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  2. 2. Vishwa Varun Page 2 Chapter 1: Introduction Fashion is serious business, everywhere. Admittedly, India was a late comer in the scene, but the pace now is scintillating. This is testified through the escalating figures of the garment market as also by the growing tally of fashion brands and retailers who have occupied substantial share of the country’s retail space. Truly, the clock cannot be turned back now. Over the past year, the garment industry has been building up on its capacities at various levels, expanding its product base, incorporating innovative technology, and engineering newer avenues of business. This sector, being one of the largest industrial sectors of the country, is a major propellant of the economy’s growth. Inherent issues and challenges dominate the industry. With the changing dynamics of doing business in a rapidly-changing global economic scenario, the sector needs to identify scopes for potential business ideas and overcome challenges by converting them into fresh opportunities. The project aim is to understand how various movements in the economy affect the garment industry. An in-depth analysis for implications of various government policies on garment industry has also been done. The project work also highlights how important is the garment industry to the growth of our economy. The study also gives insights about the demographics and psychographics of Indian consumers, the key players in the industry and recent trends in the industry.
  3. 3. Vishwa Varun Page 3 History: The history of apparel in India dates back to the use of mordant dyes and printing blocks around 3000 BC. The foundations of the India's textile trade with other countries started as early as the second century BC. A hoard of block printed and resist-dyed fabrics, primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian export of cotton textiles to the Egypt in medieval periods. During the 13th century, Indian silk was used as barter for spices from the western countries. Towards the end of the 17th century, the British East India Company had begun exports of Indian silks and several other cotton fabrics to other economies. These included the famous fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely practiced between India, Java, China and the Philippines, long before the arrival of the Europeans. Growth of Indian apparel industry: The industry has already given ample hint of ingenuity, as is evident from the revival of consumer enthusiasm in the seemingly stagnant menswear segment, besides remarkable growth in categories like sportswear, casual wear and party wear. The apparel market has grown 15.5% to INR 1,224 billion .The Indian apparel industries (including garment retail, fashion designing and accessories trade) are booming like never before. The rapid increase in job opportunities and expanding earning capabilities has resulted in the inculcation of a brand new mindset amongst Indian consumers. Spending on brands is no longer an improbability, with shoppers willing to pay for quality and premium products. The apparel industry has benefited immensely from these new market trends. The country’s organized retail is booming because of increasing private incomes and changing lifestyles and consumption pattern of consumers is having a positive effect on the apparel industry. There has been a rapid increase in the market size of ready-to-wear clothing and lifestyle apparel brands. The clothing and apparel segment is the largest organized retail category, constituting Rs 21,400 crore of
  4. 4. Vishwa Varun Page 4 the country’s Rs 55,000 crore organized retail sector in 2006.only 19% of this segment is organized, with a strong potential for still further retail penetration. The high level of branding exercises undertaken by apparel manufacturers, retailers and merchandisers across retail formats- such as exclusive outlets, multi brand outlets, department stores, discount formats and hypermarkets – and the heightened interest in the franchise route for retail expansion are all contributing to the rapid growth of apparel retail. Considering the country’s present economic preference, fashion retail can only continue to grow in direct proportion to the rising incomes and spending powers of Indian consumers. With about 65% of these consumers below 35 years of age, apparel retail can only reign supreme in the marketplace. Retail in India: India has been ranked as the top retail destination globally for retail investment attractiveness among 30 emerging markets in the world. The Indian retail sector is the second largest untapped market after China. Retail business contributes around 11 percent of India‘s GDP. Retailing as a sector is witnessing revolution in India. Retailing in India is gradually becoming the next boom industry. The growth of India's retail sector not only limited to urban areas but also growing in rural areas. In the next five years, it is expected that, India's retail industry will expand more than 80%. Higher disposable income coupled with favorable demographic changes (Increase in working women population, rise in nuclear family, largest young population and higher growth in urban and sub-urban population), changes in consumer needs, attitudes and behavior, and increased credit friendliness are some of the key growth drivers for modern retail in India.
  5. 5. Vishwa Varun Page 5 Category wise break up: over all Indian Retail The total retail market is estimated US$ 545 Bn in 2013.The food and grocery Segment is largest retail category 70% of total retail market, followed by apparel sector. Category 2006 2011 2016 CAGR 2011-16 Food Grocery 217 325 425 5.50% Apparel 25 35 50.2 7.50% Jewellery& watches 16.5 25.6 44.2 11.50% Electronics 16.5 22.7 42.8 13.5% Pharmacy 8 13.9 23.4 11% Furnituture 6.5 9.1 17.1 13.50% Restaurants 4.6 8.8 15.8 12.50% Footwear 3.6 4.5 8.3 13% Beauty .6 1.3 3 18% Healthcare .4 1 2.5 20% Others 11 23 42.5 13% Total (US $ Bn) 310 470 675 7.50% Total market growth years A: 2006, B: 2011, C: 2016
  6. 6. Vishwa Varun Page 6 Chapter 2: Objective The objectives of the project work are:  To understand the impact of various government policies on Garment industry.  To analyze various opportunities and threats confronted to Garment Industry.  To understand the demographics and psychographics of Indian consumers.  To understand the reasons for India’s recent sluggish performance in exports for textiles & garments.  To understand the entire process of garment manufacturing and budgeting implications at each stage of manufacturing process.  To study the trends in the apparel industry (Retail, Exports & Technology).
