24 November 2023, Mumbai

The Value Fashion Market in Small-Town India

The value fashion market in small-town India is booming, fueled by rising incomes and consumer expectations. Zudio, the flagship brand of Trent, is a prime example of this trend, facing stiff competition from other prominent retailers.

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Zudio's Rapid Growth and Strategy

NZudio has experienced rapid growth since its launch in FY'17, expanding to over 350 standalone stores and generating revenues of Rs 3,540 crore. 

The brand's franchise-owned company-operated model has been instrumental in reducing inventory costs, attracting the attention of national retailers like Yousta (Reliance Retail), Style-Up (ABFRL), and InTune (Shoppers Stop) who have adopted a similar strategy.

Market Analysts' Forecast

Market analysts from Motilal Oswal Financial Services predict a steady 6 percent CAGR growth for the value fashion segment from 2020 to 2026. 

However, with rising disposable incomes and favorable demographic trends, the growth rate is expected to surge to a remarkable 23 percent CAGR.

Unorganized Dominance and Regional Retailers' Lag

Despite the segment's growth potential, unorganized retailers still hold a dominant position, accounting for nearly 57 percent of the market. 

Regional retailers have yet to make a significant mark in this domain.

5 key insights :

1. Booming Market: Rising incomes and consumer expectations drive growth.
2. Zudio's Success: Rapid growth, 350+ stores, Rs 3,540 crore revenue.
3. Franchise Model: Inventory cost reduction, national retailer adoption.
4. Market Forecast: 6% CAGR growth, potential for 23% CAGR.
5. Unorganized Dominance: Regional retailers' presence limited.

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21 November 2023, Mumbai

The Indian textile industry, once struggling due to the pandemic and global economic downturn, has experienced a remarkable resurgence, reflected in the upward trend in stock market performance. 

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Major industry players have demonstrated strong financial results, attracting significant investor interest. This positive sentiment stems from several favorable factors:

1. FTA-Driven Duty Benefits: India's forthcoming free trade agreements (FTAs) are poised to grant duty concessions to local textile exports, enhancing their competitiveness in global markets.
2. Reduced Cotton Prices: The recent decline in domestic cotton prices has led to a substantial reduction in overall production costs, boosting profitability for textile manufacturers.
3. Surging Demand for Home Textiles: The growing prevalence of hybrid work arrangements and increased emphasis on home improvement have fueled a surge in demand for home textiles, particularly cotton sheets and terry towels. This has driven up orders from US importers.
4. Global Retailers' Inventory Optimization: Global retailers' efforts to streamline inventory levels have created opportunities for larger order placements from Indian textile exporters.
5. Investor Optimism and Stock Market Surge: Anticipating favorable market conditions in the second half of the year, Indian textile exporters are optimistic about the future. This optimism is reflected in the recent rise of textile-related stocks, with companies like Raymond, Vardhman Textiles, Arvind, Trident, Gokaldas Exports, Welspun, KPR Mills, and Himatsingka Seide witnessing gains of 4 to 12 percent. Additionally, Fidelity Investments India's acquisition of a 1 percent stake in KPR Mill in August 2023 further underscores investor confidence in the sector's growth prospects.

These converging factors have propelled the Indian textile industry towards continued growth and prosperity, demonstrating its resilience, adaptability, and significant potential to contribute to India's economic resurgence.

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18 November 2023, Mumbai

WHY India

From 142nd to 63rd: A Leap in Ease of Doing Business
In 2014, India's business environment was far from ideal, ranking a dismal 142nd out of 190 countries in the World Bank Doing Business Report.

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However, the country embarked on a remarkable journey of reform, propelling it to the 63rd position in just six years.
Reforms, Infrastructure, and Technology: Driving Change
A wave of government reforms aimed at streamlining processes and reducing bureaucratic hurdles transformed the business landscape. Investments in infrastructure and technology further enhanced the ease of doing business, paving the way for a more efficient and competitive environment.
Empowering MSMEs through Digitalization
Recognizing the pivotal role of small and medium enterprises (MSMEs) in India's economic growth, the government prioritized their digital transformation.

Initiatives aimed at enhancing their digital literacy and adoption of technology were instrumental in boosting their efficiency and productivity.
A Global Recognition: Two-Time Top Improver
India's unwavering commitment to reform and its efforts to attract investment were not gone unnoticed.

