As slowdown bites, garment makers fear retail chains may cut purchases

The slowdown in overall demand due to a weak Indian economy has had a negative impact on retail chains, especially readymade garment makers.

Garment manufacturers expect retail chains, suffering from huge inventories, to cut their buying by 10 to 15 per cent. The slowdown in November and December sales also caused many retailers to extend their clearance sales and offer huge discounts. Retailers feel they may have to bite the bullet for the next two quarters, till the situation improves.

“Retailers were forced to go on early stock clearance sales this season and will now be forced to cut their buying for the next two quarters at least,” said Rahul Mehta, president of the Clothing Manufacturing Association of India (CMAI). The discount period is the only time retailers witnessed good sales. Else, sales have been low in the second half of the current financial year.

“Domestic buyers have cut their buying by at least 10 per cent due to the slowdown, but demand is expected to pick up in the next few months,” said Mitesh Shah, vice-president, finance and corporate affairs, Mandhana Industries. Last year, retailers had raised apparel prices by 8-10 per cent due to volatility in raw material prices, coupled with the 10 per cent excise duty imposed in the Budget. The slowdown, coupled with rising prices of apparel, caused retail sales to decline.

Retail player Trent’s inventory went up to Rs210.5 crore in September compared to Rs130.6 crore in March. Shoppers Stop inventory also rose to Rs652.4 crore compared to Rs514 crore in March.

“The medium-priced and premium brands are the ones which have felt the impact, as disposable incomes have come down,” said Arvind Singhal, chairman, Technopak.

High inflation has also led to a slowdown in sales. Currently, consumers are looking at value or low price options, Singhal added. These companies should either launch cheaper brands or lower priced apparel, Singhal said. Retailers also plan to cut apparel prices by 10 per cent for the spring summer collection that will hit the markets soon, as raw material prices have declined considerably.