With coronavirus hitting the globe, virtually every industry has borne the brunt of the pandemic with lower sales volumes and hampered revenue flow. Textile and apparel industry is no different and has also reported significant reduction in sales starting from March when the government imposed coronavirus lockdown. “Post lockdown announcement by the government of India, domestic retail sales came to a grinding halt. To add to the woes of regular garment manufacturers, international customers, who were also under lockdown, deferred orders from Indian suppliers,” according to a recent webinar by CARE Ratings on the apparel industry. However, the issues for the textile industry do not end there.
Calling coronavirus a blackswan event for the textile industry, Sudeep Sanwal, Senior Manager, CARE Ratings said that “GDP of two major export destinations for Indian apparels manufacturers, ie, the United States and Europe, is expected to contract in 2020 which will further lower the demand for apparels”. These two destinations combined account for more than half of the apparel exports from India. Due to lockdowns, order cancellations took place in massive numbers which also led to pent-up inventories. Since, the fashion industry is highly dynamic in terms of styles, the unsold stock may soon go out of fashion which will lead to inventory losses for manufacturers.
The spring summer collection of most manufacturers also witnessed a significant hit. Also affecting the sales of the manufacturers was the fact that despite having ready clothing, logistics posed a problem.
Route ahead
While it has been almost six months since the coronavirus pandemic hit Indian shores, there is still no clarity as to when the situation will get better. Moreover, in the light of an economic slowdown, job loss, and salary cuts, discretionary spending is expected to remain low. Keeping this in mind, retailers will now focus on liquidating existing inventories and will only start placing orders when the cash cycle starts to improve. In fact, retailers are likely to cut autumn/ winter orders by more than 50%. Retailers place orders for the upcoming fall, winter season in August. The companies hope for a sales revival only after late Q3 or early Q4.
