By Prashant Mahesh and Pravin Palande
Consumer satisfaction is much more than a cliché for the textile industry especially in its current state of fragmented overcapacity. Today, it has become very necessary to keep the customer in mind before launching a product. From the choice of colour to the fashion preferences, all such aspects are taken into account. It is here that the retailer links in and is proving to be an invaluable ally.

The retailer plays the go between the consumer and the manufacturer, and is the one who happens to be the closest ally of the customer. This, because it is the retailer who understands the customer psychology well and even claims to tremendously influence purchase decisions. On the other side, the retailer plays the role of effectively representing the customer requirements to the manufacturer.

In affluent countries like for instance the USA, the retail chain is quite well developed. But back home, earlier due mainly to the lack of liberalisation and distorted prices retailing had not picked up. Also, with the retailers virtually playing no role, there was little need felt by the manufacturer to innovate. The retailer then simply sold what was being manufactured, instead of understanding and catering to consumer needs.

But post liberalisation and with competition intensifying, the not so enthusing earlier scenario has witnessed a sea change obviously. A barrage of brands have found their way into the Indian markets and today the retail market is finally showing signs of taking off.

However, the problem of a fragmented industry structure continues. There are as many as 5 million retail shops across the country with their outlet sizes varying from 50 sq. feet to 25,000 sq. feet averaging at a close 500 sq. feet. The small retailer who used to sell various textile brands got from different mills was hardly educated about the industry.

There is little awareness about the current styles, packaging, product features and worldwide developments. Those who are aware of such developments are too small to influence their suppliers and to persuade them to make extensive changes or introduce innovations.

According to KSA Technopak manager, Pradipto Roy, -- Because the retail chain is small and the back end comparatively large and better organised, the result is an inefficient push system with a high build up of inventories at each stage of the chain and a high level of mark-downs (products whose prices have been reduced in order to reduce surplus stocks).

In contrast to this, the front end of the supply chain in most developed economies are strong (see graph above). The chain here is driven either by the consumer or by the retailers. In these situations, retail-driven growth has led to a much more efficiency-conscious supply chain. It has also fostered innovation, because the retailers are nearest to the consumer market.

Meanwhile, absence of a strong and demanding retail sector saw the textile manufacturers enjoy a sellers market in India till recently. Before liberalisation, stimulation of demand was never an issue. The chain had many intermediaries - wholesalers and distributors - who were in effect responsible for marketing the companies’ products.

But with trade liberalisation and the ensuing media boom, consumer needs (demands to be precise) simply catapulted. Simultaneously, disposable incomes and spending tendencies also grew. Consumers now demanded the latest designs and fashions at the most competitive prices. In this transition from a sellers market to a buyers market, companies which have failed to adjust to the new market conditions have no other go but to vanish.

Against this scenario where the brand frenzy is catching on, the retailers are needed to display their products. Looking at the large number of shopping malls and their success abroad, many Indians are wanting to set up retail networks in India.

End of the recession in the economy couple of years back has been a watershed for the industry. Taking low land prices as their cue, savvy businessmen identified retailing as a thrust area. Bigwigs like the ITC group, Rajan Raheja group and the S Kumars group have all decided to get into large format retailing (25,000 sq. feet and above). Some others like the Piramals and RPG group have ventured into setting up malls (1,00,000 sq. feet and above).

The textile industry is lucky that retailing has caught on fast in India. Apparel retailing is one of the most developed form of retailing. One reason for it catching on is that the margins here are high, which helps deal with the high fixed overhead costs. As for the consumer, the retail revolution is all too good. Firstly, a shopping mall offers ease. Instead of moving from shop to shop, varied products are available under one roof. The shopper is offered choice and selection becomes easier.

Large retailers are increasing their ad-spends and are heavily advertising to attract customers. Retailers like Spencers Plaza , Crossroads, Shoppers Stop, Pantaloon and Westside have been highly successful in generating interest at the consumer level. In fact, they have established a more responsive and efficient supply network for themselves. Beyond that, they have begun collaborating with their vendors and have started to build supply relationships.

But then the concept of retailing has caught on only in the metropolitan and larger cities. This is because of the fact that most brands would like to enter the upper end of the market only. Due to the vast spread of the country and wide disparity of disposable incomes, it would be difficult for the retailers to reach the entire country. Hence, in the next 5 to 10 years retailers are expected to limit themselves to the top 10 to 15 cities only.

With growing affluence, composition of the Indian population -- classified by patterns of consumption and ownership of non-durables and durables -- is projected to undergo a major transformation.

According to a study conducted by KSA Technopak, a retail consulting firm, -- Between 1997-98 and 2006-07, there will be a 34 million increase in the number of households, a decline in the proportion of destitutes and aspirants from 47 to 19 per cent and a tripling of that part of the population consisting of climbers -- the consumer class and the very rich. High income and very-high income households are growing particularly in the urban centres, as new business and job opportunities create wealth, and as the number of dual-income nuclear -- rather than extended -- families increase.

However according to the study, the impact of these changes on the textile and clothing industries may be weakened by accompanying changes in the spending patterns. Personal comfort and transportation are high priorities for the Indian middle class.