Crisil Ratings predicts a 25-30 per cent decline in revenues of RMG makers in ongoing financial year due to the prolonged lockdown and lower discretionary spending. The agency expects this fall to be sharper for exporters due to tepid discretionary spending in the US and European Union, which account for 60 per cent of India's RMG exports.

The working capital cycle of RMG makers has elongated because of higher inventory and stretched receivables, which is expected to impair their credit profiles, the report said. The last fiscal ended with 20-25 per cent higher inventory as the COVID-19 pandemic took hold and lockdowns began in late March.

With demand depressed in the first half of this fiscal, inventories will remain high, which will add to the woes of exporters and will weaken credit profiles of some large global brick-and-mortar retailers, which will stretch receivables, the agency noted.

Consequently, retailers’ operating margins will contract 250-300 basis points (bps) to 7-7.5 per cent for the sample set, despite softer cotton prices, and cost-reduction initiative. Crisil Ratings Associate Director Kiran Kavala views that due to a sharp fall in profits, s RMG makers will not have sufficient cash accruals to meet repayment obligations in the first half of this fiscal. However, they are expected to utilize the cushion available in their working capital facilities, and will be helped by the moratorium on loan repayments, the government relief package to micro, small and medium enterprises, and the COVID-19 emergency credit lines

Though cash flows are likely to improve in the second half of this fiscal, the ratios of net cash accrual to loan repayments and interest coverage will still be significantly weaker at 1.4-1.7 times and well below 3 times expected this fiscal, compared with 2.4 times and 4 times, respectively, in FY20, it added.

India’s mid-market online retail fashion giant Myntra is setting foot in the international market by partnering two Middle Eastern e-commerce firms, Namshi and Noon. The e-tailer chose the UAE for expansion as the region has a huge Indian diaspora, young, tech-savvy demographics and proclivity for Indian designers’ cuts and fabrics. The partnerships will help Myntra quintuple sales over the next two years with Indian-origin brands selling casual wear for a fashion-conscious consumer.

Such partnerships also predict Myntra’s future approach to other markets, says Amar Nagaram, CEO. Besides, Middle East, the company is eyeing the Southeast Asian market thorough which it aims to chart an international roadmap from local to global.

Large buying potential attracts brands to Middle East

Lately, many Indian fashion companies have been expanding into the Middle East market, says Bain & Company, a financial analyst. Earlier this year, designer Ritu Kumar partnered Namshi to sell items from high-end label Ritu Kumar and its ready-to-wear line, Label Ritu Kumar. As Amrish Kumar, Managing Director of the brand, Middle East is a potentially more lucrative market as it has a huge buying power and similar clothing tastes to those in India.

For its Middle East foray, Myntra is planning many marketing initiatives including a social media campaign on the Namshi and Noon platforms, app banners and celebrity-driven advertising, including appearances by Bollywood star Hrithik Roshan on behalf of the fitness brand he co-founded, HRX.

Myntra is also accelerating a planned shift to casual and athleisure wear as more people work from home now. The company plans to sell over 500 casual and athleisure wear designs on Namshi and Noon from several of its private labels and a few outside fashion lines.

Attracting international customers with ‘Indianness’

However, Myntra’s plan to sell casual clothing items through these two platforms has surprised many industry leaders. As Sahil Anand, Consultant, Cedar Consulting opines, international shoppers do not buy basic clothing items from Indian brands as they have them in abundance in their countries and are often ahead of India in riding fashion trends. To attract international audience, the clothes on these two platforms will have to either have a strong Indian aspect or be sustainable and super fashionable.

To achieve this, Indian companies will have to study the market and consumer preferences constantly and adapt quickly to stay relevant. They will also have to pay extra attention to online search patterns to give customers what they want. This alone will help these companies acquire new customers and boost business.

Shashank Pathak, Centre Director and Executive Director, WestEnd Mall, expects to see a robust festival season with Made in India products being the flavor of the season. He says 95 per cent of the permissible brands have reopened and around 40 per cent customers have returned to these malls. Though currently, people are focusing on their essential needs, the condition is improving by the day, he said.

Pathak says, no trial and no exchange policy followed by most of the brands did not deter people from buying. His mall’s first bill was for Rs 15,000 and last one was for Rs 15,000 and people were spending 1.5 to 1.6 times more than usual.. The beauty and cosmetics saw 154 per cent growth in sales.