  7. 7. Vishwa Varun Page 7 Chapter 3: Hypothesis I researched on various aspects of apparel retail industry and governments policies, as I discussed from history to current market scenario of apparel retail industry in India. Despite inflationary atmosphere and economic meltdown, major apparel retailers like Shoppers Stop, Arvind Ltd and Promart have pegged a healthy like-to-like growth in the range of 12-15 per cent for the first quarter ended June 30, 2013. Like-to-like growth is the increase in sales from same store in comparative quarters. According to industry experts, reasons for the considerable growth amidst slowdown include a stable maximum retail price (MRP) to increase in promotional schemes by apparel retailers. The new financial year has started on a positive note for us with a double-digit like-to-like growth of 12 per cent. Our momentum of store expansion continues to be robust with the addition of 20 new stores across all formats this past quarter. All the finding and recommendations may be or may not be true; this research is based on data available as today.
  8. 8. Vishwa Varun Page 8 Chapter 4: Research Methodology Major segments: Men: Women:
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  11. 11. Vishwa Varun Page 11 Kids:
  12. 12. Vishwa Varun Page 12 Market Segmentation: Menswear Market Today menswear market is the biggest segment of the market,howwhere women’s wear segment is growing faster than other segment of apparel, is expected to gain majority share in future.Kidswear is also growing rapidly. Market segmentation: Women’s wear segment High growth categories in women’s wear market including woven tops/shirts / T- shirts, Ethnic wear categories sari, salwar kameez also have high growth potential.
  13. 13. Vishwa Varun Page 13 Kids wear
  14. 14. Vishwa Varun Page 14 Indian Apparel Retail: critical to success factors Four critical success factors help define the winners in India’s apparel market Fashion and pricing: Providing fashion at every competitive price is a major driver of success for max.Max does not compromise fashion for price and vice –versa. Providing apparel that beyond normal pricing level has enabled the chain to grow rapidly both within the group landmark group and within India. Part of offering good fashion localizing the styling .Max localize one third of its product range sourced from global headquarters, enable it to “be global and connect local” The customer experience: Customer needs and expectations evolve given their exposure to international travel, media, and the internet. Today the Indian consumer expects a better experience overall. Availability of apparel: The consumer wants sharply priced, fashionable apparel to expand their wardrobe both at workplace or at home.Costomers no longer wants to dress up just for work place; they also wants to look good at home, implying access to choice and range. Store experience: From the time customer enters to the store to when she/he leaves, he/she must needs to have good experience across several touch points :Trial room, Interaction with staff, After sales experience, Billing at POS,Ambience of the store. Freshness of category: Freshness takes in count new product promotions, new designs, new colors, new styling etc.Keeping fashion exciting helps engage and retain customers, results in sale, generate repeat traffic.
  15. 15. Vishwa Varun Page 15 Long-term business model: Participants need to build a sustainable business model given that the gestation period of success in the retail sector is long. Sustainable product pricing, offering products that imply longevity, expanding operations in a calibrated but determined manner etc are some of the ways in which retailers can convey their commitment to build a long-term presence. Market Overview and trends Supply chain in apparel sector: Supply Chain Management is the integration of key business processes from end user to original suppliers that provides products, services, and information that add value for customers and other stakeholders. Apparel supply chain: The Apparel Supply Chain comprises diverse raw material sectors, ginning facilities, spinning and extrusion processes, processing sector, weaving and knitting factories and garment (and other stitched and non-stitched) manufacturing that supply an extensive distribution channel. This supply chain is perhaps one of the most diverse in terms of the raw materials used, technologies deployed and products produced. This supply chain supplies about 70 per cent by value of its production to the domestic market. The distribution channel comprises wholesalers, distributors and a large number of small retailers selling garments and textiles. It is only recently that large retail formats are emerging thereby increasing variety as well as volume on display at a single location. Another feature of the distribution channel is the strong presence of ‘agents’ who secure and consolidate orders for producers. Exports are traditionally executed through Export Houses or procurement/commissioning offices of large global apparel retailers.
