The textile sector, low-profile in recent years, has also caught the merger virus going around. Consequently, 1999 ended on a big note with Indian Rayon, an Aditya Birla group company acquiring Madura Garments (the ready-made garments division of Madura Coats), at a consideration of Rs 236.23 crore. Madura Coats is a subsidiary of Coats Viyella Plc., With this buyout, Indian Rayon will now own popular brands like Allen Solly, Louis Phillippe, Peter England, Byford, San Frisco and Van Heusen.

This is not the only exciting portent. Pantaloon, a company known better by its eponymous brand, pays a daily rent of Rs 50,000 for its Crossroads showroom, one of the biggest in its chain. Cheek by jowl is Piramyd, a departmental store belonging to the Piramals who own the mall. Both are retail outlets. For Pantaloon, almost entire of its revenue comes from selling ready-made garments. As for Piramyd, it is slightly lower than 80 per cent.

Piramyd CEO, Kris Iyer explains, Clothes are the only products an individual decides to purchase around four times a year. That is the reason we concentrate more on clothes and apparel for 80 per cent of Piramyd’s turnover.

As far as Pantloon is concerned, one would have expected that the overheads incurred on maintaining a presence at Crossroads would induce a bearish outlook towards the stock on the bourses. Contrary to that, analysts are very bullish as they expect this move taken by the corporate to reap in good revenues. The prime location will attract the targeted customer at lower costs, they feel. Internationally too, GAP, one of the biggest retailers in the USA, also has a corporate strategy that concentrates on clothes.

All these examples only go to prove one thing: that the ready-made garments industry is here to stay and that a well-established brand will go a long way in securing returns.

Same cloth in new cut
This may not have been a reality till a few years ago. But, with rising disposable incomes and more and more Indians getting westernised, ready-made brands are gaining popularity. Further, with the opening of the skies and big brands being lasered through the tube that too directly into the living room of the consumer, the Indian customer has fallen hook, line and sinker.

This is particularly in the case of men’s clothing. In urban India it is not very difficult to notice that a majority of the men wear ready-made shirts. Thus, the emphasis on -- brands -- . Brands are also available in different price ranges. From a Cambridge to a Tommy Hilfiger, India can truly cater to all kinds of customers. The sheer size of advertisement budgets that companies are putting aside also proves that the Indian corporates have realised the long-term value of a brand. No wonder, companies like S Kumars have actually managed to get a James Bond (aka Pierce Brosnan) to promote their Reid and Taylor suitings.

A case study is Arvind Mills. Though the company is stuck up with its financial problems, it probably has the the best portfolio of brands in the country which includes Newport, Arrow, Ruf & Tuf, Excalibur, Flying Machine, Lee and Ruggers. These rank among the most economical ready-made brands in the country.

With the brand push concentrated in cities, the market for ready-made garment manufacturers appears to have saturated. Many feel that the scope for expansion is very limited, since the high-end brands will, out of need, concentrate on these areas.

All these herald a significant change in sales of ready-made garments. With retailing coming of age and shopping malls becoming common, importance of branded products has only improved.

That’s not the real story
But these trends -- many shops coming up, and the urban ready-made garment market getting saturated -- are specious. One area that needs to be focused on are the semi-urban areas and the rural markets, states Assad Fakih, a garment exporter. The semi-urban areas are touted as the future markets as the entire segment is largely untapped.

Ready-made brands from the stables of Arvind Mill are well-placed to exploit this segment, courtesy affordability and a well-developed distribution network. Brands like Ruf & Tuf and Newport attract volumes. And, as long as the company’s focus is clear, low margins will keep competition at bay.

On the other hand, many are of the opinion that investments required to tap the potential in the rural markets is a big deterrent. This, because the gestation period is likely to be very long. Also, the big players need to come together for the marketing push. But, nobody wants to be the first one to invest in this segment. It is a case where everyone wants to ride on others’ efforts.

Even as this may be true, the harsh reality is that the urban markets are completely saturated. The higher-end is totally dominated by the foreign players who, with their advertising and marketing muscle are making it difficult for the Indian brands to sustain in that market.

The story repeats itself in niche segments like swimwear and sportswear too. Here again, with the entry of foreign brands in the Indian market, the few Indian players in this segment simply had to shut shop. Proline, a 100 per cent Indian brand is facing the heat of competition from all types of foreign companies.

Another interesting thing about the Indian markets is the fact that there are no brands available for the womenfolk. Brands are specifically targeted to the men. Industry experts argue that there are too many hassles in having brands in ladies garments, as the market is too complex. Strong regional variations make it difficult to pre-suppose common tastes even in cities as close by as Mumbai and Pune.

Difficulties are just stories
But apart from some technical hitches, this market appears to be very promising. To gauge this, one has to just look at the branded saree market. With brands like Parag sarees catching the consumer’s fancy throughout India, one wonders why there aren’t branded salwar kameezes in the market as well. Why isn’t anyone interested in introducing a range in ladies ready-made garments?

Industry experts argue that it is just a question of taking a lead. Volumes are the name of the game, and the early bird will rake in the volumes. An average salwar kameez costs way above Rs 1,000 at any boutique. As such, if a player decides to launch a brand priced way below the boutique price, one could say that boutiques will become passe.

But, the saddest part is that a foreigner with acumen and financial power will probably be the one to take the plunge. Ironically, it could also happen where the same foreigner may land up exporting an Indian creation and beat the Indians at their own game.

This shake-out is just the beginning. As the business models of companies start changing on account of technology upgradations and opening up of the markets, many more players will have to shut down.

