Ratings agency ICRA has assigned a 'Negative' credit outlook on the value and lifestyle fashion retailers as it expects their revenues to decline by 35-42 per cent in FY21, with an expected decline in their operating profit margin (OPM) by 300-500 bps.

According to the agency, fashion retailers will witness a material weakening in their credit profile in FY2021, though some of the retailers have strong liquidity and/or financial support from a strong parentage. F&G retailers are expected to report 3-7 per cent revenue growth in FY2021, with increased proportion of food and staple products (vis-a-vis general merchandise) in their revenue mix, it said.

This would weaken their gross margins on a Y-o-Y basis. However, it is expected to weaken their credit metrics. To conserve cash and optimize working capital, most of these retailers have restricted fresh inventory purchase during April to October as they are looking to carry forward their spring-summer inventory till the autumn season.

Since JioMart announced its plan to venture into fashion and electronic e-commerce, experts have opined the e-tailer would find it extremely tough to make inroads into e-commerce market currently dominated by Amazon and Flipkart. As per a Live Mint report, in the past six months, Reliance has raised more than $21 billion for its digital unit Jio Platform. This month, its retail unit, Reliance Retail, bagged about $1.8 billion from private equity firms Silver Lake and KKR. This would help the company transform itself into a 21st century digital giant and India’s answer to Amazon, Facebook, Google, Alibaba and other world-class digital giants.

JioMart launched its e-services late last year. The company aims to deliver products from local kirana stores for which it will connect 3 crore kirana stores with neighborhood customers. Its entry in the online grocery market will expand the market 20 times to $29 billion 2024, says Goldman Sachs. Reliance’s partnership with Facebook will help the firm to garner market share of more than 50 per cent by 2024.

Low order value slows expansion plans

JioMart sources majority of its orders through the Reliance Retail supply chain. The e-tailer signs up with a few thousand kirana stores every month, though analysts believe, its expansion rate is slower rate than other e-tailers. The company’s average order value is lower than that of other e-grocers as its delivery costs are higher. Though Reliance plans to expand its e-grocery market to smaller cities, it may find it extremely difficult to maintain profitability in these markets.

Reliance will boost profit margins by selling more products through private labels. The company plans to sell private labels both in grocery and FMCG categories. These products form a key component of its retail and wholesale business plans However, Reliance’s focus on private labels is making large FMCG companies such as Hindustan Unilever, Marico and Dabur, wary of working with its B2B arm. To create an integrated ecosystem, Reliance will have to work with many kirana stores, brands and modern retailers across the country.

Focus on private labels

Analysts believe, though Reliance has a better chance to push its private labels in wholesale and retail markets, it may struggle to scale in electronics and FMCG categories, currently dominated by big brands, kirana stores and e-commerce firms. Particularly in fashion, it will have to tap low-priced private labels to attract customers.

Google and Facebook have invested more than $10 billion in Reliance as they plan to enter the Indian e-commerce market and expand in other sectors like payments and content. Both these companies will collaborate with Reliance in a few areas. However, they may end up competing with the firm in others

As the pandemic has made e-commerce indispensable, the government has softened its stand towards US e-commerce firms. This has encouraged Flipkart and Amazon to step up their lobbying efforts to counter growing Reliance might. However, the winner amongst these three will ultimately be decided by the consumers.

Designer Anita Dongre believes, COVID-19 has made Indian brands realize the importance of sustainable fashion production. Her company, House of Anita Dongre, sources ethically produced materials besides adopting innovative and environmentally sensitive production processes. Its 11,000-sq. mt. headquarters near Mumbai conforms to the guidelines of the Sustainable Apparel Coalition and uses natural lighting, water conservation and biodegradable packaging.

A FashionScope report from McKinsey & Company highlights, sustainability is gaining ground in India as veteran Indian designers like Rohit Bal, Ritu Kumar and Rajesh Pratap Singh are reviving forgotten local weaves besides empowering artisan communities and using earth-friendly fabrics. Delhi-based designer Gautam Gupta has introduced natural handspun fabrics crafted from banana, bamboo, coffee beans and natural silks while designer Aneeth Arora launched two new labels: Pero Recycle and Pero Upcycle, to focus on environmental conservation.

Renewed interest in eco-friendly technologies and materials

Some of the biggest Indian fashion houses are factoring in ecology as a major growth driver. There is a renewed interest amongst them for new, more eco-friendly technologies, materials and production methods such as hemp from the Bombay Hemp Co. For instance, the Aditya Birla Group’s brand Liva has launched a clothing line made from biodegradable fiber derived from wood pulp.