  16. 16. Vishwa Varun Page 16 Key players in market Aditya Birla Group: Aditya Birla Group is in the league of Fortune 500.It is anchored by an extraordinary force of 100,000 employees, belonging to 25 different nationalities. In India, the Group has been adjudged "The Best Employer in India and among the top 20 in Asia" by the Hewitt-Economic Times and Wall Street Journal Study 2007. The apparel business of Aditya Birla Nuvo dominates the premium and popular segments of the Indian lifestyle market with its companies, Madura Garments Lifestyle & Retail and Peter England Fashions & Retail. Aditya Birla Nuvo Brands:  Esprit  Peter England  Allen Solley  Van Heusen  Louis Philippe
  17. 17. Vishwa Varun Page 17 Raymond’s: A 100% subsidiary of Raymond Limited, Raymond Apparel Ltd. (RAL) ranks amongst India's largest and most respected apparel companies. RAL entered into the ready-to-wear business with the introduction of Park Avenue in 1986 catering to the men's formal wear market. Parx was launched in 1998 to address the growing trend of smart casuals. In 2000, Manzoni, a luxury lifestyle brand was launched offering a super-premium formal range of men's shirts, suits, trousers, jackets, ties and leather accessories. Raymond identified the vacuum for a high end, casual wear brand and hence decided to acquire ColorPlus as a part of strategic expansion plan for their ready-to-wear business. Notting Hill was launched in 2007 to cater to the popular price segment. In addition to this, Raymond Apparel has also ventured into the kids wear segment with its exclusive brand Zapp! Raymond Brands:  Raymond Finely Crafted Garments  Manzoni  Park Avenue  Park Avenue Woman
  18. 18. Vishwa Varun Page 18  ColorPlus  ColorPlus Woman  Parx  Notting Hill  Zapp! Arvind Mills: Arvind Mills was established in 1931. It was founded by Kasturbhai Lalbhai, one of the leading families of Ahmedabad. Arvind’s brand portfolio includes: Lee , wrangler, nautical, Jansport, Kipling, Tommy, Flying Machine, Excalibur, Arrow, US Polo , Izod, Pierre Cardin , Palm beach ,Cherokee, Gant, Hart Schaffner, Marx, Sanabelt. It manufactures denims, shirting, khakhis, knits, and garments. The company has a turnover of approx $500 million and is a part of over 100 year’s old Lalbhai group. Arvind entered into exports of garments setting up shirts factories in Bangalore 2001. This modest beginning has quickly grown to a capacity of around 4.50 million shirts, annum and the list of customers includes Dockers, gap, next, Espirit, FCUK, Osh, Kosh and many others. The lalbhai group subsidiary Arvind Mills said recently that it temporarily suspending expansion plans for two apparel brands, Rider and Hero, which the company had jointly developed with the US based branded lifestyle apparel player VF Corporation. The two companies had signed the JV agreement in 2006 establishing the VF Arvind Brands to design market and distribute VF’s branded lifestyle apparel in India.
  19. 19. Vishwa Varun Page 19 Arvind Brands:  Flying Machine  Newport  Ruf & Tuf  Excalibur  Arrow  Lee Wills Lifestyle: ITC’s lifestyle retailing business division has established a nationwide specialty retail presence through its Wills Lifestyle, a chain of exclusive specialty stores. Wills Lifestyle, as a fashion destination, offers Wills Classic work wear, wills lifestyle, as a fashion destination, offers Wills Classic work wear, Wills club life evening wear and fashion accessories. Wills Signature designer wear. ITC forayed into the youth segment with the launch of john players in December 2002. The brand available pan India through a network of over 1300 multi brands outlets. The launch of Miss Player is currently available at select exclusive stores, select John Players stores and multi brand outlets. Wills lifestyle currently command retail space with 50 EBO’s of 2,500 sq ft each and plans to add 50 additional EBO’s in next two years. WILLS LIFESTYLE
  20. 20. Vishwa Varun Page 20 SUCCESS STORY OF RETAIL BRAND Pantaloon: India’s leading retailer in multiple retail formats
  21. 21. Vishwa Varun Page 21 Shoppers Stop: The leader in diversified market strategy
  22. 22. Vishwa Varun Page 22 Growth value proposition: Ample growth opportunities in the Indian retail industry: Large number of retail outlets:  India is the fifth largest preferred retail destination globally.  The sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier- III cities. Rural markets offer significant growth potential:  FMCG players are focusing on rural market as it constitutes over 33 per cent of FMCG consumer base in India  With increasing investment in infrastructure, retailers will be able to increase their access to high-growth potential rural market
  23. 23. Vishwa Varun Page 23 Private label opportunities: The organized Indian retail industry has begun experiencing an increased level of activity in the private label space. Private label strategy is likely to play a dominant role as its share in the US and the UK markets is 19 per cent and 39 per cent, respectively while its share in India is just 6 per cent. Sourcing base:  India‘s price competitiveness attracts large retail players to use it as a sourcing base.  Global retailers such as Wal-Mart, GAP, Tesco and JC Penney are increasing their sourcing from India and are moving from third-party buying offices to establishing their own wholly-owned/wholly-managed sourcing and buying offices. Strong growth potential attracting high foreign investment
  24. 24. Vishwa Varun Page 24 Recent Merger and Acquisition in the Indian Retail Industry
  25. 25. Vishwa Varun Page 25 Key issues in Indian apparel industry The Multi-Fiber Agreement (MFA) had been forced in India since 1962, governing the textile trade between various countries. It was later abolished in 2005. When the MFA was abolished, it was expected that tariff distortions, which were prevalent earlier, would gradually disappear, facilitating global trade of textile and apparel. The abolishment of the quotas did fuel growth of the sector with textile exports growing from US$17 billion in 2005-06 to US$19.24 billion in 2006-07.The readymade garments segment benefited the most with the abolishment of the quotas. According to the Apparel Export Promotion Council (AEPC), readymade garments export from India is expected to reach US$14.5 billion by 2009-10. Presently, it accounts for 43 percent of total textile exports and six percent of India’s total export. Fluctuation Rupee Value: The subsequent spurt in exports did elude exporters in the segment as most focused on short-term gains. But with the economy growing and appreciation in the rupee value, there was a rather different tale to unfold. With an appreciation in rupee value, the apparel and textile export industry now needs more introspection to reduce the extent to the blow. Export agreements, which were conducted in US dollars, faced the most severe blows. Unemployment: As per a Confederation of Indian Textile Industry (CITI) study, total employment generation from exports was at 25.80 lac in 2004-05. The CITI study points out that with appreciation of Rupee, the growth rate of apparel and textile exports decreased from 16.6 percent to 9.2 percent in 2006-07; and this has already reduced employment from the apparel and textile export trade by about 1.22 lacs, and can further lead to an overall loss of over six lacs jobs, unless serious remedial measures are undertaken to prevent the crisis. Under present circumstances, it’s estimated that about 2.72 lacs jobs will be lost in direct employment in the textile and apparel industry in 2007-08.