The World Bank acknowledged India's remarkable progress by recognizing it as a top improver for two consecutive years, making it the first BRICS and South Asian country to achieve this distinction.
A Beacon of Progress: Attracting Investment and Fostering Growth
India's improved business environment has served as a beacon for investors worldwide, attracting significant capital inflows and propelling the country's economic growth.

This transformation stands as a testament to India's dedication to fostering a conducive environment for businesses to thrive.

Exhilarating drive

1. India's business environment transformed.

2. Reforms streamlined processes and reduced hurdles.

3. Investments enhanced ease of doing business.

4. MSMEs empowered through digitalization.

5. Global recognition for two-time top improvement.

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24 November 2023, Mumbai

Industry experts and financial data align with CITI's October 2023 analysis of India's textile and apparel (T&A) sector performance.

Textile Exports Flourish but Apparel Sector Struggles

• Textile exports experienced a remarkable 24% surge in October 2023 compared to the same month in 2022.

• Cumulative T&A exports grew by 10.44% in October 2023 compared to the previous year, indicating overall growth in the sector.

• However, the apparel sector presents a contrasting picture, with an 8.08% decrease in exports observed in October 2023, highlighting the sector's struggles.

Mixed Picture Emerges from Overall T&A Export Performance

• The overall performance of cumulative T&A exports over the six-month period from April to October 2023 has been lackluster.

• A 6.67% decline was registered compared to the same period in 2022, and a more significant drop of 15.55% compared to the same period in 2021, reflecting a slowdown in T&A export growth.

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T&A Sector Makes Modest Contribution to Total Exports

• Despite the overall downturn, the T&A sector's contribution to the nation's total exports showed a modest improvement from 7.31% in 2022 to 7.6% in 2023, indicating a slight gain in its share of total exports.

Certain Segments Face Setbacks

• Popular Indian raw cotton and waste exports faced severe setbacks, declining by 78.69% compared to the same period in 2022, highlighting the challenges faced by specific segments within the T&A sector.

Manufacturing Sector Mirrors Subdued Export Performance

• The manufacturing sector mirrored the subdued state of exports, despite expectations of a boost from the domestic apparel market during the festive season.

• This subdued performance suggests that the manufacturing sector is also facing challenges apart from the slowdown in exports.

Manufacturers Grapple with Regulatory Challenges

• Challenges such as the recent Quality Control Order mandating Bureau of Indian Standards certification for man-made fibers, including imports, have contributed to a decline in exports.

• These regulatory hurdles have made it difficult for manufacturers to meet government specifications in international markets, further hindering export growth.

Workforce Implications: a Cause for Concern

• The implications of the sector's subdued performance on the workforce are a matter of concern.

• Industry leaders hold varying perspectives on the future trajectory of the T&A sector.

• While some, like KM Subramaniam, president of the Tiruppur Exporters Association, express confidence in a temporary decline and anticipate a revival with recent policy changes, others warn of potential job losses if the current trend persists.

Revival of Western Demand: Crucial for Apparel Exports

• The revival of demand in Western markets is identified as a crucial factor that could potentially uplift India's apparel exports.

• An increase in demand from Western markets could provide the necessary boost to the apparel sector, which has been struggling in recent months.

A Mixed Performance with Uncertain Future

• The CITI monthly report depicts a mixed performance in the T&A sector, with varying perspectives on the industry's future trajectory.

• The positive growth in textile exports and the modest improvement in the T&A sector's contribution to total exports offer some hope for the industry's overall performance.

• However, the challenges faced by the apparel sector, the subdued manufacturing sector, and the regulatory hurdles faced by manufacturers create uncertainty about the industry's future growth prospects.

  Key Insights:

  1. Textile Exports Soar:

     • Remarkable 24% surge in October 2023.
     • Mirrors positive financial data trends.

  2. Apparel Sector Struggles:

     • Apparel sector faces an 8.08% decrease.
     • Highlights challenges within the industry.

  3. Mixed Picture in Overall T&A:

     • Cumulative T&A exports show lackluster growth.
     • 6.67% decline compared to 2022.
     • 15.55% drop compared to 2021.

  4. Modest T&A Contribution to Exports:

     • T&A sector contributes 7.6% in 2023.
     • Slight gain from 7.31% in 2022.

  5. Challenges and Setbacks:

     • Certain segments, like raw cotton, face setbacks.
     • Manufacturing mirrors subdued export performance.
     • Regulatory hurdles impact export growth.