The Phoenix Mall in Pune, too, was buzzing during the Independence Day weekend with serious buyers and footfall fast converting to sales. The Croma and Reliance Digital stores had people lining up waiting for their turn to buy. Laptops, LED TVs, microwave, refrigerators and electric kettle were moving off the shelves, said Arun Arora, Centre Director, Phoenix Marketcity Pune,

The Amanora Mall witnessed 18,000 footfall and significant sales during the Independence Day weekend. The sale of electronics dominated with high demand for mobile phones and laptops followed by casual wear and white goods. The demand for white goods, too, was higher with dishwashers and washing machines among the top buys, said Surjit Singh Rajpurohit, CEO.

Koushik Marathe, Director, Fashionking Brands, which has a network of 100 outlets selling formal clothes for men, said they had their worst ever time in the last four months. Though the demand for formal clothes has not returned, they did see some buying during Rakshabhandhan and Independence Day.

These retailers expect F&B and entertainment services to resume after the 10-day Ganesh festival by August end.

By selling his retail empire to Reliance Retail for Rs 24,713 crore, entrepreneur Kishore Biyani has finally ended his stint in the retail world. The entrepreneur has got rid of all key businesses to save himself from bankruptcy. Now, only the FMCG business, the Rs 4,000-odd crore Future Consumer, the integrated fashion sourcing and manufacturing business as well as its joint ventures with Future Generali and NTC Mills remain with him.

A person who never feared to experiment, Biyani has an unending appetite for taking risks. He first landed in trouble in 2008-10, when he ventured into the mall and supply chain business. The misadventure landed him in a debt crisis forcing him to sell Pantaloon Retail to Aditya Birla in 2012. Hoping to turnout his FMCG business into Rs 20,000 crore by 2021, Biyani continued to expand his retail business, opening new formats and also acquiring new businesses. However, all these businesses tanked pushing him to the brink of bankruptcy.

Over-dependence on private brands

After selling his retail business to Reliance, Biyani is now left with Future consumer and apparel sourcing and manufacturing businesses. He was especially passionate about the FMCG business. Apart from his own stores, he was also eyeing the global market. However, his FMCG business hasn't been particularly successful as it over depended on private brands, says a retail expert.

Future Consumer focused on launching more competitively priced products in regions where national brands don't have a presence. Therefore, in a category such as atta, the company’s atta brand, Desi Atta, offers a host of other varieties such as jowar atta, ragi atta and so on. In soaps, the company launched liquid body wash at the price of a regular cake of soap. Though these ideas looked great on paper, there weren't too many takers.

Getting back to roots

Biyani also distributed these brands through Aadhar Wholesale in order to push his own brands. Majority of the company’s sales came from own stores. However, his strategy of carpet bombing failed miserably, says a former Future Group senior executive.

Biyani now aims to go back to his apparel business as both Pantaloon and FBB have been successful ventures. Whether he will able to carve a niche in the FMCG space and give stiff competition to legacy companies such as HUL or Nestle, only time will tell.

For the first time in decades, Indian retailers have mixed expectations for the upcoming festival season. The festival season in India begins in September with Ganesh Chaturti and stretches till November with Diwali and beyond. Usually, this is the most opportune time for the country's apparel, jewellery and home appliance makers as it contributes to around 40 per cent their annual sales.

Apparel retailers go easy on stocks

Though electronics retailers hope to clock some sales growth during Diwali, apparel retailers are not so optimistic. In fact, they have lowered their sales forecasts for the festive season. Meanwhile apparel brand Benetton India expects Diwali to be dull with sales declining by at least 25 per cent over the past year. According to Sundeep Chugh, Managing Director and CEO, retailers are unlikely to match numbers of previous years and may see 25-30 per cent lower sales than last year.

With customers deferring their purchases of apparel, accessories and beauty categories, retailers are going easy on stocking new inventory for the festive season. However, hopeful of demand reviving by September and October, Puma India has launched new products every month. Similarly, value retailer V-Mart, meanwhile, expects sales to improve by the end of the month on account of better farm income due to sufficient monsoons

Electronic makers upbeat about festive demand

With consumers shopping for laptaps, upgraded television sets and kitchen appliances, electronics retailers are more upbeat about festive season. Retailers like Nilesh Gupta, Managing Director, Vijay Sales expects demand for these products to continue as they are more need-based. His firm registers 40 per cent of its sales from September to November.

