The Indian retail industry is worth US $ 490 billion and is expected to demonstrate a promising year-on-year growth of 6 percent by 2023 to reach US $ 865 billion, even when the present COVID-19 outbreak has put this forecast under doubt. The share of apparel in India’s retail market is 8 per cent, corresponding to a value of US $ 40 billion. The Indian fashion retail market has and is witnessing several fascinating changes and challenges over the years, which are the indicators of the growth of this industry. And these indicators have attracted a number of players into the apparel retail segment over the years, even from the manufacturing side of the business. Also, a number of retail brands are entering the manufacturing side of the business for better profits and self-reliance.
Dual roles for better market reach
For ages, businesses were being operated in the traditional way wherein manufacturers had the task of producing and the retailers were selling. However, with digital transformation of the industry, the boundaries between these traditional roles have started to fade.
While a number of manufacturing firms have started entering the retail segment with their own brands or through direct-to-consumer business, there remain a number of prerequisites that need to be taken into consideration while entering the new business avenue. The biggest hurdle for manufacturers to make retail their primary revenue stream is the fact that they lack the manpower, retail space and branding expertise required to make their products desirable, and unfortunately, they are unable to scale any further. However, India has witnessed a number of firms exercising this, including the likes of Oswal Woollen Mills that launched Monte Carlo, Donear Industries Ltd. that runs manufacturing as well as its retail business, Alcis that originated from Paragon Apparels, etc., and some other manufacturing firms, which have initiated retail directly to consumers through digital platforms, etc.
Sourcing and manufacturing are no longer enough to fuel apparel company and industry growth, and thus, a number of cutting-edge factories have started to offer design, product development and direct-to-consumer distribution as well. A number of manufacturers today find themselves well-equipped with all the means to divulge into retail in the floundering market.
The industry perspective
The ongoing digital revolution has had enormous opportunities opened up for both retailers and manufacturers – retailers take on the role of manufacturer, and manufacturers try their hand as retailers. Apparel Resources gets candid with few industry players on the practicality of this trend.
For Madame from the house of Jain Amar Clothing Pvt. Ltd., the hybrid model is helping the firms sustain the competition that has increased to an all-time high due to globalisation. Akhil Duggar Jain, Executive Director, Jain Amar Clothing Pvt. Ltd., asserts, “In an era of e-tailing picking up steam and slowdown in the consumer market, the bricks-and-mortar retailing is going through a tough phase. The existing brands are consolidating their operations to secure the bottom line for the last three years. Nevertheless, a few companies like ours working on a hybrid model have sustained the multiple onslaughts of both domestic and international competition.”
While the manufacturing firms believe that retailing is a much more profitable business than producing, they do not ignore the fact that retailing is not an easy process to enter or to follow, and it definitely requires more investment. “Manufacturers can and they should enter the retail sector, but it depends upon the production they carry. There needs to be a proper balance and knowhow of the percentage of the total production from what they want to afloat in retailing. Retailing requires more investment than manufacturing. But yes, profitability is also better than wholesaling. Per month fixed expenses have to be lower to sustain in the offline retailing business. Also, for a local manufacturer, it’s difficult to create brand visibility and put in an adequate investment in marketing,” avers Anuj Mundhra, CMD, Nandani Creation Ltd., (jaipurkurti.com).
The entry of manufacturing companies into the retail segment, however, may negatively impact the retail brands because their brand value may go down since the merchandise will be readily available by the manufacturing firm. “The relationship between manufacturers and retailers is crucial for maintaining the long-term demand and supply of any product. Any brand worth its salt safeguards itself by having a long standing exclusivity agreement with the manufacturer, which is definitely enforceable. I do believe that in this scenario, it is the brand’s responsibility to ensure that the manufacturer is fairly benefiting from the relationship and they need to take it seriously if they wish to grow and expand,” maintains Sandeep Gonsalves, Co-founder and Director, Sarah & Sandeep.
Meanwhile, Puneet Jain and Yatin Jain, Directors, Odhni, opined that manufacturers should not consider entering the retailing business and stick to what they are best at instead of being a jack of all trades, master of none. “While manufacturing requires creativity and is system-oriented, retailing requires a completely different skill set. On the surface, it might seem that if the product is good, it will sell itself, but I’ve witnessed many manufacturers, who’ve tried to enter the retail business, fail miserably. Manufacturing and retailing require very different temperaments. It’s only natural that if you concentrate all your energies on one thing, you’ll have a greater chance of success than if you are trying to juggle many things at once,” he adds.
Talking on the same lines, Maniesh Sondhi, Owner, Valencia Apparels, says, “If we talk about the current scenario, it won’t be deemed prudent for manufacturers to enter retailing. Even in general, manufacturers should not put their feet in two boats, as retailing is meant for those who have deep pockets. When a manufacturer expands into retailing, he should not expect any returns for the first few years. All the big brands of the world focus their energies on the retailing part, leaving the manufacturing to others.”
