With no orders from domestic retailers for the last two months, the Indian fashion industry seems to have reached a dead end. As retailers are struggling to liquidate existing orders, they are unlikely to place any new orders until their cash cycle improves. They may also cut down their inventories for Autumn/Winter season by 50 per cent.
Customer diffidence leads to low sales
Many retailers opened their stores last week after over two months of anti-Coronavirus lockdown. However, their sales have remained tepid at around 25 per cent of pre-COVID-19 level as against their expectations of 50 per cent, said Rakesh Biyani, Managing Director, Future Group. This is preventing them from placing any orders, he added. And as Kumar Rajgopalan, CEO, Retailers Association (RAI) says, apparel retail has declined by almost 70 per cent since June 1, as customers have restricted their store visits. This has limited the business of retailers who are now hesitant to place any new orders.
Clearing old stockpile
Many of these fashion retailers also have their Spring/Summer stock to deal with. Hence, they now plan to concentrate on selling this stock before placing fresh orders. This may lead to an overall drop of orders by around 40 per cent as compared to last year, feels Sundeep Chugh, CEO, Benetton India. Ethnic wear brand Biba has reduced orders for next season by almost 40 per cent so has another rival ethic wear brand whose sales are currently hovering around 35 per cent of the pre-COVID levels.
Even orders for winter wear are likely to be limited as retailers are facing a huge cash crunch. However, Mehta expects exports to revive soon as not only have manufacturing activities in garment hubs like Tirupur picked up but the European and the US markets are also opening up. Hence, exports are likely to start moving towards 60-70 per cent of their original mark by the beginning of third quarter of this year, believes Kulin Lalbhai, Executive Director, Arvind Ltd