Makers of home appliances and consumer electronics expect around 10-20 per cent growth in demand over last year, says Rakesh Khanna, Managing Director and CEO, Orient Electric. To leverage this demand, retailers are filling up inventory for the festive season as disruptions caused by the lockdown and the subsequent shortage of labor has yielded lower production. The production of Bajaj Electricals has reduced to 70-80 per cent of its capacity though it plans to increase this to 100-110 per cent in future, says Anuj Poddar, Executive Director.

However, all retailers worry local weekend lockdowns could meddle with the festive season’s demand and their plans. Hence, they plan to go easy on discounts and instead focus on good EMI options and genuine need, adds Gupta.

Nobody had imagined the transformation Indian retail landscape is currently going through due to COVID-19 crisis. The debilitating effect of continuous lockdowns has sent many retailers, especially those in the luxury segment, into a tailspin, with more consumers opting for delivery services, curbside pickups, online services and WhatsApp-based concierge services, says Yogeshwar Sharma, CEO & Director, Select Citywalk.

Consumers are either booking a slot online for luxury brands such as Bottega Veneta or buying products in stores and getting them delivered to their cars, says Deval Shah, Group Vice President, Reliance Brands.

Need for customer-oriented approach

The onus of making the shopping experiences impeccable rests on the well-trained store team. The staff needs to ensure that all their stores, including changing rooms and billing desk are sanitized, points out Anshuman Singh, Founder-CEO, Paul Adams. The team should also visit client’s homes with pieces chosen online or a catalogue, adds Divyansh Sanklecha and Vipul Pirgal, Founders, Curio Casa. This would allow clients to test products. Moreover, the staff needs to be service driven and find quick solutions to customers’ problems, says Yogesh Chaudhary, Director, Jaipur Rugsem.

Sangeeta Boochra, Owner of Eponymous jewellery brand, advises retailers to deploy VR solutions for store associates. Beauty brands like Kama Ayurveda have already replaced testers with virtual consultations and complimentary samples of new products. Their stores have been rejigged to allow fewer customers.

Bridging the online-offline gap

To leverage the growing demand for e-commerce, brands need to bridge the online and offline experience. Customer’s decision journey needs to be tracked to understand their changing preferences. Broocha, implements a mirroring 3D technology to offer in-store experience to customers, digitally to boost sales.

As customers are being more cautious about their purchases, luxury brands need to focus on offering more value for money products. They need to add meaningful value to their luxury offerings and make them more sustainable.

Domestic shopping to boost luxury retail

Indian luxury retail sector may benefit from continued closures of borders as more people may spend in India. Earlier, around 50 million Indians travelled abroad each year to meet their shopping needs, particularly during the peak months of May, June and July. Now, most of this demand is coming from within India. Indian luxury stores are dealing with lesser footfalls by adopting a highly personalized ‘By appointment’ strategy, However, this may reduce impulse buying amongst consumers.

Also, consumers may now prefer to shop in a malls as they have are dealing with the situation more effectively with employees dressed in PPE, temperature check, air filters and purifications.

Reliance Industries has spread its wings in retail with its acquisition of debt-strapped Future Group. Valued at Rs 24,713 crore, the deal doubles Reliance’s $68 billion retail business by merging five listed units of the Future Group into Future Enterprises (FEL). Reliance Retail will also invest Rs 1,200 crore in FEL preferential equity and Rs 1,600 crore in preferential warrants.

Doubles retail footprint

The deal increases the retail store footprint of Reliance Retail from current 28.7 million sq. ft. to 52.5 million sq. ft, consolidating its supreme position in the industry. As UBS analysts say, the deal would require approvals from SEBI, CCI and NCLT in addition to no objection from creditors and minority shareholders. However, it would benefit Reliance by increasing its geographic presence, improving sourcing efficiencies and rationalizing costs.

HSBC believes the deal will allow Reliance Retail to double its current retail footprint besides increasing store count by 15 per cent. The acquisition includes a complete acquisition of Future Retail, Future Lifestyle Fashions Ltd (FLFL) and Future Supply Chain Solutions (FSCSL). In addition, Reliance will also acquire 13.1 per cent shares in the remaining of FEL.

Consolidate market position

The transaction could also consolidate Reliance Retail's position in the organized retail business across categories, says Goldman Sachs. It will boost the company’s warehousing and logistics facilities enabling its online operations to grow at a faster rate besides improving competitiveness against foreign retailers like Walmart and Amazon.

