With international markets opening up and rising demand for locally made products, the Indian lifestyle industry is set to witness exponential growth over the coming years. However, the looming recession in US and European markets affecting apparel exports from India, rupee depreciation, inflationary pressure, and geo-political situations around the world are some concerns that the industry in India is facing.
Recently, we hosted a roundtable with our customers in the lifestyle industry to discuss the changing landscape of the industry, the challenges and opportunities that it presents, and how local businesses can go up the value chain. There were several valuable insights that we came across which can broadly be categorised into:
Consumer Behaviour Reshaping The Industry
Consumer preferences have shifted back to lifestyle products, and they are willing to pay a higher price if they believe that the product has a unique value. Also, reaching customers through online mediums and social media has now become a true democracy.
Previously unheard of, instant gratification became the norm during the COVID period. With the abundance of options available, if a brand wasn’t able to meet this expectation, consumers would switch to purchasing from a competitor. Online retail has played a huge role in expanding the growth and reach of brands as COVID changed the consumer mindset away from considering omnichannel as an expensive proposition. In fact, omnichannel is is no longer a differentiator, but rather a ‘must have’ for brands in order to stay prominent on consumer’s radar as well as gain consumer loyalty.
Additionally, omnichannel also comes with an added cost or capital investment as brands have to ensure that they integrate partners who can support them with platforms, markets, payment mediums and logistics amongst others to create an ecosystem that allows them to be closer to their consumers. Like, facilitating dark stores, setting up closer distribution hubs or a digital world for tracking and tracing or seamless payments and returns amongst others for an enhanced customer experience. Thus, partnerships and collaborations in the Indian industry is increasing at a fast rate.
A classic case study was explored around online retail particularly in the apparel and fashion industry. Consumers often hit-or-miss the fit, feel or overall look of the products that they have purchased and thus, want to return the product. Understanding the willingness of customers in the UK to visit stores for returning products, the popular brand NEXT, converted these stores as a point of contact for this purpose. The resulting reduction in the logistics costs involved in collecting the products themselves and a higher footfall in their physical stores helped NEXT gain a record profit.
In India, this approach might not have worked since consumers here want more convenience without a premium, i.e., the ability to have the product collected at no additional cost. Thus, brands have to observe the local consumer behaviours in order to identify solutions that best work for them.
Supply Chain Transformation
Fast fashion is the need and speed to market is vital to establish to facilitate this. The lack of a good Just-In-Time strategy in place means losing out on shelf space. However, this requires establishing an overall infrastructural and capability ecosystem for a seamless end to end supply chain that can support a highly flexible and scalable manufacturing and production.
Operational leakages need to be plugged with the help of infrastructure. When COVID restricted the movement of goods, the industry mindset shifted towards creating hubs in different states to support easier distribution of products in the area and manage logistics time and cost better.
There was a unanimous agreement that the establishment of logistics parks and investment in infrastructure would help to significantly cut down lead times for the movement of raw material and finished products. Moreover, more policies, agreements and capabilities have to be explored and invested in to facilitate more easier cross-border payments of raw materials and goods.
Another trend that is further helping reduce lead times and cost is near sourcing. Retailers who want to turn their stock around faster would like to have further flexibility in placing business orders closer to them. As a result of a higher demand, most fashion and lifestyle brands in India are sourcing more locally, which in turn is rejuvenating the livelihoods and businesses of local artists, weavers and craftsmen amongst others.
Technology plays a significant role in providing brands more visibility on the storage and transportation of their stock and products and thus optimise inventory management, cost control besides identifying opportunities for promotions and discounts to further boost revenues. Predictive modelling also helps brands identify trends ahead of time and guide their production and logistics accordingly.
From an overall country perspective, another factor to be considered is the movement of people. The labour that is often employed in factories and plants come from all over India. Setting up enhanced network linkages to allow for easier transportation for people will help to increase the availability of labour. This in turn will help factories move up and improve scalability of their production.
Brands need to bring in partners with best practices and reliability who make a push for better services and turnaround times. Stakeholders who push themselves and each other to improve and enhance the processes in sourcing, transportation, clearances and more, can transform the overall supply chain which would be a real gamechanger for the future of the Indian industry.
Sustainability
There was an interesting mix of opinions as we debated this topic. Some felt that sustainability is not just an expensive proposition but also a contrasting element for the industry. Afterall, the most commonly known fact about fashion is that it is always changing. So, how much sense does it make to create a sustainable fashion product?
Others are focusing on bringing in sustainability in other ways like the fibers or raw material that they use, energy and water consumption, carbon emission reduction etc. However, as a result of these initiatives, the cost of the end product that is finally produced becomes slightly higher. While there is an emotional call from the younger generation for sustainable products, there is still a vast majority of the population who are not willing to pay a premium for sustainable products.
Being a price-sensitive country, lifestyle and apparel brands in India are restricted in becoming the first movers towards sustainability. Governmental policies and regulations on sustainability are highly important to push the sustainability goals for the industry as a whole. What brands can do in the meantime is to analyse and prepare for those areas of sustainable policy that you believe will be coming out in the future and start to build towards it now in order to become the first mover when said policy comes into place.
However, it was opined that fast fashion can indeed be sustainable if the industry considers establishing a circular economy. Fast fashion is usually the best way for lifestyle brands to cut down their mark-up and being sustainable often involves brands asking themselves if they want to be in the throw-away, recycle or repurposing business. The ESG agenda is forcing brands and consumers alike to invest and pay premiums on sustainability; it is inevitable that the Indian lifestyle industry will also head down that path. The concept of circular economy is still relatively new and unexplored in India but could be a vast benefit for brands to reduce their carbon footprint as well as the cost involved in the pursuit of sustainability.
Potential of the Industry
Indian exports of lifestyle and apparel products are growing significantly and price is expected to stabilise over the next few quarters. India is now predicted to become the third largest exporter by 2025. An opinion shared was that lifestyle brands in India ‘shouldn’t strive to be a more expensive Bangladesh proposition but aim for a cheaper Turkey model’.
In order to capture this market though, the Indian industry needs to work quickly to establish a vertically integrated set-up. This can help brands to cut down their margins and increase the capital that they have to invest in research and development to launch new and unique products. So, overall, this focus can help brands in India become competitive with their price points or their product uniqueness or ingenuity.
At present, the Indian textile and garment industry has a broken value chain in terms of capacity. Only 3-4% of fabric comes from the organized sector and technology does not exist currently in India for fabric makers. To be on par with the likes of Japan and Europe, businesses in India needs to produce at least 40000 looms per year over the next decade. But today, we are only producing about 5000 a year. So, it is crucial to start inviting foreign direct investment in loom manufacturing to start building our capacity.
The overall industry sentiment is that the garment is basically an engine for growth, but the rest of the processes in the value chain have to follow. Business leaders in the industry need to collaboratively focus and develop the industry, academia and government in order for the Indian industry to really move ahead and thrive.