Similarly, leading textile manufacturer and fashion retailer, Raymond Group has launched an eco-friendly range of fabrics called Ecovera in collaboration with Reliance Industries. These fabrics are made from recycled plastic bottles using biofuels and energy efficient processes.

Likewise, the flagship company of Aditya Birla Group, Grasim Industries has launched Liva-branded Viscose Staple Fiber. This man-made, biodegradable fiber is seen as replacement for cotton in apparels, home textiles, dress materials and knit wears. Nelson Jaffery, Head-Design, Liva says, there is enhanced mindfulness amongst consumers towards eco-friendly fabrics as they seek sustainable brands and slow durable fashion.

Launched in 2018, Aslee uses bamboo, hemp and native nettle fabrics to craft hemp and bamboo T-shirts as well antibacterial socks made from 70 per cent bamboo. The company launched biodegradable bamboo face masks during the pandemic as an alternative to the single-use disposable masks.

Rise in sustainability events

Sustainability is also being embraced by event organizers like the Lakme Fashion Week, which has been promoting Indian handlooms and textiles since 2012. Fashion Design Council of India launched the concept of ‘phygital’ fashion events. Fusing the elements of physical and digital, these events help FDCI curtail expenses and tread lighter on earth. Sunil Sethi, Chairman opines, COVID-19 has catalyzed increased sensitivity towards the environment, and given fashion leaders time to rebuild a sustainable future.

Analysts expect the online market for secondhand clothes, shoes and accessories to grow post pandemic. As Tanisha Saxena, who owns a sustainable brand store, advises, millennials should buy fewer but value-driven classics that endure through time and trends. They should also make their fashion consumption more responsive towards society as well as the environment, Dongre sums up.

Fast fashion brand H&M is optimistic about India business. Although the world’s second biggest retailer is closing stores globally, it is planning to open new ones in India; both online and offlline, reports Live Mint. Led by Janne Einola, so far, the brand has opened 48 stores in 24 cities besides launching its own portal and its retail on Myntra.

Physical expansion despite headwinds

Before COVID-19, H&M was opening one store every month in India. Now, the brand may go a bit slower but expansion will continue, says Eionala. It is currently opening a new store in Lucknow and plans to open more stores next year. Some physical stores are still closed due to local lockdowns while remaining are operating with restricted hours. The brand’s revenues from physical stores up to August 2020 declined 31 per cent while net sales declined 50 per cent. Yet, the brand plans to continue opening physical stores in India.

Focus on kids’ and casual wear

The brand also plans to focus on online operations and as well as kids wear, says Eionala. During the lockdown, H&M saw growing demand for casual wear, lounge wear and basics. Eionala says, this trend was common for both men’s and women’s apparels. However, women are showing stronger interest for casual and lounge wear, she adds.

COVID-19 has made consumers conscious about their consumption habits. According to her, changing consumption patterns will determine future course for the industry. There will be growing emphasis on sustainability and H&M will benefit particularly since it has been focusing on sustainable operations for years.

India plans

Despite pessimistic industry outlook, Eionala is confident about the brand’s future in India. It has opened almost 50 stores in the past five years and plans to open more stores over the next five years. The brand plans to also launch a loyalty program called Hello Member in the country for better conversations and personalized shopping experiences.

Besides the flagship brand, H&M also plans to launch other brands from its stable like COS, Monki and H&M home in India. It is waiting for the right opportunity to launch these brands and hopes current FDI rules support its India investment plans.

Benefitting in a big way from the COVID-19 pandemic, the $27 billion Indian e-commerce market is expected to grow by 40 per cent in 2020. Redseer Consulting expects the market to gross $38 billion in 2020. They expect the total number of online shoppers to jump from 135 million in 2019 to 160 million in 2020 owing largely to digitization caused by the pandemic. It expects the percentage of online penetration to increase from 3 per cent in 2019 to 5 per cent in 2020. Studies also show with growing Internet usage across India, new consumers are emerging from Tier II and III, even rural India. A study by Unicommerce states demand is slowly shifting. Currently, Tier II and beyond cities contribute around two-third of the total online consumer demand in India and this share is expected to rise in the coming years. The aspirational young Indian consumer in these cities is driving growth for the sector. Tier III and beyond cities witnessed 53 percent growth, making it the fastest-growing region.