  26. 26. Vishwa Varun Page 26 Though India enjoys the advantage of a host of low costs in textile and apparel manufacturing, subsidies and supply of cheap labor currently faces threat from its neighboring competitors- Bangladesh, Vietnam and Sri Lanka. These countries with minimal cost undervalued exchanged rates, low taxes, subsidies and plentiful cheap labor could result in sail of the industry to these locations. Lagging in Cost and Technology Spheres: Post MFA, exports splurged and substantial capital expenditures were made to diverse and also re-inforce production capacity to meet the growing domestic demand. For the short term this may be fine but mere increasing the productivity was not a solution rather improving productivity and cost efficiency ought to be the long term goal. In this segment, Indian Apparel and Textiles companies face threat from low-cost Chinese Companies while negotiating with tough global buyers. It has also been observed that the textile and apparel sector witnessed more investment in existing technology than on new technology. Although nanotechnology has helped in developing manmade fibers (and filament yarn), the industry still lags behind it counterparts in the United States, china, Europe and Taiwan. Import of new and advanced technology could certainly compensate for the losses on account of exports due to declining dollar. Existence of long and complex Supply Chains causing lengthening of lead – time The supply chain in India is highly fragmented mainly due to government policies (SSI reservation) and lack of coordination between industry and trade bodies. Existence of large number of intermediaries adds to the cost but also lengthen the lead times. The countries who have significantly consolidated their supply chain are globally competitive – Korea, China, Mexico, Turkey.
  27. 27. Vishwa Varun Page 27 Retail scenario This can be sub divided into brand and non-brand. The branded retail sector is not more than 10 % of the total. A retailer ( whether shop owner or mall) has to keep a higher margin for branded garments than for unbranded to take care of returns on his investments as well as discount on end of season sales or out of fashion stocks and overheads. Indian apparel sector trends Maximum employment with minimum investment. High percentage of women employment –35 %.95% production in small-scale sector.3% share in global apparel exports. Cluster based growth –concentrated primarily in 8 clusters, i.e Tirupur.Ludhiana, Bangalore, Delhi /Noida /Gurgaon, Mumbai, Kolkata, Jaipur and Indore Contributes around 8% to India s overall exports and 48% to textile exports. Production in Apparel Sector: The apparel sector is expected to record a CAGR of nearly 15% in quantity terms and 20 % in value terms in 11th plan period. By 2001-12, production is expected to reach 19 bn pcs , amounting to rs 299300 crs, 32% of this population is expected to be generated by the export sector. In value terms, 51 % of the population is expected to be contributed by exports. The accent is on the value added growth –both for domestic and export market India in recent years has been the focal point of continuous growth and development making it one of the fastest growing economies of the world. It is the 4th largest economy in terms of Purchasing Power Parity, after USA, China & Japan, and is rated among the top 10 FDI destinations.
  28. 28. Vishwa Varun Page 28 The Indian consumer is evolving and driving retail growth due to increased consumption. Private consumption growth contributes to more than half of the GDP growth and is growing in double digit figures. Several businesses are reacting to this evolution positively, both through pull and push phenomenon. Recent trends These are few recent trends pertaining to the garment industry Trend: 1Indian consumers are converting from stitched apparel to ready-to wear causing a surge in discount retailing. Factory outlets have become distinct and important shopping destinations Retailers are increasingly accepting the widely agreed fact that consumer solve a bargain and always look forward to buying brands at low prices. Factory outlets have become distinct shopping destinations with distinct audiences. Apparel companies are focusing on this market to cash in on consumers converting from stitched apparel to ready-to-wear, further graduating to branded apparel. India is thus seeing a surge in retailers offering year round discounts, ranging anywhere between 30% to 70%. Trend: 2 Consumers now desire branded products in all aspects of their life Traditionally brands that offered formal wear are now extending into casual wear, accessories, footwear etc. With most brands turning lifestyle brands, they are opening larger Exclusive Brand Outlets (EBO’s) to showcase their complete range of merchandise and give an international feel, The past few months has seen brands opening up very large format stores in India.
