In the doldrums!

Indian apparel businesses could face up to 40 per cent loss of revenue and many smaller players are contemplating closure.

Most countries are under lockdown since mid-March due to Covid-19. This means a total of total 3 to 4 months closure for almost all the brick-and mortar fashion stores. Currently, online stores remain the only option to buy apparel, but consumers are primarily focusing on grocery, medicines and staples purchase. According to a report from Wazir Advisors: “Apparel purchasing will largely be delayed due to: no urgency to replenish, uncertain economic scenario, reduction in occasions to go out (schools, offices, restaurants, gyms, etc. are all closed), limited product options and late and expensive deliveries (online stores), and US as a society is more consumerist compared to Europe. Younger population with a habit of regular spending will cause US to maintaina tad higher consumption than EU during the lockdown period; and more importantly, faster return to normal consumption levels.”

India’s textiles and apparel sector production is expected to decline by 10-12 per cent in the April-June quarter owing to the coronavirus pandemic, according to a study by KPMG in India. Demand shocks are expected to hurt India’s textile exports over the next few quarters, the study observed, assessing the current and potential impact of coronavirus on the sector.

With lockdown in China, price of man-made fibre imports is expected to rise significantly, resulting in higher price for some goods in the domestic market. If the current scenario persists over the next few months, the domestic retail market would also be impacted significantly.

Rahul Mehta of the Clothing Manufacturer Association of India (CMAI) said that apparel businesses could face up to 40 per cent loss of revenue and many smaller players are contemplating closure. “In the absence of relief from the government, the apparels and garment sector could lose one crore jobs,” said Mehta.

Mehta pointed out that almost 80 per cent of the garments industry falls under MSME business category—more on the micro business side than any other—and would therefore be impacted much harder. He suggested wage subsidy as one of the possible solutions to retain workers and said that he hopes the government would help with providing working capital and an incentive package to restart the industry.

Owing to this, India’s retailer associations have urged the government to announce a wage support subsidy that will help them save millions of jobs in the retail space reeling under Covid-19 stress.

The Reserve Bank has announced a slew of liquidity-boosting measures for NBFCs and other segments including further easing of bad-loan rules, freezing dividend payment by lenders and pushing banks to lend more by cutting the reverse repo rate by 25 basis points, which has helped in lifting sentiments amid the Covid-19 gloom.

With Europe and the US being affected the most, there will be a huge impact on exports as global demand is expected to come down significantly, it said on outward shipments from MSMEs. A study by the All India Manufacturer’s Organisation (AIMO) estimates that about a quarter of over 75 million MSMEs in India will face closure if the lockdown due to COVID- 19 goes beyond four weeks and this figure is estimated to touch a whopping 43 per cent if the situation extends beyond eight weeks, said the KPMG report.

The pandemic has already led to big fashion labels announcing cancellation of orders and relieving labour. Macy’s, the US-based retail giant, has announced that it would grant leave to most of its 1,30,000 employees. British luxury giant Burberry have predicted a steep drop in sales of about 70-80 percent. The UK-based retailer Primark has cancelled all new orders and Inditex (the owner of popular brand Zara) has written off some $336 million worth of inventory.

“We will of course pay for these goods and we will do it under agreed payment terms,” H&M spokesperson said in a statement. “This is in accordance with our responsible purchasing practices and not only thhe case in Bangladesh, but in all production countries.”

“We will do our outmost to live up to our commitments and take delivery of garments already made and those in production. We are aware of our responsibility and we are in close dialogue with each of our suppliers on how to handle the current crisis,” said Thomas Børglum, CFO, Bestseller.

Macy’s declared that the heavy toll from coronavirus is forcing it to freeze both hiring and spending, reducing receipts and extending the terms for payment of all goods and services.

A spokesperson from Primark said, “We are losing sales of £650m a month… We have large quantities of existing stock in our stores, our depots and in transit, that is paid for. If we had not taken this action, we would be taking delivery of stock that we simply could not sell.”

Mehta of CMAI, concluded, “the apparel industry would need to rethink its volume-driven strategy,
and relook the scale of their operations and their
pricing policies.”

– KARTHIK MUTHUVEERAN