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Textile Sector: Unfolding global geopolitical & economic situations

07 September 2022, Mumbai:

Inflation-induced economic stress and energy crisis are affecting the global textile sector and will have far-reaching implications on development issues. Economic headwinds are been witnessed e.g. soaring energy and consumer product costs leading to an ever-present risk of mismatches between energy supply and demand. Coupled with a reduction in disposable incomes in the UK and EU & looming recessionary pressures will impact the global textile industry.
Strengthening Dollar
According to reports," The US dollar is on a tear, strengthening around 11% since the start of the year & this will increase the price of gasoline paid by importing nations and will put pressure on debt repayment by developing countries like Sri Lanka and Pakistan, which are major textile manufacturing countries. This led to the devaluing of currencies in other countries & is evident from the ongoing crisis conditions in the United Kingdom and Sri Lanka.
The shift in the geopolitical landscape
The World Economic Forum's Global Risks Report 2018 argued that geopolitics is becoming not just multipolar, but also “multi conceptual”. The ongoing Russia-Ukraine war and mounting tensions between China and Taiwan are all contributing to the slowing of the textile sector. There has been a change of guard in the UK with The Rt. Hon. Ms. Liz Truss, becoming the PM; had a direct impact on economic woes there, which resulted in the change in the party leadership. As stated on 07-09 by her the priority is to tackle the energy crisis so that cost of living raises can be controlled. If uncontrolled, analysts predict that inflation may spiral up to 13.3% by Spring in the UK. Such a dire economic situation may affect the sales of textiles and other commodity items.
Demand headwinds
“Yarn enquiry is not there,” stated Mr. V. Shanmugam, GM of Aruppukkottai, Jayalakshmi Textiles, India a cotton spinning mill having 2k ring spindles. Mills are forcing additional weekly holidays or reducing production in states like Gujarat, A.P. & even in T.N. “Our production has come down from 12 tons/day to 8 tons/day,” added Shanmugam.
While the issue surrounding high cotton and raw materials costs has occupied the textile industry for a few months now, it is important to focus on the demand aspects. The demand for textile products has slowed down due to global geopolitical and economic situations.
Even at Rupees 430/Kg for 60s Ne compact cotton yarns, there are not many takers. Mills incur a loss of Rupees 30-40/Kg at such prices,” agonized Velmurugan Shanmugam.
Cautious Optimism
Textile & manufacturing sectors must adopt a new management paradigm, “Caveat Emptor et Venditor.” It indicates that both buyers & sellers must pay attention to global scenarios to have the situation under control. The industry should be cautious in its planning in terms of modernization and non-essential capital expenditure. In my opinion, it is worthwhile to postpone such activities for a period of at least 18 months.
The burden rests in the hands of policymakers and central bankers of nations to have a good grip on their economies to avoid recession. Fall-2022 will be an interesting one to watch, setting the course for the global textile & manufacturing sector for the next few years to come.
(Credits: Dr. Seshadri Ramkumar, Ph.D., CText, FTI (UK), FTA (Honorary), TAPPI Fellow (USA) & TexSnips)

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Growth

Fashion space & start-ups

04 September 2022, Mumbai:

The way we shop is changing thanks to fashion entrepreneurs. A lot is occurring in the fashion business, from tech-savvy customers to the industry's walls being broken down by technology given that the Post-Covid fashion industry is started to find its feet. The new paradigm is pushing companies to align and adapt to new consumer preferences on the back of the growth headroom digital/tech intervention is providing necessitating them to raise more money and embrace technology earlier than ever.
Fashion entrepreneurs are increasingly expanding outside eCommerce. The business is getting hotter. The advent of ‘Fashion Startups’ is changing the way consumer buys n shop. The trade is coming to a realization, of how Startups' arrival will be etched in history unraveling how fashion is produced distributed, and consumed by consumers of the day. Experts anticipate that the fashion industry will continue to grow and that fashion startups will play significant roles in this modernization process as the industry moves toward modernization and more startups emerge in the sector.