  6. Workforce Concerns Amid Uncertainty:

     • Workforce implications raise concerns.
     • Varying perspectives on sector's future.
     • Policy changes may impact revival.

  7. Crucial Role of Western Demand:

     • Western market demand crucial for revival.
     • Potential uplift for struggling apparel sector.

  8. Mixed Performance with Uncertain Future:

     • CITI report indicates a mixed performance.
     • Positive textile growth contrasts sector challenges.
     • Uncertainty persists about future growth.

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20 November 2023, Mumbai

WHY India

A Global Textile Powerhouse with a Complete Manufacturing Value Chain

India stands as a prominent force in the global textile industry, boasting a comprehensive manufacturing value chain encompassing every stage from fiber production to apparel manufacturing.

This backward integration grants India a unique advantage in the global marketplace.

The country's commitment to attracting foreign investment is evident in its liberal investment policies, which allow 100% FDI through the automatic route for the textile and apparel sector.

A Heritage of Textile Expertise

India's textile heritage is deeply rooted in its rich history and diverse cultural tapestry.

The country produces a wide spectrum of textiles, from intricate handloom creations and handicrafts to capital-intensive mill products. 

This legacy of textile craftsmanship is preserved with pride and serves as a testament to India's enduring textile expertise.

Navigating Transformation: Innovation, Market Shifts, and Sustainable Practices

The Indian textile and apparel industry is undergoing a transformative journey, driven by radical innovation, dynamic market shifts, and an evolving supply chain landscape.

This transformation is marked by a growing emphasis on responsible and sustainable manufacturing practices, reflecting a global shift towards environmentally conscious production.

Unveiling Growth Potential: Doubling Global Trade Share

As the world's second-largest textile industry, India possesses the potential to double its current five percent share in global trade within the next five years. This growth potential is fueled by India's strengths in traditional textiles and natural fibers, as it stands as the world's largest producer of cotton and the second-largest producer of polyester and silk.

A Catalyst for Change: Employment Generation and Economic Empowerment

The textile industry in India catalyzes change, generating employment opportunities at an unprecedented scale.

For every INR 1 crore ($132,426) invested, the textile industry creates 70 jobs, far exceeding the average of 12 jobs generated by other industries. 

This remarkable employment potential highlights the industry's role in fostering economic empowerment and social progress.

Unlocking Growth Strategies: A Roadmap for Success

This report delves into the current dynamics of the textiles and apparel industry in India, providing insights into the strategies that can effectively harness the sector's growth potential.

By embracing innovation, adapting to market shifts, and prioritizing sustainable practices, India's textile industry can continue to flourish and solidify its position as a global leader.

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18 November 2023, Mumbai

China’s once-unmatched dominance in the global export market for consumer goods has been steadily diminishing since 2016, marked by a shrinking market share.

A major factor contributing to this decline The rising labor costs in China are prompting Western importers to seek more cost-effective alternatives in other countries, particularly for products like clothing and textiles.

• China’s position as the world’s primary source of low-cost goods has eroded, leading many businesses to consider relocating their production facilities elsewhere.
• China’s loss of edge in key consumer sectors

In a fast-changing landscape; China has lost its competitive edge in several key consumer sectors, including apparel and accessories, footwear, furniture, and luggage. 

Exports of other items, such as minerals, hardware, and office equipment, have also experienced a decline.

However, the primary cause for these changes is the escalating political tension that has created a rift between the United States and its Western allies on one side and China on the other.

The situation was further exacerbated by the supply chain disruptions caused by the stringent lockdown measures imposed by the Chinese government to curb the COVID-19 pandemic.

The Ripple Effect of Political Tensions and Supply Chain Disruptions

The political conflict between the West and China has had a significant impact on the global trade landscape. 

The imposition of tariffs and trade restrictions has made it more difficult and expensive for Chinese companies to export their goods to Western markets.

Additional points

Additionally, the pandemic-induced supply chain disruptions have caused delays and shortages, further hindering China’s ability to maintain its export dominance.

The Search for Alternative Production Hubs

As labor costs in China continue to rise and political tensions persist, Western importers are increasingly looking for alternative production hubs in other countries.

Diversification; Southeast Asian nations, such as Vietnam, Indonesia, and Bangladesh, have emerged as attractive destinations due to their lower labor costs and favorable trade policies.