As per Motilal Oswal, besides improving its retail footprint, the deal would also help the company build competitive strength. Also, it would lower the time and cost of deliveries by JioMart as a result of its deeper presence through Future Retail's neighborhood store network of Heritage Fresh in South India and EasyDay Club in North India.

Global financial services company Nomura rates Future Group's retail business as the largest offline organized retail business in India after Reliance. The business is particularly strong in the grocery and fashion/lifestyle segments, has a pan-India presence, and has outlets at strategic locations.

However, due to COVID-19, the business faced several challenges and only a financially strong company like Reliance can help it turn around, grow sales volumes and improve profitability, says Nomura. It expects the combination with Reliance's existing retail advantage to bring synergy and scale advantages.

Operational benefits and supply chain integration

Valuing Reliance Retail at Rs 3.6 crore, Axis Capital believes besides network expansion, the acquisition offers Reliance tremendous benefits in operating synergies/scale efficiencies, supply-chain integration, and acceleration in JioMart rollout.

The current retail footprint of Future Retail stands at 16.1 million sq. ft. across a network of 1,388 outlets including 290 Big Bazaar stores and 990 Easyday, Heritage Fresh and Nilgiri stores. The proposed acquisition will boost Reliance's retail footprint to 13,540 outlets from the existing base 11,806 outlets as on June 30, 2020, says Kotak.

As an apparel retailer, Future Lifestyle Fashions operates the Central and Brand Factory stores across India. Besides, it also operates standalone stores in partnership with foreign brands like Clarks, Celio, etc. As of March 2020, the retailer boasted of a network of 348 stores and retail trading area of 7.7 million sq. ft.

In the past, Future Group has formed multiple partnerships with Amazon India, informs JP Morgan. Such investors would now have to pay a higher premium to buy into Reliance Retailer, the analyst adds. Valuing Reliance Retail at $65 billion with online grocery delivery business JioMart accounting for $20 billion, the analyst estimates the deal to take a year to be finalized.

According to estimates by Goldman Sachs, India’s e-commerce sector — especially grocery — is forecasted to grow to $112 billion by FY25. Amazon, Flipkart and Reliance Industries would be the key players in this segment with RIL’s push initially likely to be in grocery/FMCG, and over time into categories such as apparel and electronics.

Three-four players are likely to co-exist in the Indian e-commerce space, given the size of the vertical, says Goldman Sach. Advertising will emerge as the second-largest after e-commerce, which also includes OTTs. The dominance of Google and Facebook will sustain, with some incremental market share to telcos including Reliance Jio, Bharti Airtel,etc. Within video/audio OTT, advertisement will continue to contribute more than 50 per cent of segment revenues.

Other categories like travel would also see growth in traction in the online space and drive the growth for sectors like hotels. MakeMyTrip continues to be the dominant platform here with more than 50 pere cent market share currently, and according to Goldman Sachs, there’s not room for more than two platforms to co-exist in this space.

The addressable market for segments such as food delivery and ride-hailing will be limited to less than $10 billion by FY25 as these services are likely to stay restricted to key urban centres in terms of volume contribution.

Goldman Sach says, fintech in India is estimated to be a $2.5 billion revenue pool by FY25, split 20 per cent-60 per cent-20 per cent between payments, lending and insurance. Digital payment platforms are expected to process more than $200 billion of merchant payments annually by FY25 and WhatsApp has the potential to become the dominant platform in payments, given its high traffic.

However, profitability would remain elusive as categories such as online retail, grocery, food delivery and fintech will face stiff competition.

Focusing on a sustainable business model, apparel brand Madame has trimmed expansion plans for this financial year and will open only seven new stores in FY21 against the previous plan of 22-25 stores in 2020. The brand also plans to enhance its back-end operations and improve the logistics segment. It will think more about profits than revenues now. The apparel major will open new stores in Ahmedabad, Itanagar, Bengaluru, among others this fiscal. Among the seven stores scheduled for launch this year, one was launched in Lucknow last month.

Akhil Jain, Executive Director believes demand for apparels may pick up by November on the back of the festive season. According to him, the market will fully recover in the second quarter of the next financial year and companies will be able to turn towards the expansion mode.

