March 31, 2021
In our latest webinar on 24 March, Serai CEO Vivek Ramachandran hosted leaders from the Indian apparel industry to discuss the latest trends, insights and business opportunities for Indian manufacturers to capitalise on.
Following an extremely tough 2020, the apparel industry and Indian economy have started to see signs of recovery. To discuss this topic, we were joined by Vivek Ramachandran, CEO of Serai, Dr. A Sakthivel, Chairman of the Apparel Export Promotion Council (AEPC), Deepak Seth, Chairman of Pearl Global Industries Ltd & PDS Multinational Ltd, and Rajat Verma, MD and Head of Commercial Banking at HSBC India. Check out the key takeaways and a highlight video below:
The Indian apparel industry has a huge opportunity to step up into the void left by other countries due to geopolitical issues. Brands worldwide are looking for new suppliers, and it is essential for the Indian apparel industry to look outwards, making new connections with these international brands and capitalising on the opportunities that are presented. But to be successful, it’s important that manufacturers in India are able to differentiate themselves through value added services such as creative design and sustainability.
Creativity should go beyond design into other areas such as product engineering, fabrics, and finding the right price point and market fit for the product. This kind of creativity must be an ongoing focus within the company to make it successful. - Deepak Seth (PDS Multinational)
Sustainability has become key for the apparel industry. Many global brands have sustainability standards to comply with and will only work with suppliers and manufacturers who can meet such standards. Whether it is related to in-house processes such as fostering a green factory, using alternative energy, monitoring water discharge, or external measures like making sure the yarn or garments created can be recycled to promote a circular economy, there are several steps manufacturers can take to be more sustainable. This should be a major focus area, if it isn’t already.
India can be a difficult market for companies to build relationships in. It's challenging to establish trust because there's no consistent set of information from companies, and there's huge variability in quality. The manufacturers often don't have a strong digital presence, so it is almost impossible for global buyers to learn about them.
The priority for the industry should be to embrace digital change. Suppliers must digitise processes: from design to fit to production. In the last two years, retailers and customers have realised the benefits of designing through 3D technology and digital platforms.
"It's going to be expensive. But long term benefits are going to be huge. They'll increase efficiency, productivity, and eventually, the cost will come down and create results." - Deepak Seth (PDS Multinational)
Many buyers in the West already have trusted vendors. If you want to grow with your existing retailers, you will need to add more product lines and explore new markets.
"Now, we (the Indian market) have started to produce new garments, specifically sportswear, loungewear, and performance wear. These are categories which buyers are actively looking for." - Dr. A Sakthivel (AEPC)
Each country has its strengths and weaknesses, so becoming a multi-product vendor will allow Indian suppliers to become unique in their offerings.
In the retail sector, there have been a lot of bankruptcies and shakeouts worldwide. If any manufacturer or exporter wants to succeed today, they must ensure that they work with vetted and credit insured retailers, so that their receivables are protected.
“The rapidity at which credit risk can move, especially in the apparel sector, means that companies should pay more attention to this risk. Do not just seek financing from a bank, but also advice on credit protection.” - Rajat Verma (HSBC)
Speaking of financing, a strong balance sheet that can handle temporary hiccups is critical and financing can help. There are several financing options apparel companies in India can consider. The traditional options include Letters of Credit, bank facilities, packing credits and Receivables Finance or Factoring.
Newer solutions include Dynamic Discounting from HSBC India. It allows buyers with excess cash to pay their suppliers earlier than the agreed due dates, in return for a discount on the original invoice value. The technology solution enables ‘dynamic’ pricing - in other words, the earlier the buyer pays the supplier, the greater the discount. For a product that is only 2 months old, the response has been tremendous from the c.10 large companies using the solution.
Financing can also take place on a supplier’s balance sheet. For a supplier who is part of a large anchor buyer’s supply chain, banks have the ability to leverage this into financing for the supplier at a much lower rate, and with much better terms.
“If banks look into the historical data of suppliers and their large anchor buyers, banks can use a different form of assessment compared to the usual approach of balance sheet assessments, potentially reducing the cost of borrowing for the supplier” - Rajat Verma (HSBC)
One challenge for new manufacturers today is that the big retailers are not looking for new vendors. Instead, these companies should target smaller retailers who are looking for smaller quantities. These brands are more flexible, and nimble suppliers can easily enter the market with these clients. After creating a base in the mid-sized segment, these manufacturers can begin to look for larger retailers.
Exploring new markets is another opportunity for companies who are just getting started in the industry. India poses as a great example of expanding in the domestic market. Not only does this reduce lead time, but it also makes product development easier because suppliers are so connected to the consumer market. New companies can also focus on emerging markets such as the Middle East and Africa, where there is still much growth in store.
I don't know about any other countries, but positive sentiment towards India has increased. The whole world wants to buy from India. That sentiment helps us to learn more, and that's what I think is fantastic. - Dr. A Sakthivel (AEPC)
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