These countries are rapidly gaining a foothold in the global consumer goods market, challenging China’s traditional dominance.

China’s Adaptation to the Changing Landscape

China is aware of the challenges it faces in retaining its position as a leading exporter of consumer goods.

The government has implemented various measures, including industrial subsidies and tax incentives, to encourage businesses to upgrade their technology and move into higher-value-added manufacturing segments. 

Mitigate; Additionally, China is investing heavily in infrastructure development, including transportation and logistics networks, to improve its competitiveness in the global market.

The Future of China’s Consumer Goods Exports

The future of China’s consumer goods exports remains uncertain. 

While the country’s dominance is waning, it still possesses a significant manufacturing base and a vast domestic market.

Way forward: The country’s ability to adapt to changing market dynamics and address the challenges it faces will determine its future trajectory in the global consumer goods export market.

5 key insights :

1. China's export dominance declines since 2016.
2. Rising labor costs lead to relocation of production.
3. China loses edge in key consumer sectors.
4. Political tensions and supply chain disruptions hinder exports.
5. Southeast Asia emerges as alternative production hub.

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21 November 2023, Mumbai

Diwali, the festival of lights, is traditionally a time for increased spending in India, with sales across various categories, including garments, receiving a boost. However, the 2023 Diwali season, which concluded on November 12, has left representatives of the garment sector feeling disappointed with the lackluster sales performance.

Garment Sales Fail to Shine

Rahul Mehta, Chief Mentor of the Clothing Manufacturers Association of India (CMAI), expressed his disappointment with the overall performance of the garment retail sector during Diwali 2023. He noted that this year's sales were the weakest since the COVID-19 pandemic began.

Mehta questioned why garment sales did not experience the same growth as other categories, such as FMCG products, domestic appliances, automobiles, and personal devices. 

He hypothesized that consumers might have prioritized social and religious aspects of the festivities, leading to increased spending on home upgrades, gold and silver purchases, and entertainment.

Another possibility, according to Mehta, is that impulsive garment purchases throughout the year have resulted in well-stocked wardrobes, eliminating the need for new clothing during Diwali.

Bhivandi Powerloom Industry Takes a Break

The Bhivandi powerloom industry, which caters to the domestic garment market, is taking a 20-day holiday this month due to the sluggish demand that has affected the entire textile value chain, including cotton farmers, ginners, and spinning mills.

In contrast to 2022, when Diwali clothes and footwear sales surged by almost 97% compared to 2021, the 2023 Diwali season saw sales in the single digits.

Inflation Dampens Spending

India's rising inflation, currently at 5.4%, is expected to continue throughout the fiscal year 2023-24. This represents a 0.3% increase from the previous year.

A YouGov India survey revealed that only 31% of urban Indians planned to increase their spending during Diwali 2023, down from 36% in 2022. Among those who intended to spend more, 68% indicated that they would allocate their increased spending towards new clothes. However, post-Diwali figures suggest that these intentions did not translate into actual purchases.

Deepa Bhatia, General Manager of YouGov India, attributed the subdued spending behavior to the rising cost of living. She emphasized that discretionary spending, including garments, is likely to be adversely affected by inflation.

CAIT's Conflicting Narrative

The Confederation of All India Traders (CAIT) presents a different perspective on the Diwali 2023 market performance. In a statement, CAIT claimed that retail markets across India registered record sales of Rs 3.75 lakh crore during the entire festive season, encompassing Navratri, Durga Puja, and Diwali. 

They further projected an additional Rs 50,000 crore in sales from upcoming festivals like Govardhan Pooja, Bhaiya Dooj, Chhath Pooja, and Tulsi Vivah.

CAIT Secretary General Praveen Khandelwal also highlighted the significant reduction in sales of Chinese goods during the Diwali season, estimating a loss of over Rs 1 lakh crore. This decline is attributed to a preference for Indian-made festive products.

Epilogue

While the overall festive season witnessed record sales across various sectors, the garment retail industry experienced a mixed bag of results. 

Despite intentions to increase spending, garment sales failed to meet expectations, raising concerns among industry representatives.