According to a recent webinar by CARE Ratings, Indian textile and apparel industry reported significant reduction in sales starting from March when the government imposed coronavirus lockdown. Post lockdown domestic retail sales came to a grinding halt. To add to the woes of regular garment manufacturers, international customers, who were also under lockdown, deferred orders from Indian suppliers.

Sudeep Sanwal, Senior Manager, CARE Ratings said that GDP of two major export destinations for Indian apparels manufacturers, ie, the United States and Europe, is expected to contract in 2020 which will further lower the demand for apparels. These two destinations combined account for more than half of the apparel exports from India. Due to lockdowns, order cancellations took place in massive numbers which also led to pent-up inventories. Since, the fashion industry is highly dynamic in terms of styles, the unsold stock may soon go out of fashion which will lead to inventory losses for manufacturers.

The spring summer collection of most manufacturers also witnessed a significant hit. Also affecting the sales of the manufacturers was the fact that despite having ready clothing, logistics posed a problem.

As per a Forbes India report, Indian consumers, who earlier equated fashion buying with ‘touch and feel’ experience, are slowly warming up to online shopping. Figures indicate India’s online penetration in fashion and lifestyle, which stood at 9-10 per cent in 2019, is expected to rise to 14-17 per cent by 2022. Indian brands aspire for at least 20-30 per cent share of their business to come from online channels.

Brands can explore this growth through two avenues: marketplaces like Flipkart and Amazon and own websites or apps. Of these, marketplace is a more dominant sales channel and constitutes around 80-95 per cent of any brand’s business. A marketplace enables brands to quickly respond to consumer needs with minimum investments in technology and manpower. However, Indian marketplaces focus more on growing their private labels besides forcing brands to shoulder customer discounts, increase marketing spends and be account table for returns.

Despite this, brands cannot simply pull away from marketplaces as building their own websites is challenging given their offline mindset, inadequate capacity building and their incapability to fund early losses.

Clear demarcation of roles

To succeed in online operations, brands need to clearly define the role of each of their online channels and invest accordingly. For instance, they need to focus on their websites for selling fresh merchandise, and exclusive and customized collections. They can launch special online-only assortments or marketplace-specific merchandize to avoid conflict with offline channels.

Brands can also improve customer retention by launching omni-channel loyalty programs or investing in platform-specific marketing, with clear ROI markers jointly owned with the marketplace. Another way they can gain speed to market is by building the right ecosystem of partners. They can invest in relationship managers that conduct Joint Business Planning (JPB) exercises with the respective marketplaces.

While building their websites, brands need to develop a single view of customer across channels to be able to drive hyper-personalization and superior omni-channel experience. They can deploy web crawling to capture competitor data around assortment, pricing etc.

For fashion and lifestyle brands in developed markets, multiple sales channels improve customer interaction. However, India is yet to fully warm upto omni-channel retail as elements like buy only return in store, click and collect self check-out as these concepts are not so relevant in the Indian context.

Focus on staff training and inventory management

In post-COVID world, the need to balance profitability with social distancing norms will drive brands to limit store sizes. This in turn, will help to curtail their inventory sizes. Facilitating ordering and shipping-from their local stores can help brands reduce shipping costs by over 50 per cent. It can also reduce their delivery times from a few days to a few hours. Brands and retailers need to have a single view of inventory across stores and warehouses, with minimal latency. They also need to train their store staff on the use of online stores/endless aisles, updating inventory as soon as a product is sold offline. Adjusting the knowledge of their store staff for omni-channel operations can help brands treat their stores as an experience centers for customers leading to online purchases or as a fulfillment location.

Thus, in order to reinvent strategies and boost sales, it is very important for brands to choose the right omni-channel partners and execute them well.

The Retailers Association of India (RAI), in the fifth edition of its fortnightly business survey, reported a 63-per-cent year-on-year decline in retail sales during July. The massive decrease compares favorably with that recorded for June (67 percent) and April (more than 80 percent).

The trend towards recovery was most pronounced in the food & grocery and consumer durables product categories, but not apparent in the apparel, sports goods, and beauty & wellness sectors.

The statistics signal challenges still facing retailers despite the easing of India’s lockdown last month.

Kumar Rajgopalan, CEO, RAI said, though the Unlock 3.0 creates a possibility of significant sales recovery for retail businesses, localized lockdowns, weekend curfews, and not allowing formats like food courts and cinema halls to reopen are creating roadblocks on the path to revival.