E-grocery to lead retail growth

Present in 35 cities. India’s largest e-grocer BigBasket saw sales double from February to July. The e-tailer’s customer base grew by 80 per cent during this period while its existing customers bought 25 per cent more, goods. Now, the grocer has upped its growth targets for FY21by 40-50 per cent and is on track to achieve it.

Another B2B platform for over 22,000 kirana stores, MaxWholesale expects a 20-40 per cent spike in demand around the festival season driven by purchases of healthier/natural snacks, dry fruits, pulses, juices, mithai, chocolates, beverages, etc. From a Rs 25-crore revenue last fiscal, the company is set to achieve Rs 300 crore revenue this fiscal, informs Samarth Agrawal, CEO and Co-Founder

Expert say e-grocery category will be the fastest growing category in Calendar Year (CY) 20 with 70 per cent Year-on-Year (YoY) growth. This is significantly higher than the CY 2016-2019 average YoY growth rate of 50 per cent for this category.

As per Amit Monga, Co-Founder, ANS Commerce, this year offline retail has recovered by just 40 per cent, retail brands aim to achieve 30-50 per cent of their sales from online retail. His firm ANS Commerce works with 90 large brands, of which 30 were acquired in the last three months alone.

Sellers’ confidence increases

As evident from the 50-60 per cent increase in seller registrations on Amazon.in, sellers’ confidence in online retail is increasing. More sellers are registering themselves on e-commerce platforms as there has been a huge jump in demand for pet toys, athletic and open footwear, essential ‘stay at home’ clothes, furniture, gourmet food, TVs, laptops and sports equipment on Amazon.in, points out Manish Tiwary, Vice President, Amazon India.

Flipkart recently onboarded 50,000 kiranas to provide fast, personalized e-commerce services to its customers during the upcoming Big Billion Days sale. The company attributes the growing preference for online shopping to the safety and convenience attached to it. It has seen a significant spike in demand for its work-from-home essentials like electronic devices and furniture. Demand is also being propelled by kitchen appliances and medical equipment, a Flipkart spokesperson.

Meanwhile the Unicommerce report says: Major ecommerce players like Snapdeal have developed a strong foothold in these cities. The two big players, Amazon and Flipkart, are also focusing on targeting customers and sellers from Tier II and beyond. The ecommerce industry is also helping artisans and small retailers to get a platform where they can sell their products to consumers across the world. And goes on to add: “Most ecommerce companies have launched a website in Hindi and other regional languages to attract more consumers and retailers. During the festive season sale, most brands witness the maximum volume of orders from Tier II and III cities,”

The pandemic has encouraged many Indian textile and apparel brands, including Reliance, Arvind, Aditya Birla, Donear Group, Raymond Siyaram and few start-ups to enter the market for anti-viral clothing in India. Peter England, a menswear brand from the Rs 8,743-crore Aditya Birla Fashion and Retail recently launched a range of antiviral shirts and masks. The company has launched many products across categories such as work from home collection, disposable masks, reusable cloth masks, antiviral shirts & masks and the latest offering is Neem Tulsi Collection. The company is now gearing up to launch trousers, denims, T-shirts & loungewear.

Donear Industries launched anti-viral fabrics in April this year. The group has collaborated with men's wear brand Zodiac to launch anti-viral shirts called Securo. The cost of products ranges from Rs 250/m onwards.

However, Dr C Jagadeesh, Senior Consultant -Internal Medicine, Apollo Hospital, has doubts about the use of these garments. There is not enough scientific data on whether people using these clothes get less infected compared to others, he says. According to him, it is doubtful that these fabrics are able to reduce the transmission of infectious diseases.

In turn, companies confirmed that their products are tested at various labs in India and outside and they have virus resistant properties to ensure safety by inhibiting the persistence and growth of viruses and bacteria on its surface.

After several months, fashion retailers are once again opening new stores,. Fashion retailer Madame opened six stores in July. It plans to open six more stores in the next three months. Similarly, footwear retailer Metro Brands plans to open 15 more stores in addition to the six it has opened post-lockdown. Cantabil Retail plans to add four-five new stores every month.

Some retailers are shutting down underperforming stores in the city and opening new stores at better locations. For instance, Metro Shoes plans to move its standalone store in Lucknow to one of the malls. Most landlords in Delhi and Mumbai are offering a discount of up to 25 per cent to their retailers until their sales pick up, while others have entered a revenue-sharing agreement.