  29. 29. Vishwa Varun Page 29 Trend: 3Designers realize the huge opportunities in ready-to-wear market and are introducing prêt lines Another trend visible in the Indian designer wear market is corporatization i.e. strategic tie-ups with large corporate in related industries to provide the necessary financial support and expertise in operational management. The designer wear industry lacks the processes, systems, people and financial resources to rapidly scale up their operations. The direct advantage of this would accrue to the designers who would be able to concentrate on the design and aesthetics rather than on business planning. Trend: 4 Indian companies see a huge opportunity in partnering with luxury brands wishing to enter India The Indian consumer desires to possess international luxury brands as an inspirational product. Additionally, no Indian retail brand actually qualifies to be categorized as a luxury brand. This readiness for luxury as an organized market has been recognized throughout the world and international luxury brands are exploring possible avenues and tie-ups to enter the Indian retail market. Trend: 5 worldwide surges in demand for organic and eco-friendly products Organic cotton has been able to achieve maximum popularity amongst all eco- friendly fibers. Global retail sales of organic cotton products are projected to grow to $2.6 billion by the end of 2008, reflecting a 40% average annual growth rate. Hence, the demand for organic cotton fiber is expected to grow to 100,000 metric tons in 2008, an average annual growth rate of 47%.
  30. 30. Vishwa Varun Page 30 Trend: 6 Kids and youth are influenced by icons & characters and desire to possess them in their everyday life India has become an important market for character licensing specially in Apparel Today's consumer is greatly influenced by media and he exhibits a propensity to follow icons to the extent of bringing them into his everyday life. This growing trend amongst consumers is being tapped by apparel companies by taking up licensing of popular characters and icons to be used in their merchandise. This is especially true for the kids and youth market since they identify with these characters and icons more strongly. According to Cartoon Network, the business of license merchandising of animated characters is estimated at Rs. 360 crore in India. Trend: 7 Companies are exploring new' locations to retail in order to increase visibility of their brand Apparel retailing is geared to take on customers at places other than the traditional locations like neighborhood markets, high streets and malls. With increased need for convenience and visibility retailing, companies explore newer locations like airports, metro stations, restaurants, cafés & even beauty salons. Retailing at such outlets typically follows two formats - the first is when space is sublet for retailing branded merchandise at airports, metro stations, etc. The second kind is when cafés, restaurants, fast food chains sell merchandise to promote their own brand through T-shirts, caps, bags, mugs, etc. While brand retailing at airports/metro stations is growing at a fast pace, brand building by cafés/restaurants through retailing of merchandise will also be an important trend mostly targeted at kids and youth. Trend: 8 Textile companies are strengthening front and back end operations through mergers and acquisitions Companies are increasingly looking to acquire domestic and overseas companies which complement the value chain. However, it is the foreign acquisitions which have caught the attention of the industry and the world. Indian companies are taking on larger companies, integrating the Indian advantage of manpower & raw material with the acquired company's strategic location, technology and/or well established distribution channels.
  31. 31. Vishwa Varun Page 31 Role of FDI in single and multi brand retail in India
  32. 32. Vishwa Varun Page 32 51 % FDI in multi brand retail (Policy Passed)  Minimum investment cap is USD 100 million  30 per cent procurement of manufactured or processed products must be from SMEs  Minimum 50 per cent of total FDI must be invested in back-end infrastructure (logistics, cold storage, soil testing labs, seed farming and agro-processing units)  Removes the middlemen and provides a better price to farmers  Development in the retail supply chain system  50 per cent of the jobs in the retail outlet could be reserved for rural youth and a certain amount of farm produce could be required to be procured from poor farmers  To ensure the Public Distribution System (PDS) and Food Security System (FSS), government reserves the right to procure a certain amount of food grains  Multi brand retail would keep food and commodity prices under control  Will cut agricultural waste as mega retailers would develop backend infrastructure  Consumers will receive higher quality products at lower prices and better service 100 % FDI in single brand retail:  Products to be sold under the same brand internationally.  Sale of multi brand goods is not allowed, even if produced by the same manufacturer.  For FDI above 51 per cent, 30 per cent sourcing must be from SMEs.  Consumerism of the retail market.  Any additional product categories to be sold under single brand retail must first receive additional government approval.
