The De­mand and Sup­ply Co­nun­drum

An anal­y­sis of the key is­sues fac­ing the de­mand and sup­ply chains of the ap­parel in­dus­try

Apparel - - Contents December 2014 -

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 BUD­GET

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

TECH ‘WISE’

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.

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