The approach to fashion trade is shifting thanks to fashion entrepreneurs. Many fashion startups are emerging, helping to transform the sector. Previously, these sorts of businesses were constrained by their enormous risks. Fashion startups are the newest businesses that market apparel/clothing, accessories, cosmetics, and other items that may be used to seem fashionable or nice. These firms continually bring about improvements challenging the established fashion industry business model to become a center of the newest and finest fashion. The semblance is that 'Fashion Startups' are been seen to drive innovations in the space such as VR fashion, AR apparel, AI & IOTs of the world.

Simplistically how do we describe what luxury means to you can be," very rich, pleasant, and comfortable surroundings". Most cutting-edge fashion businesses today have transformed from being an exclusive luxury of high society to a means of expressing personal style for people from various backgrounds. The technology here solves the issue of finding apparel/garments that suit one's body form, skin tone, and personal taste. As a result, fashion entrepreneurs now focus on producing unique items for each consumer. With new technology making it simpler for everyone to acquire what they want at a price they can afford, fashion companies are predicted to rule the globe in 2022. So let's explore the most recent developments and the businesses influencing the fashion industry's direction.

The evolving fashion business today contributes to the success of individuals in a society that is becoming more and more image-conscious. Catwalk events clearly are a communication funnel/a convergence between fashion designers & end consumers allowing designers exhibiting ideas, and merchandise on live models to live up to the experience.
Of late, Indian fashion startups are been witnessed to have reinvigorated the Indian fashion market because of inherent advantages, for instance, start-up costs are modest, and as in many cases, you won't require employees or even an office.

Fashion startups hack for curating niches in order to start getting a better fit is to try on. The desires of men and women who have trouble fitting into conventional clothes stores are the same. The cliche goes is," Fashion defines our personality and distinctively we as a person/persona/an embodiment". If you've ever had trouble finding the right fit or have a passion for bringing fashion to everyone, starting a plus-size apparel/clothing store may be a significant business venture.

It is anyone's guess that the entry barrier here is factors like attaining economies of scale (given little money/no capital in hand) in a space wherein its cottage industry/business may be conducted from a home in many cases on the one hand and product differentiation on the other. Undeniably the innate advantage of a home-based business is that fittings are more private and comfortable.
Pulse Check
The fashion industry today is grappling with multiple headwinds amid rising geo-political risk concerns fuelling supply-chain disruption, and slackened demand.
As per one McKinsey report,” From a geographic perspective, China was the standout performer over 2021, as its economy recovered much faster than those of other countries. In 2022, the industry’s growth will likely be driven by both China and the United States, while Europe lags behind”.
India has emerged as one of the world's fastest-growing fashion markets over the past few years. It is projected to grow at 15 percent CAGR by 2022 and become a $102 billion market for apparel, as per a recent report.

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Startup

Srilanka: Offers competitive advantages in lingerie manufacturing, Wacoal reports

02 September 2022, Mumbai

Wacoal, a leading designer and manufacturer of high-quality, plus-size lingerie and bra-sized swimwear for the European market, eyes for one location in particular – Sri Lanka. Sri Lanka is an integral part of Wacoal’s manufacturing Strategy.

The Company, a market leader in the plus-size lingerie categories, promotes inclusivity and body positivity via women’s intimate wear with its extensive brand portfolio for Wacoal Europe which includes Wacoal, Fantasie, Freya, Elomi, and Goddess.

“We initially came to Sri Lanka in 2005 through a partnership with a leading Sri Lankan manufacturer,” recalls Supply Chain Director of Wacoal Europe Andrew Yeomans. “We have been continually upscaling our operations in Sri Lanka and now employ more than 1200 in our team.”