Retailers are also opening stores in Tier-II cities and beyond, which are projected to recover faster than the metro cities. The company plans to invest Rs 75 lakh- Rs 1.5 crore in opening these stores. Cantabil plans to add company-owned as well as franchisee stores in smaller towns to fuel growth. Similarly, Madame has decided to open smaller 800 sqft franchisee stores as opposed to its earlier average size of 1,400 sq ft. It plans to invest Rs 50- Rs 60 lakh for stocking inventory in these stores.

However, most retailers are opening these stores in anticipation of revival and would have to close them down if consumption does not return to the prem-pandemic level.

Recovery in the textile and apparel sector in Q2 FY 21 is likely to be led by increasing demand in the domestic and overseas market, says India Ratings and Research (Ind-Ra) report. It estimates volumes in both segments will reach 80 per cent over September 2020. Both man-made fibers and cotton segments will benefit from low raw material prices in the third quarter. Ind-Ra will continue to monitor demand recovery in domestic as well as export markets of the US, Europe and China.

Topline to decline by 15 per cent

As per Ind-Ra, in Q1 FY21, cash flows in the textile sector were impacted by weak profitability and supply chain disruptions. Though the moratorium announced by the Reserve Bank of India (RBI) under COVID-19 relief package provided adequate liquidity support, the agency expects topline of textile players to decline 15 to 35 per cent year-on-year(Y-O-Y) and operating profits to decline 20 to 50 per cent Y-O-Y.

In August 2020, textile prices across the globe staged a broad recovery from the lows of April-May 2020. International cotton prices (US) recovered by 4 per cent month-on-month (M-O-M) in August 2020 while Indian cotton prices increased by 5 per cent M-O-M. Plant utilization of pure man-made fiber and yarn manufacturers was badly impacted. Prices of fiber and yarn remained steady though discounts were offered to boost sales. Cotton yarn and blended yarn prices largely remained flat, despite demand recovery. Moreover, cotton season procurement was at about 10 per cent higher prices with operating utilizations still remaining below optimum levels.

Discounts, loans bring relief

Quick supply restoration led to a decline in fabric and apparel prices in August 2020. From July-August 2020, industry players not only offered discounts to boost sales but also generated internal liquidity. They were relieved by the disbursement of COVID-19 bank loans, promoter-led infusions and the ability of apparel prices to remain modest in 2HFY21.

From June-July 2020, readymade garment exports recovered significantly, says Ind-Ra. Supported by restocking at global retailers and global sector consolidation, order book buildup remained strong in August 2020 Large apparel and readymade garment manufacturers were able to resolve labor mobility and availability concerns as they benefitted from the shift in market share to India, it adds.

Though COVID-19 has moderately impacted the global demand for home textiles , the US-China trade war has provided a strong impetus to home textiles exports from India. This demand for home textile exports is likely to sustain in 2HFY21 at healthy levels, says Ind-Ra. The agency also expects Indian players to increase their market share in terry towels and bed linens.

Brands as well as online fashion and beauty marketplaces Myntra and Nykaa expect a strong rebound during the festive season after a weak first half impacted by the COVID-19 pandemic. Myntra expects sales to double during the festive season compared to last year. The retailer is working towards scaling up festive season to two times that of last year. Marketing initiatives will be led by celebrities having a wide audience appeal cutting across regions.

Nykaa expects to grow 50 per cent on n omnichannel basis. Its fashion category is expected to become a Rs 500 crore business at an MRP or retail price level and grow by 6-7 times. The retailer expects a strong pickup in its makeup category, especially colour cosmetics.

In terms of brands, MamaEarth expects sales to grow three times over last year. It has been building stocks over the last four weeks. Though facing supply chain challenges, the brand expects to have enough stock by early October. Ethnic brand Raisin plans to launch more than 40 styles that work for intimate gatherings and festive celebrations. The brand expects online sales to contribute 35-40 per cent of its business.

Etailer Flipkart is gearing up to attract shoppers with new sellers, personalized offerings, video conferencing facilities and improved logistic services, for the upcoming festive season sale that begin from October 16, with its flagship event the Big Billion Days. Reports suggest, Flipkart expects more value-seeking buyers from small towns during its six-day sale period. To cater to their demand, the e-tailer has launched services in several regional languages including Tamil, Hindi and Kannada besides instilling a voice and natural language technology to drive adoption.

