Rapid Strides by the Garment Industry
[Interview with Mr. Rahul Mehta Chairman, Clothing Manufacturers Association of India]
[Credit goes to Shri Rahul Mehta for induction of Modern Management Techniques into the garment industry. After bagging Masters in Business Administration with distinction from a highly reputed Business School, he joined a leading Multi National Firm and rose rapidly to be the National Sales Manager before opting to become an Entrepreneur in the nascent Garment Industry in 1982.
The gamble paid off and he grew with the garment industry, which has become the most significant segment of the textile industry. He climbed the ladder of success at a fast rate and right now he oversees the interests of the world garment industry in his capacity as President of the International Apparel Federation based in Netherlands. He is also the Chairman of the Clothing Manufacturers Association of India. Besides, he is on various Government Committees.
Had Mr. Rahul Mehta not joined the garment industry, he might have become an Actor on the Gujarati theatre. Even now his first love is theatre, but he is also keenly interested in cricket, and he freely uses all cricket techniques to bowl over his opponents.
In an interview to a representative of this magazine, he airs out, among other things, his views on the complex relationship between textile and garment industries.
Excerpts from the interview are given below:-Editorial advisor ]
Q: As you are aware raw material prices are decreasing, whether of cotton or crude oil, but still garment prices are not decreasing and hence at Retail level there is no increase in sales. Is that so?
Ans: It is important to note that the garment industry is the last point in the Production Chain, and we are totally dependent on the prices offered by our Fabric suppliers. Although many Consumers have been expecting a drop in Garment prices, pursuant to the fall of the order of 20-25% in cotton prices, we have not been able to either receive or pass on such discounts since the there is hardly any drop in the prices of our main Raw Material - Fabric. Only if fabric prices go down by 10%, garment prices may go down by 2 to 3%. As a result, retailers faced untold challenges in disposing of the stocks particularly of bread and butter qualities.This resulted in long delays in receiving payments from retailers.With great persuasion and the recent united effort by CMAI, the problem has been some what brought under control.
At the same time, cognizance needs to be taken of the fact that there is a distinct change in the pattern of purchases. Earlier consumers used to purchase garments/fabrics at the time of festivities or marriages or opening of educational institutions etc. This calendar has been jettisoned and the purchases are made when stock-clearance sales are announced. Online Sales or e-retailing are also becoming a craze.
Today, the consumers have wide options. There are more players, more brands, more retail outlets, more malls and the option of online purchase.
The strategy of e-retailers is to drop prices and achieve larger sales volume. This has an adverse impact on prices which remain depressed. The sum total of all this is that, the bottom line of the balance sheets of garment manufacturers is far from a satisfactory level.
Q. CMAI changed a lot after you came on its Board with a clear-cut vision. Even then, why participation in January 2015 shows was on a lower side than in June/July show. Why the decline in participation?
The January Fair is always smaller than the June Fair. This is because the January Fair is aimed towards the Summer Season, which is spread over a long period – offering the Retailers a longer time span to visit their Brands to place their business. On the other hand, the Festive season, though most important, is a very short season, making it necessary for the Retailers to place their orders in a short time frame of 15 to 20 days of June.
This is why the Festive Fair of June is traditionally the much larger Fair.
However, it is important to know that this January has broken all previous records in terms of participation and Visitor turn out for January Fairs.
In general, the NGF ( National Garment Fair) Fair is the place where the manufacturer connects with retailers and buyers. It also helps garment manufacturers to finalise their production programmes and targets.
Participation in fairs has thus become a must. Retailers find it easier to make up their mind on visiting fairs and place confirmed orders. Ultimate consumers also get a fairly good idea about availability of different patterns, styles, colour combinations, designs etc. All this helps him to satisfy his preferences for different types of attires.
During the periods of price volatility, the retailers tend to unwind longs and build up shorts. What it means in substance and tenoris that, when price movements take place rapidly in both directions, the retailers refrain from building stocks, but prefer to work on hand to month basis.
Q. CMAI fair participants are mainly SME’s. We feel they are comfortable with traditional distribution channel like distributor & retailers, not adopting modern distribution channel like large format store, EBO, MBO.
Ans: That is not necessarily so. However, many of the smaller manufacturers prefer to do outright sale business, and not provide goods on consignment basis. On the other hand, most large format retailers deal only on Consignment basis, except in their Private Labels. They provide space, ambiance, and customer pull for the Brands.However, even smaller Brands will have to accept that the reality is that growth is happening at organized retail only. They will have to play as per the norm of the industry.
Q: E-commerce has affected offline store (brick & mortar model), its opportunity &benefit for the unorganized brand, as they are getting wonderful response, everyday selling good units. In fact, its a good tool if creatively use. As today’s price conscious customer needs good product with comfortable price. Comment!
Ans: Yes, e-commerce is a double edged sword. On one hand,Retailers, especially the Organized Retail as it is known,are certainly worried about discounts offered on e-commerce sites. Some manufacturers of fabrics and garments will open their own site in the near future. Even some big retailers are thinking of having their own online platforms. The entire market for garments will shake up in future.
On the other hand, it is a virtual platform for
1. quick disposal of stocks,
2. cheapest way to reach theconsumer, and
3. Making available exclusive brands in all cities across the countries, in a jiffy. Hence it is a cost-effective system.
4. It is a great platform for smaller manufacturers to compete on an even playing field with the large Brands.
However, how long this emphasis on Discounting will last is a question. A few e-commerce players have started making losses, so they may in course of time stop playing discounting game & will sale at normal prices. At that time some customers may leave e-commerce platform, but some will stay in this fast growing economy. Even if some walk out, still there will be new consumers buying our brands online. So frankly it is all a confused state at this point.
Q. What is CMAI’s future planning?
Ans: CMAI’s new initiative is to set up Apparel Training and Development Centers throughout for training 30,000 workers. Such centers are set up for improving skills by imparting training. This leads to creation on of multitude of jobs.
CMAI’s novel initiative in the recent past was to bring pressure on retailers to clear their dues. Various measures have been undertaken, such as a Committee being formed to coordinate the Payment collection efforts, giving the smaller players support, information being shared of defaulting Retailers, barring entry of such Retailers in our NGFs, etc. In 1 month alone, we have been able to recover over RS.100 CRORES for the Industry!It is to be appreciated that 80% members of CMAI are in the SME sector. Naturally their capacity to weather financial storms is limited. This is why this effort, along with its NGFs, is a tremendous service being provided by the CMAI to the Industry.