Despite the recent challenges faced by the island nation, production volumes of Wacoal Lanka – the Sri Lankan entity – have been maintained. Wacoal is eyeing further expansion of its manufacturing base in Sri Lanka, with two additional production lines being added in the coming months. In tandem, the company continues to invest in new technology.

Sri Lanka recently initiated a dedicated fabric processing zone in its Eastern Province, which conforms to high standards of environmental protection and sustainability.

Besides strengthening the supply chain and sustainability measures, this move will also enable the country’s apparel exporters to make greater utilization of preferential tariff schemes, by increasing local value addition.

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Srilanka

Brand acquisition & house of brands

03 September 2022, Mumbai:

The brand acquisition seems to be the flavor of the day. Aditya Birla and Reliance Group, two of India’s prominent business groups have recently invested in designer brands like Manish Malhotra, House of Masaba, Tarun Tahiliani, Sabyasachi, and Anamika Khanna.

Both groups seem to be more inclined towards luxury brands, though they have also invested in a few premium ones, says an Inventiva report.

BRANDED HOUSE VS HOUSE OF BRANDS

As per Mahesh Singh, Founder and Managing Director, Singhi Advisors these acquisitions will give Reliance Brands and Aditya Birla Fashion and Retail (ABFRL), a chance to expand their product lines while offering the designer brands an opportunity to open more stores, introduce new products, etc.

Steady growth in the fashion industry

The Indian fashion industry has been growing at a steady rate despite a curb on weddings due to the pandemic. As per the market research company Euromonitor International, the Indian fashion market is expected to grow at a CAGR of 15 percent between 2021 and 2026.

Both Reliance Brands and ABFRL have been trying to get a piece of this growth pie. For the last few years, they have strengthened its position through new acquisitions and partnerships.

For instance, ABFRL invested in the House of Masaba to boost its beauty and personal products range. The acquisition helps the company acquire a well-known brand and a well-established consumer base.

Through these acquisitions, both these groups plan to widen their price range to include consumers from all social and economic strata. For instance, ABFRL offers a mix of brands like Van Heusen, Allen Solly, Jaypore, and Sabyasachi Couture for women.

One ET study refers," In Q1 2021, $1.3 billion of VC funding was raised by D2C brands in the US, with India at $500 million. The hyper-accelerated D2C Brands explosion made way for many disruptions, with The hyper-accelerated D2C Brands explosion made way for many disruptions, with ‘‘.

Widen products and market reach

Such collaborations benefit designer brands by allowing them to sell and distribute products across the world through big companies. They help brands consolidate their market position and unlock some value. Meanwhile, conglomerates like ABFRL and Reliance Retail are able to offer more choices in clothes, points out Aditya Chaudhury, Partner, and Argus Partners.

Investing corporate money into the designer clothing industry also offers more expansion opportunities to designers. For instance, known for its bridal lehengas, Sabyasachi Couture launched its jewelry line in 2017.

The designer brand also launched a fast fashion range in August 2021 in collaboration with H&M. Designers can also explore new markets by introducing affordable clothing or jewelry range. This ensures their clothes are bought by more number people.

Build omnichannel networks

Brand acquisition by corporate houses also helps them build omnichannel networks and adopt a direct-to-consumer approach. For instance, the strategic purchases of Genesis Luxury and Brooke Brothers help Reliance form partnerships with Burberry, Coach, Jimmy Choo, Diesel, Kate Spade, Michael Kors, Steve Madden, etc.

The paper intends to explore the basics of Brand Architecture getting readers valuable trade insights with a handful of examples. However, corporate acquisitions aren’t limited to luxury brands alone as affordable brands like Clovia, were bought by Reliance for ten times its sales this year and Amante for the same amount in 2021. Similarly, ABFRL bought Phillipe, Van Heusen, Allen Solly, Peter England, Forever 21, etc.

Both groups prefer to buy brands rather than make them. To sustain its growth momentum, they need to widen its price range to serve a wide range of consumers. They also need to retain the core value of couture brands while growing them.

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