5 key insights :

1. Garment sales fall during Diwali 2023.

2. Social spending prioritizes over new clothes.

3. Inflation dampens discretionary spending.

4. CAIT reports record festive season sales.

5. Indian-made products gain preference.

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20 November 2023, Mumbai

A Resurgent Industry Fueled by Favorable Factors

The Indian textile sector, once beleaguered by the pandemic's economic fallout, has staged a remarkable comeback, as evidenced by the buoyant stock market trends. Major industry players have reported robust financial performances, attracting a surge of investor interest. This positive sentiment is attributed to a confluence of favorable factors:

FTA-Driven Duty Benefits

India's impending free trade agreements (FTAs) promise duty benefits for local textile exports, enhancing their competitiveness in global markets.

Declining Cotton Prices

The recent dip in domestic cotton prices has significantly reduced production costs, boosting profitability for textile manufacturers.

Booming Demand for Home Textiles

The growing trend of hybrid work arrangements and increased focus on home improvement has fueled a surge in demand for home textiles, particularly cotton sheets and terry towels, driving up orders from US importers.

Global Retailers' Inventory Reduction

Global retailers' efforts to reduce inventory levels have created opportunities for larger order placements from Indian textile exporters.

Investor Optimism and Stock Market Surge

Indian textile exporters are anticipating favorable conditions in the second half of the year, fueled by rising demand and favorable market dynamics.

This optimism is reflected in the recent surge of textile-related stocks, with companies like Raymond, Vardhman Textiles, Arvind, Trident, Gokaldas Exports, Welspun, KPR Mills, and Himatsingka Seide witnessing gains of 4 to 12 percent. The acquisition of a 1 percent stake in KPR Mill by Fidelity Investments India in August 2023 further underscores investor confidence in the sector's growth prospects.

Long & Short

The Indian textile sector is poised for continued growth, driven by a combination of favorable policy developments, improving market conditions, and rising investor sentiment.

This revival is a testament to the sector's resilience and adaptability, and its potential to contribute significantly to India's economic resurgence.

5 key insights :

• FTA boosts exports competitiveness
• Lower cotton prices improve profit margins
• Home textiles demand surges due to work from home
• Global retailers reduce inventory, increase orders
• Investor optimism drives stock market surge

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17 November 2023, Mumbai

An iconic retailer of 'British Quality Goods'

Marks & Spencer (M&S), a British multinational retailer founded in 1884, has been on a growth trajectory in India since its foray in 2008. 

The company plans to continue opening new stores and ramp up existing ones in India, with a focus on strengthening the home segment. 

M&S India has been on a growth spurt with operating revenue rising 53% and net profit growing rapidly. 

Lingerie and winterwear have always been the best-sellers for M&S globally and account for a large part of its India revenue as well. 

The company is positioned in the mid-to-premium segment and is the second-largest international operation for M&S outside the UK.

Expanding Presence in India

M&S India currently has over 100 stores in the country and plans to continue opening new stores and ramping up existing ones. 

This expansion is taking place at a time when M&S is closing numerous outlets in its home market of the UK. India is a key growth market for M&S, and the company is committed to expanding its presence here.

Strengthening the Home Segment

One of the key focuses of M&S India's expansion plans is strengthening the home segment. This includes expanding the range of kitchen, bathroom, bedding, and home accessories products. 

Lingerie body care and cosmetics products are also selling well in India, and M&S India is expanding its offerings in these categories as well.

Driving Growth through Online Sales

In addition to expanding its physical store presence, M&S India is also driving growth through online sales. The company sells its products through various online channels, including its website and third-party marketplaces. 

Online sales account for a quarter of M&S India's total sales, and this proportion is expected to grow in the future.

Positioning in the Mid-to-Premium Segment

M&S India is positioned in the mid-to-premium segment of the Indian retail market. This positioning is consistent with M&S's global brand positioning and has been well-received by Indian consumers.

Second-Largest International Operation for M&S Outside the UK

M&S India is the second-largest international operation for M&S outside of the UK. This is a testament to the company's success in the Indian market.

Overall, Marks & Spencer India is a success story in retail. The company has a strong track record of growth and is well-positioned for continued success in the future.

Interesting Points:

• M&S India has been on a growth spurt, with operating revenue rising 53% in 2022 and net profit growing rapidly.
• Lingerie and winterwear are the best-sellers for M&S India.
• M&S India has around 6,000 styles in its versatile product portfolio.
• The company has a strong focus on brand recall and customer awareness.
• M&S India is positioned in the mid-to-premium segment of the Indian retail market.

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