Some kind of a consolidation has to happen in this industry. Either a foreign company will come and takeover the small manufacturers or, these small players will have to come together on their own. Consolidation is inevitable, says Clothing Manufacturers’ Association president, Premal Udani.

Does all this mean a better future for the large players then? Analysts do expect the big companies to leverage their reach through strategic tie-ups for marketing and distribution with the foreign companies. Definitely, the foreign players will face problems initially tapping the huge potential outside the urban areas.

On the other hand, foreigners who have already concentrated in the urban markets by replacing the domestic players in the high-end segments could keep going. They do not need to toe the high volume low margin44s strategy and hence, don’t need to enter into strategic alliances with the Indian players.

Please create a presence
A marketing expert argues that the Indian manufacturers need to have a change in mind-set. Thus far, they have restrained themselves from innovations. They have simply catered to existing demands. A customer is not that well-informed about all the new products hitting the market. He buys from the available options.

All this while, companies have been rolling out the same patterns and designs, assuming that the consumer is not interested in anything new. It is time that companies experiment. Design marketing should be the mantra where the company develops its own style, which comes through in collections and a range of garments. This style should be based on experience of a certain specific market, and the company should promote these designs among the existing as well as potential buyers.

As the struggle in the Indian markets intensifies, brand-building exercises have become real though still not effective. It is a sad fact that whereas textile exports account for 30 per cent of total exports and 5 per cent of the GDP comes from this sector, there is not a single Indian brand known internationally. This, at a time when 20 per cent of the value-addition in the manufacturing sector is attributed to this sector.

The government has done its bit encouraging the exporters through incentives to establish brands in the international markets. The ministry of commerce has also started the Brand Equity Fund, about which though very few know. This Fund considers brand promotion an integral part of the export promotion strategy. A major objective of the fund is sustained higher unit value realisation for exports.

Importantly, the Fund is attempting to portray the Made in India label as one symbolizing quality, competitive price, reliability and customer service. Even as such is the ambitious agenda of the Fund, the total budgetary allocation and contribution to it is a measly Rs 90 crore.

Experts argue that branding is a long-term investment and, exporters with a long-term perspective are most suited to promote their brands.

Branding requires the support of a marketing organisation and considerable investments in designing. But then this could just be the beginning of the end. That is, the Indian textile industry will have to gear up to combat major challenges by the end of 2004. That is the time when the markets will be totally open and vulnerable to mounted competition from the foreigners.

2004 -- time to face the mirror
Today, the Indian textile industry is merely passing through tough times. The first trouble comes in the form of trade barriers which are likely to get dismantled in 2004. With liberalisation gaining ground, the second challenge comes from its protected markets which are fast changing.

Domestic textile consumption per head in India is extremely low -- a mere tenth of developed countries. With the advent of media and satellite television, fashion trends are changing rapidly.

Earlier, fashion which took a couple of years to get replicated is now being replicated almost overnight. Also, with a surge in international awareness the Indian consumer has himself become much more demanding.

Also, with technology changing very rapidly, India’s age-old labour advantage is no longer relevant. With consumption patterns unlikely to change, they clearly have to focus on exports. However, the exports outlook is mixed. While the bigger ones would achieve volumes through joint-ventures with foreign firms, smaller ones will not have any other option but to close shop.

The rate of mill closures climbed to more than 20 per cent in 1997. And many more mills are facing closure with passing time. In cities like Mumbai, this land is being used to set up retail centres and hotels wherever possible.

The industry has to face a consolidation at the retail stage in India’s major foreign markets, impact of quick responses and the growing demand in the domestic market for better product variety and, an increase in the volume of products available to consumers.

At the retail level, the threat to the Indian players is the ongoing consolidation in developed markets. In all the major countries where the Indian textile products are sold, namely those in North America and the European Union, it is the consumer who is getting more value driven. Retail margins are under tremendous pressure. In order to maintain margins, retailers are exploring all the options that allow reducing the cost of products on their shelves.

One of the options available to the retailers is to scale down operations. However, as the retailers grow, their requirements in terms of volumes per style are likely to exceed the production capabilities of most suppliers in the sub-continent. Such retailers would require factories capable of turning out longer runs of consistent quality. Few facilities in India currently offer that.

Retailers are also looking at rationalising their suppliers. Their aim is to deal with fewer, but larger suppliers. But few facilities in the Indian sub-continent are of truly global size. Indian companies, therefore, face the threat that buyers may source their requirements from elsewhere.

Satellite television has greatly shortened the fashion cycle in major consuming markets. As such, there is immense pressure on the players to change accordingly. Suppliers in the two major consuming regions are shifting manufacturing bases to nearby low cost countries.

The trend shows up in investments in Mexico, Caribbean and Latin American countries for supply to the USA and, investments in the East European and North African countries for supply to the EU market. The Indian textile industry is therefore threatened with a loss of its US and EU businesses to such countries. The proximity of these producers to the main markets means that they can offer shorter delivery periods than the Indian firms, at little extra cost.

Also, while such developing economies are main sources of garments, it is unlikely to be long before investment moves upstream into textile operations, again driven by the need for quick response. This is already happening in Mexico, which has begun witnessing some investments in weaving and spinning and even in fibre manufacturing.

The great Indian textile exports which were such an important part of the country’s GDP could also vanish following complete opening up of the markets by 2004. Furthermore, with countries like Bangladesh also becoming competitive in terms of low labour costs (which is anyway not an advantage), the going for the Indian exporters will be quite tough.

Quality of the Indian products is also not very inspiring. Realisations in the export markets are declining. As for volumes, the Chinese are dominating this market. Though many say, that the small orders that Indians process itself has been a great advantage, small countries can as well join the bandwagon. So where can India expand?