  33. 33. Vishwa Varun Page 33 New Goods and Service Tax (GST) would simplify tax structure Supply chain structure:  Introduction of Goods and Service Tax (GST) as a unified tax regime will lead to a re-evaluation of procurement and distribution arrangements.  Removal of excise duty on products would result in cash flow improvements. Pricing and profitability:  Elimination of tax cascading is expected to lower input costs and improve profitability.  Application of tax at all points of supply chain is likely to require adjustments to profit margins, especially for distributors and retailers. Cash flow:  Tax refunds on goods purchased for resale implies a significant reduction in the inventory cost of distribution.  Distributors are also expected to experience cash flow from collection of GST in their sales, before remitting it to the government at the end of the tax-filing period. System changes and transition management:  Changes need to be made to accounting and IT systems in order to record transactions in line with GST requirements.  Appropriate measures need to be taken to ensure smooth transition to the GST regime - through employee training, compliance under GST, customer education and inventory credit tracking.
  34. 34. Vishwa Varun Page 34 Income growth will drive organized retail demand  Multiple drivers are leading to strong growth in Indian retail through a ‘consumption boom’  Significant growth in discretionary income and changing lifestyles are counted among the major growth drivers of Indian retail  Easy availability of credit and use of ‘plastic money’ have contributed to a strong and growing consumer culture in India  Increasing acceptance and usage of e-trailers by consumers due to convenience and secured financial transactions  Expansion in the size of the upper middle class and advertisement has led to greater spending on luxury products and high brand consciousness
  35. 35. Vishwa Varun Page 35 Career opportunities in Retail Industry Several streams of employment are available to students and recent grads seeking access into the retail industry, each one offering unique opportunities and requiring specific skill sets. The opportunities within each of these streams cater to a wide variety of disciplines. Depending on your interests, there are positions within the retail industry in everything from fashion to business to marketing to interior decorating (store design) to industrial engineering (manufacturing) and more! There is a huge amount of variety within the retail industry and success involves the understanding of how all the individual pieces fit together. Most importantly, understanding how all these factors affect the customer at the consumer interaction stage where the money is actually made. Logistics and supply chain management: This is the essential role of getting products from suppliers through distribution centers and into the customers’ hands. Being able to manage these interconnected parts becomes a greater concern as the size of the retailer increases. Much of the knowledge required for this is includes planning supply routes, finding affordable methods of transportation and ensuring there are never too many—or too few—of each product in stores. Merchandising, marketing and sales: This can include buying, category management, inventory analysis, planning and allocation, marketing co-ordination, sales management, business development and loss prevention.
  36. 36. Vishwa Varun Page 36 This particular area has made significant advancements in recent years and can vary considerably between individual retailers. Technological advancements have allowed massive amounts of data to be collected, and currently the major issue is determining the most effective way of analyzing that data. Having a background or familiarity with interpreting statistics is valuable here. Knowledge of the customers is key to these positions and being able to interpret that data will help further that goal. Operations management: These roles may include district or store management, and require wide range knowledge and abilities. They can include recruiting and hiring employees, managing inventories, implementing promotional strategies, and many other skill sets which vary across retailers. These operations are the core of the business and where most of the actual money is made. The skills required for these positions can vary considerably depending on the retail outlet. However, a strong knowledge of the retailer’s customer base and the products are key. - General corporate: These positions are ones most commonly shared by all businesses, such as IT, accounting and human resources. Within retail, the human resources role may exist at the corporate level or in field roles that require HR management across regions, or in large store locations. Much of these particular corporate aspects of the retail industry are focused upon in business courses and operate in the same way. This area is often considered to be the more ‘traditional’ aspect of the industry. Third-party support roles, including consultants, designers and manufacturers: There are many other opportunities within the retail industry that don’t necessarily involve working for retailers themselves. These include retail consulting firms, store designers or branding agencies. This can even include
  37. 37. Vishwa Varun Page 37 product supplies, such as manufacturers or fashion labels. These types of opportunities are often overlooked by the assumption that working in the retail industry means working directly for a retailer. This stream of employment is ideal for anyone whose education is less focused on business and more geared toward professions such as engineering in the case of manufacturing, or architecture in the case of store design. Entrepreneurial: There are also opportunities for those looking to use some of their own ideas to create a business. This could be setting up a fashion boutique, developing an online business or even opening a franchise location. These positions offer the most control over your own role within the retail industry, but also involve the most risk as success or failure largely rests on your own abilities. Department Manager: Department managers plan and coordinate the operations of departments or sections of larger retail outlets. This may include the recruitment and management of staff, sales and customer service, and managing sales targets and budgets. They are often also responsible for the visual presentation of the department and its merchandise. Visual Merchandiser: Visual merchandisers design the merchandising plan for a store or group of stores, in order to maximize sales opportunities by attracting the attention of customers. They may develop individual displays such as window, wall or point of sale displays, and floor plans and layouts. These can range from simple product stands at cash registers to more elaborate and creative window displays. As well as attracting customers, displays can also project the image of the store and target specific groups of customers.
