape presenting a new paradigm of, opportunities & challenges as the new norm.

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D2C Brands In India

Studies indicate that the decade 2021-2030 will see D2C brands like Clovia, Atomberg, Furlenc attract significant attention and investments as they keep growing. The market thrives with the launch of super apps Driven by Gen Next entrepreneurs, the current D2C market in India is thriving with the launch of super apps by big companies like the Tata group and Reliance Group.

In fact, big players are in the frays, for example, the Aditya Birla Group is looking to set up a new subsidiary for building a portfolio of New Age, digital brands (D2C brands) across fashion, beauty, apparel, and allied lifestyle segments.

Studies indicate that the decade 2021-2030 will see D2C brands like Clovia, Atomberg, Furlenc attract significant attention and investments as they keep growing.

 

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The market thrives with the launch of super apps

Driven by Gen Next entrepreneurs, the current D2C market in India is thriving with the launch of super apps by big companies like the Tata group and Reliance Group. In fact, big players are in the frays, for example, the Aditya Birla Group is looking to set up a new subsidiary for building a portfolio of New Age, digital brands (D2C) across fashion, beauty, and allied lifestyle segments.

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It has launched the ‘House of Brands’ business, TMRW to roll out and back digital businesses. TMRW is looking to create a portfolio of fashion and lifestyle brands by acquiring and incubating over 30 brands in the next three years.

The format also enables multiple founders to operate within its ‘house of brands’ platform that shares a common vision and capabilities, as shared by the company. Meanwhile, startups like Globalbees, Mensa Brands, Thrasio, Good Glamm Grup, and GOAT Brand Labs will join ABRFL to build a new brand portfolio, says Ashish Dikshit, Managing Director.

 

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Boosting brand-customer relationships

D2C fashion brands serve customers across all marketing channels. This model does away with any middleman barriers such as wholesalers, retailers, or distributors and offers better prices and faster delivery times with higher profits. D2C also enables fashion brands to utilize new technologies to boost brand-customer relationships and bridge the supply-demand gap.

For example, the digitally immersive store introduced by premium lifestyle brand Van Heusen helps enhance the fit and fashion experience of shoppers. 

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Adopting omnichannel strategies to boost engagement

To reach their target consumers, D2C brands are leveraging the services of social media influencers. They are also adopting the omnichannel model to boost brand engagement and encourage repeat purchases with long-term loyalty. Many new small and medium-size D2C players are entering the apparel retail segment. However, only a few have the resources, and detailed know-how to invest in design development, team building, raw material sourcing, and manufacturing. 

Eastman Brands, the division of Eastman Exports Global Clothing, Tirupur has introduced the ‘White Label’ concept for the apparel segment, D2D (Design-to-Delivery) and D2C (Direct-to-Consumer).

The concept allows a product or a service produced by one company to be rebranded by the other companies to make it appear as if they have made it.

 

 

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Helps brands launch new products

Stakeholders believe the D2C brands segment enables new retailers or brands and labels to launch their products as no big product development, lead times, and investment is required. S Kannan, the CEO, of Eastman, explains, that the ‘small order quantity concept is going to be a massive business in the next few years and the company is trying to cater to this segment as soon as possible

Ensuring small orders remains a problem for nearly all brands and start-ups and for that they keep searching for manufacturers/vendors who can support them, and work with small factories which are ready to take small quantities.

Product category also matters in the case of smaller orders like Bewakoof.com which focuses on T-shirts since it is comparatively easy to source and has fewer issues like fit. The brand works with a few vendors having 50 stitching machines.

Market to reach $100 billion by 2026
D2C brands in India sector is expected to be the biggest drivers of the retail market in India with their size expected to reach $100 million by 2026. In 2021, these brands clinched around 174 deals to raise $1.81 billion in the capital.

This not only resulted in the creation of thousands of new brands but also gave enablers and digital sellers new growth opportunities by launching new disruptive models such as e-commerce roll-ups, houses of brands, etc.

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