The Demand and Supply Conundrum
An analysis of the key issues facing the demand and supply chains of the apparel industry
India is considered to be one of the most dynamic and evolving fashion hubs in the world. The presence of numerous creeds, cultures and their distinctive tastes have served as important factors to further the apparel industry, giving it recognition on a global scale. Over the last few decades, the industry has witnessed some phenomenal changes in the demand and supply chain, giving the market a greater impetus. The appended laws and policies fostering Foreign Direct Investment (FDI) have bolstered international entrants into the Indian apparel scenario, giving a brand-new dimension to the apparel industry.
How the demand is affected
One of the primary reasons for augmenting rates is that of keeping to international standards. This, indeed, has proved instrumental in steering the Indian apparel industry, that has witnessed over two decades of declining apparel prices. This saw a complete halt in 2011, when the prices began to stabilise at 25 per cent to 30 per cent higher than in the previous decades. For instance, retailers, both Indian and international, were compelled to curtail profits by offering attractive discounts once the holiday season came to a close, urging the consumers to
The rising prices served a blow to the retailers as well as the consumers. Retailers were confronted with the dilemma of minimising costs, which directly hit on the healthy profit margin that now looked almost bleak. Many in the supply chain risked recreating apparel using sub-standard raw materials and simultaneously upping costs. Hence, the year 2011 not only saw an upward trend in the pricing of apparel by 5.6 per cent but also saw consumers lamenting on the substandard quality of products offered by
RETAILERS WERE CONFRONTED WITH THE DILEMMA OF MINIMISING COSTS, WHICH DIRECTLY HIT ON THE HEALTHY PROFIT MARGIN THAT NOW LOOKED ALMOST BLEAK.
The recession lent a hefty blow to the industry. Political apathy led to a GDP of less than five per cent and inflation in double digits. With this, not only did the prices go up, but it also compelled the consumer to become a cautious spender. Most of the income of the average middle class family was driven towards procuring food and groceries, underlining the idea of ‘value for money,’ especially while purchasing apparel. Hence, the woes of consumers being delivered substandard goods needed to be attended to promptly.
couldn’t be overlooked was, ‘What is in fashion?’ Well, with so many brands and designers flooding the market, it has become difficult to define a particular trend for the season. In fact, it has been observed that trends seem to transform within the season itself. With recession, one observed sharp erosion in the percentage of consumers who would pay a high premium for an outfit. The consumer today strives hard at striking a balance between ‘need based purchasing’ and ‘aspiration based purchasing.’
SUPPLYING IT RIGHT!
On the other hand, to balance the flaws of the demand and supply system, we have the latest policies of the Modi government which assumed power in May 2014. Apparel ventures of global repute have been successfully ushered into the country. In fact, Indian brands too, are fast adopting the modus operandi used by foreign brands, such as Marks & Spencer and Zara, setting up a successful supply chain that is imperative for the apparel segment to thrive
perfected the supply chain by helping consumers purchase products within the same season, or just on the brink of the new season. They have adopted predictive methods to stock on seasonal clothing. On the other hand, brands like Marks & Spencer are involved with the product from its very inception. This includes the sourcing of raw materials, manufacturing, logistics and so on. International brands lay emphasis on customising their portfolio, making it easier for the consumer to comprehend the end purpose of the label, for
fostered by Indian brands as well, eg., AND, Charagh Din & Linen Club.
Analysis shows that private (Indian) labels want to gain a stronghold on the supply chain. They hope to market to a broader spectrum of buyers in the high potential markets of the tier II and
The 2014 budget gives a much needed stimulus to the apparel industry. To begin with, the government has created single entry points, cutting down on the mammoth paper work to conduct trade. Trade assumes new routes, using the internet as a vehicle for beneficial advancements. Bearing in mind the phenomenal contribution of the apparel industry, the government has devised six new textile clusters. This, in turn, will ensure direct employment to more than 35 million people from various pockets in the country and will also help in catalysing exports. Exemption of excise duty on branded goods will trim manufacturing costs and encourage newer brands in the market. The government has done well by sounding off taxes on any kind of cotton, making India one of the top exporters of cotton yarn, contributing to about 25 per cent of the global cotton trade. The weaving
THE 2014 BUDGET GIVES A MUCH NEEDED STIMULUS TO THE APPAREL INDUSTRY. TO BEGIN WITH, THE GOVT. HAS CREATED SINGLE ENTRY POINTS, CUTTING DOWN ON THE MAMMOTH PAPERWORK TO CONDUCT TRADE.
industry has been allocated a healthy sum in order to revive traditional weaves, tapping into the largely unexplored market of connoisseurs
The Internet serves as an important platform for the industry in the recent years. With the help of information technology, the Government of India (in the recent budget), has created a single entry-point online for apparel traders, dismissing unwarranted paperwork to conduct business.
This has also given rise to e-commerce, where traders can display their goods online. This not only provides for a wider reach but also serves as an advantage for both the trader and the buyer. The trader is happy as his products can be sold to a wider clientele in tier II and tier III cities, without incurring a heavy and recurring establishment costs. The client, on the other hand, can choose from a wide array of goods at better rates than the MRP, as marked in
Studies show that even though there is a sizeable population of the consumers who prefer to buy only after ‘feeling the fabric,’ there is an expected upsurge in online consumers
E-commerce has helped the vendor comprehend the nuances of the market as well as the mind-set of the consumer. Problems can be addressed with immediacy as one can easily establish a two-way communication on
away with unnecessary and unwanted expenses, for example, garment fittings on models. Trimmings are now devised using the e-fitting
Even though the industry faces a yawning gap in the demand and supply chain, it is gradually being bridged by incorporating numerous methods ranging from favourable government policies to technology and everything in between. By 2020, the Indian apparel industry will not only top the global charts but will also set a new record in contributing to the GDP, second only to agriculture.
EVEN THOUGH THE INDUSTRY FACES A YAWNING GAP IN THE DEMAND AND SUPPLY CHAIN, IT IS GRADUALLY BEING BRIDGED BY INCORPORATING VARIOUS METHODS RANGING FROM FAVOURABLE GOVT. POLICIES TO TECHNOLOGY AND EVERYTHING IN BETWEEN.