Focus on social selling and video offerings

This festive season, Flipkart plans to focus on social selling, gaming and video offerings. The platform aims to add value by introducing a wider and affordable product selection led by small local businesses, says Rajneesh Kumar, Chief Corporate Officer. It also plans to work closely with local governments to optimize safe order fulfilment amid the pandemic.

For Big Billion Days sales, Flipkart has added over 3.4 million sq. ft. space across supply chain assets1; roped in 50,000 kiranas for deliveries, partnered with 60 brands to ship goods faster, and doubled its seller base, reveals Amitesh Jha, SVP - eKart and marketplace. The e-com company has launched a new initiative, Brand Advantage, which allows sellers to store inventory in brand’s own warehouses across the country.

New categories with personalized products

To attract more sellers from small towns online, Flipkart is helping several first-time small businesses to launch operations online, says Jagjeet Harode, Senior Director, Flipkart. It is introducing new programs to enable businesses launch more categories and onboard new SMEs.

Personalization is another aspect that helps Flipkart drive sales from existing customers. For Big Billion Days sale, the e-tailer has scaled up personalized offerings through technology, value-driven shopping and expanding its assortments to customers from smaller cities. The festive sale will push the e-tailer’s active online shopper base in India to 160 million, says RedSeer Consulting.

Flipkart employees will create virtual war rooms across cities. The e-tailer will ramp up its partnerships with value brands such as Bata and Max Fashion to offer more choice to consumers at lower price points. It will also source products from local markets through the Flipkart Quick service launched in July. Merchant kiranas will help the firm provide faster deliveries to customers in metros.

Demand for fashion to rise by 40 per cent

Though electronics and smartphones will continue to dominate Flipkart’s sales this season, demand for fashion will also increase with around 40 per cent of new shoppers looking to buy more comfort and lounge wear, says Nishit Garg, Vice-President-Fashion, Flipkart.

As the furniture category will also see a surge in demand, Flipkart has doubled the total number of furniture sellers on its platform besides increasing seller count by 30 per cent. It has also doubled its warehousing capacity to reach 100 per cent serviceable pin codes, with most of them being in Tier II and III cities. To add to the convenience of its buyers, the e-tailer has launched ‘Pay Later’ products and expert chat on its listing pages, for quicker resolution of doubts, informs Manish Kumar, Senior Vice President-furniture.

The firm has partnered with international brands to launch around 320 private brands across babycare, fast-moving consumer goods, sports and fitness, electronics and other categories, adds Dev Iyer, Vice-President, Private Brands. Ankur Bisen, Senior Vice-President, Technopak says, as the pandemic has impacted imports from China, e-commerce firms will have to deal with several supply chain disruptions this year.

As Redseer Consulting, around three lakh jobs are likely to be created by various e-commerce and logistics companies during this year's festive season. Most of these jobs are temporary, created by platforms to help them prepare for surge in orders during the various sale periods. However, about 20 per cent of these temporary workers are retained at the end of festive season, says RedSeer.

About 70 per cent of these three lakh jobs are expected to be offered by online platforms Ecomm Express and others. Around 60 per cent of these jobs will be in the logistics sector, while the remaining will come from warehousing and customer service sectors.

RedSeer expects daily average e-commerce shipments during festive days to jump by 1.8X jump to 22 million as compared to last year. It expects the total shipments during festive sales for the first event to grow by 60 per cent y-o-y (year-on-year) over CY2019 (calendar year) to reach 150 million.

According to the firm, the rise of Tier II+ shoppers will drive an increase of shipments as the purchase value of these consumers will be lower than their metro/Tier I counterparts.like Amazon and Flipkart, while the remaining will be by logistics players like

According to Redseer Consulting, the number of online shoppers in India will nearly double to around 50 million during the festive season this year.

This year’s bonanza sales will gain from the COVID-driven adoption among shoppers from Tier II and III cities, said a RedSeer report. The rise of new models like video- and WhatsApp-based shopping will become mainstream as companies try to serve their clients better

Given the expected festive sales performance, RedSeer estimates e-commerce in India to reach $38 billion (Rs2.8 lakh crore) in sales for all of 2020, up 40 per cent year-over-year.

During the first set of festive sales days, India’s e-commerce sector is expected to clock $4 billion in gross merchandise value (GMV), the Bengaluru-based firm estimates.

Lower value, long-tail categories will do well. Fashion is expected to pick up as activities and social gatherings increase after a lull for almost six months due to the raging pandemic. Home and home furnishings will also do better than previous years due to the high demand for upgrading work-from-home and study-from-home equipment.