  38. 38. Vishwa Varun Page 38 Buyer: Buyers source, select and purchase the goods that are sold in retail stores. They review current stock levels, sales patterns and their competitors’ ranges of stock to plan future stock. They can determine everything from stock levels to the product range. Keeping up to date with new products on the market is very important, and retail buyers need to do research and attend trade shows to keep ahead of future trends. This may involve travel to find the most suitable goods for the industry and for seasonal trends, sometimes interstate and overseas. SWOT ANALYSIS S Strength W Weakness O Opportunity T Threat STRENGTH: Abundant raw material availability: India is one of the leading producers of natural and manmade fibers. The abundance of raw material allows industry to control cost and reduce overall lead time. Low cost skilled labor: India has third lowest wage rate as compared to other key garment manufacturing companies. This provides industry with a distinct competitive advantage.
  39. 39. Vishwa Varun Page 39 Presence across value chain: Indian industry has manufacturing capacity present across complete product range, that allows garment manufacturers to source raw material locally and thus reduces the lead time. Growing domestic market: The Indian domestic market is extremely sensitive to fashion fads and this has resulted in development of very responsive garment industry. WEAKNESS: Fragmented industry Global buyers prefer to source their requirements from two to three vendors and Indian garment manufacturers find it difficult to fulfill the capacity requirements. Effect of historical government policies The industries continues to be affected by several historical regulations, for instance there is still an absence of viable exit options for industry players. These regulations resulted in complex industry structure, which is currently an obstacle. In the Pre 2000 era garmenting sector was reserved for the Small scale Sector, which has resulted in most units being set up with small capacities. Till now, knitted garment sector is reserved for the small scale sector. Though the historical regulations are relaxed now, they continue to be an impediment to global competitiveness.
  40. 40. Vishwa Varun Page 40 Lower productivity & cost competitiveness Lower cost competitiveness has hampered ability to compete with lower cost global players because the labor force in India has a much lower productivity as compared to competing countries like China, Sri Lanka. Technological obsolescence: A large portion of the industry’s processing capacity is obsolete. This has resulted in low value addition in the industry and a need has raised for significant technology investments to achieve world class quality. OPPORTUNITY: Liberalizing economy: Opening up of Indian economy has presented the players with lots of opportunities; Indian companies are tying with global brands. They are leveraging the brand name of global brands. Growing dual income: With number of working women’s increasing the dual incomes are income thus income available at peoples discrete has also increased.
  41. 41. Vishwa Varun Page 41 Rising Disposable Income: According to McKinsey Global Institute (MGI), by 2035 over 23 million Indians will number among the country’s wealthiest citizens. Forecasts for India’s real GDP growth rate over the coming two decades generally range between 6 and 9% per year. MGI forecast real compound annual growth of 7.3% from 2005-2025. Average real household disposable income will grow from 113,744 Rs in 2005 to 318,896 Rs by 2005, a compound annual growth rate of 5.3%. This is significantly more rapid than the 3.6% annual growth of the last two decades. Sizeable urban middle class: As Indian incomes rise, the shape of the country’s income pyramid will also change dramatically. Apart from a substantial reduction in poverty, India will create a sizeable and largely urban middle class. Middle class comprises two economic segments - seekers with real annual household disposable income of 200,000 to 500,000 Indian rupees and strivers at 500,000 to 1,000,000 Indian rupees. In 2005, the Indian middle class was still relatively small comprising approximately 5% of the population, however middle class is expected to reach 41% of population by 2025. Fifth largest consumer: India will become the world’s fifth largest consumer market by 2025. The combination of rapidly rising household incomes and a robustly growing population will lead to a striking increase in overall consumer spending. The aggregate consumption in India will grow in real terms from 17 trillion Indian rupees today to 34 trillion by 2015 and 70 trillion by 2025 a fourfold increase. THREATS: Fluctuation in rupee value: The fluctuation in rupee value posses a big threat in front of importers and exporters. The exchange value of Rupee against UD Dollar has depreciated to Rs 61.45 which has resulted in huge losses for the importers. Thus there is always a
  42. 42. Vishwa Varun Page 42 great threat for players in international trade. But since it affects only international players thus it is not as big a threat as some of other threats. State of Recession in the economy: The apparel industry gets severely hit during recession because of less liquidity in the market. This industry is an export-oriented industry which lies in doldrums during this stage. Competition from global players: The major exporters of garments from all over the world are giving tough competition to India as they are providing higher productivity with lower costs. Competition is not likely to remain just in the exports space; the industry is likely to face competition from cheaper imports as well. This is likely to effect the domestic market and may lead to increased consolidation. Ecological & Social Awareness is likely to result in increase pressure on the industry to follow international labor and environmental laws.
  43. 43. Vishwa Varun Page 43 Chapter 5: Data Collection  Apparel Export Promotion Council of India website.  From the annual report of India Brand Equity Foundation.  Data available on apparel brands website
  44. 44. Vishwa Varun Page 44 Questionnaire Sample size of survey is 30 people. Que: Are you aware the current FDI I retail? a. Aware b. Not Aware c. No response Result: In survey 20 people are aware about FDI in retail, 9 people are not aware about FDI in retail, the person answer NO response is 1
  45. 45. Vishwa Varun Page 45 Que: Do you think the Indian government should open up FDI restriction in the Retail sector. a. Yes b. No c. We can’t say anything (Sample size of survey is 30) Result: After survey I come to conclusion 22 people are saying yes,5 people said no and 3 said we can’t say anything.
