With the pandemic impacting both apparel manufacturers and retailers in India, these industry players are preparing themselves for the new normal. Speaking at a recent webinar by the Retail Association of India to discuss the effects of COVID-19 on the apparel industry Vineet Gautam, Chief Executive Officer, Bestseller India said that the challenge for the fashion apparel industry is greater as fashion products ages very quickly, especially fast fashion products, which continuously keep getting older.
Conserving cash by cutting expenses
To mitigate losses, industry players are taking several measures including conserving cash, taking payments on consignments, cutting down discretionary spending and production, renegotiating rents, adapting to technology, omnichannel retail, and utilizing the leftover inventory. They are facing several challenges like managing the cash flows and keeping the cost of the working capital low. Though their factories remain unoperational, supply chain remains disrupted, revenues remain nil and consumer sentiment is subdued, they still have to pay certain costs.
To tide over this, Raymond is effectively managing its liquidity flow by focusing on payment realization from the market, noted Sanjay Bahl, CFO of the company. The company is working on measures for cost rationalization by cutting down all non-critical expenses and marketing spends. Another way retailers are managing their cash flows is by managing inventory, says Shailesh Chaturvedi, CEO, Tommy Hilfiger Apparels India. Almost 50 per cent cheques that the brand writes are for inventory, whether paying for insurance, freight and custom duty on imports, or paying domestic vendors, he stated.
As they need some liquidity to produce inventory for the upcoming season, they often resort to discounts to sell current stock. Clothing Manufacturers Association of India (CMAI) President, Rahul Mehta, advised retailers against resorting to such tactics. However, he viewed it better than having dead stock. Besides discounts, another avenue open for retailers is leverage demand during the upcoming festive season. They plan to use some of their current inventory for the wedding-winter season besides conservatively producing collections according to the trend at that time.
It is crucial that players work closely with important stakeholders including vendors, brand partners, and mall-developers. Dalpat Jain, Chief Financial Officer at Vedant Fashion (Manyavar) revealed 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.
A recent Nielsen India survey indicated, about 43 per cent of retailers in India are likely to cut spending on discretionary items such as fashion, personal grooming, and home decor once their shops reopen. Over the next few months, these retailers will also increase focus on ensuring consumer safety as customers will be skeptical of trying a garment at a store because of the fear. Some of the initiatives that Lifestyle International plans to undertake include: installing sanitizer stations in stores and floor markers to facilitate social distancing. The retailer will also frequently steam garments and disinfect surfaces such as escalators, cash counters, card machines, shopping bags, etc, informs Vasanth Kumar, Managing Director of the company.
Over 39 per cent respondents to Nielsen’s survey stated they intend to increase online shopping by more than 20 per cent .Some players plan to scale up online. Raymond launched its online tailoring initiative; the company is planning to scale this up.
Lifestyle too is planning to focus on omnichannel to offer choice and comfort to customers to seamlessly transact across digital and physical stores. It has equipped itself to handle higher volumes of deliveries for its e-commerce vertical and has made adequate arrangements to cater to any surge in demand.