  46. 46. Vishwa Varun Page 46 Que: Why participant’s thoughts FDI policy should not be opened? a. Opening of FDI allows improved market. b. It will bring change in Indian economy c. No response (Sample size of 30 people) Result: As per result I found that 20 people saying it will bring change in Indian econom,7 people said Opening of FDI allows improved market and 3 people said NO response.
  47. 47. Vishwa Varun Page 47 Que: Are you happy with current FDI retail policy as it is? a. Dissatisfied b. Satisfied c. WE can’t say anything (Sample size of 30 people) Result: After survey I found that 22 people are dissatisfied form current FDI retail policy,7 people are satisfied and 1 said we can’t say anything .
  48. 48. Vishwa Varun Page 48 Chapter 6: Findings  More R& D work by apparel brands before launching the collection.  Customer is god for any business, so good connect with customer.  Quality product, Brands needs to work on perceived value.  Apparel industry is unorganized; very few companies are in organized sector.  Apparel retail industry required huge investment.  We need to increase export, so our economy will be in better condition.  Local apparel store need to work on branding and promotion.  More use of technology technology
  49. 49. Vishwa Varun Page 49 Chapter 7: Recommendations After understanding the industrial and economic scenarios we would like to give following recommendations to Indian companies operating in garment Industry:  More emphasis should be given on the micro and macro level economic factors. These factors indirectly or sometimes directly affects each and every business in the economy, marketers should be proactive enough to foresee the future impact of these factors on their business.  Look for co-branding: It involves merging two or more well known brands into a single product. It is an effective way to leverage strong brands and helps in gaining synergy by having the best combination of unique strength each brand has. Co-branding can be based on innovation, ingredient, alliance, supply chain or any other.  Find out new ways of communicating to customers, like sending information about new products, offers, stocks, etc through SMS on cell phones Brand page on social media sites.  Industrialists shouldn’t consider the expenditure on R&D and technology as a cost, it should be considered as an investment because it pays rich dividend in future.  Industrialists must emphasize on improving the standard of labors because garment manufacturing is a labor intensive industry. The productivity of industry directly depends upon the productivity of labor.  Give priority to consumers’ opinion. Keep in touch with customers by creating loyalty clubs and online data bases and opinion leaders.  Marketers are under estimating the importance of Visual merchandising, visual merchandisers not only makes the store look impressive but they also makes sure right wears are kept at the right place in the store.  Blend up the bollywood, cricket and other entertainment mix with other areas such as product design, distribution channel, price, promotion
  50. 50. Vishwa Varun Page 50 activities. Using celebrity endorsement can prove effective provided the credibility and popularity of celebrity is taken into consideration.  It has been seen in apparel retail stores that mostly In store advertisements to communicate various promotional offers, thus only that part of population is reached that is already visiting the stores. Thus using Outdoor advertising & promotional campaigns is quite important.  Through research it was revealed that majority of customers prefer to buy with family members or with friends, and such partners also influence the purchase decisions of the buyer. Thus it’s necessary to have a strategy to impress these influencers. Having an associate loyalty card thus should always be a part of the loyalty program.  For retails apparel stores its imperative to build their own Brand name they can’t just rely upon the brand names of the wears available in the stores.
  51. 51. Vishwa Varun Page 51 Chapter 8: Bibliography  Marketing Management By-Philip Kotler.  Retail Management By-Gibson G.Vegamani  Data available on website of Apparel Export Promotion Council of India.  Annual reports of India Brand Equity Foundation.  Google  Direct Interview
  52. 52. Vishwa Varun Page 52 Conclusion The trends discussed above clearly show that the fashion business is exploring all aspects of expansion i.e. it is bound for a multilateral expansion rather than only unilateral expansion. Multi lateral expansion is happening at every part of the value chain as well as for every consumer segment. The Indian Garment Industry is taking cue from international standards as well as the burgeoning consumer appetite to create their own growth path. Fashion companies are taking a much larger perspective of this industry in India and consolidating their position to face it. On the other hand, the Indian consumer is at a preliminary stage of development and yet due to international exposure trying to keep pace with the international fashion scene creating unprecedented pressure on companies to perform. This is a window of opportunity which the Indian Garment industry should make the most of before it reaches maturity which will signify slowdown. Companies need to react as well as participate through in-depth understanding of fashion, consumer demands & micro/macro level economic factors to take on this challenge.
  53. 53. Vishwa Varun Page 53 Glossary FDI: Foreign Direct Investment FMCG: Fast Moving Consumer Goods FY: Indian Financial Year (April to March) So FY10 implies April 2009 to March 2010 IT: Information Technology MoU: Memorandum of Understanding MT: Million tonnes MTPA: Million tonnes per annum SEZ: Special Economic Zone USD: US Dollar