Some brands will follow the strategy of diversification and reduce their dependency on China to prevent any such situation in the future. India can utilise this opportunity and present itself as a credible alternate to increase its textile and apparel exports share, says a latest report by business management consultants Wazir Advisors.
The global outbreak of coronavirus has created a havoc in the fashion industry. The spread of the virus is bound to have serious implications and companies have started feeling the impact with store closures and uncertainty in orders. Since the pandemic is still in its growing phase it is difficult to predict the full extent of the impact. However, there are some key changes that can be foreseen as an aftermath of this pandemic and how it can shape the industry, says Wazir’s special edition report ‘Impact of COVID-19 on the Indian Textile Industry’.The black swan event has affected the Indian textile & apparel industry, in terms of both trade and domestic consumption. With the steep reduction in demand due to sudden halt of global trade and domestic sales due to the closure of retail stores, the industry is likely to face unprecedented and severe losses. The spread of the virus initiated in China and later spread to EU and the US, which are huge markets for Indian textile & apparel products. Hence, the Indian textile value chain is bound to face adverse repercussions of the pandemic. “Brands are expected to postpone orders in the upcoming six months and will initially demand smaller order quantities at very tight margins as a step to recover from the reduced sales in the previous weeks,” the report says.
Coming to the domestic market, brands are looking at very low consumer sentiment and a steep decline in consumption in the coming year. “Retailers and brands have already started halting production lines, delayed season releases and cut buying budgets to prepare for these eventualities,” according to the report.
As brands look to reduce dependency on China, there lies an opportunity for India. China, the initial epicentre of the coronavirus outbreak, manufactures more than a third of all clothing and textiles globally. The production lockdown enforced in the country early this year vastly disrupted the textile & apparel supply chain. Apparel brands who sourced goods solely from China were in a fix and were forced to explore other countries for sourcing in a short time period.
Post-coronavirus, some brands will follow the strategy of diversification and reduce their dependency on China to prevent any such situation in the future. “Brands were already actively pursuing the move of diversifying from China, owing to increase in manufacturing costs and tariff issues with the US. The supply chain gap developed due to this pandemic has added more weightage to this strategy.
“Brands will explore alternate options such as Bangladesh, India, Vietnam, Cambodia or any other Southeast Asian supplier. India has a competitive manufacturing costs and presence of complete supply chain. India can utilise this opportunity and present itself as a credible alternate to increase its exports share,” the report states.
Wazir also foresees an increase in global demand of medical textiles. “Sales of medical protective gears including surgical masks and protective clothing has jumped drastically. Western nations are importing large quantities of such products to battle the disease. The supply of these products is not able to keep up with the rising demand. The rapid spread of the disease across the globe has sensitised people to hygiene and healthcare. The demand for medical protective gear such as masks, disposable gloves and hygiene products such as wipes is expected to surge and sustain even after the end of the coronavirus pandemic. This is a lucrative opportunity for the textile industry in the near future.”
Post-coronavirus, there will be an increased focus on e-commerce sales and digitalisation of supply chain, according to the report. During the initial phase of coronavirus, consumers increased their online purchasing as a safe alternative to visiting physical stores. “This shift could lead to a changed buying behaviour post the pandemic and has the potential to build long-time e-commerce customers.
“Brands and retailers are further driven to incorporate digital strategy in their buying process. Online marketplaces like Joor are expected to become more popular as brands and retailers look to maximise digital options of showcasing their products and facilitating the buying and selling process,” the report predicts.
Analysing how the Indian textile industry can emerge from the current pandemic, the report states that the industry will need to gear itself to fight the economic consequences that the coronavirus has brought with it. Manufacturers need to maximise their internal capabilities and focus on building their efficiencies. This will enable them to work with the anticipated shorter lead times and tight margins.
Companies should further focus on adopting digital ways of connecting with buyers. Textile and apparel companies need to maintain close connect with buyers and be ready to respond to buyer requirements. Companies may also focus on planning for the winter or next spring summer season and target the channels of value retailing and e-commerce, which are expected to grow in the near future.
“Indian companies should also look out for new markets beyond US and EU like Japan, South Korea, etc and focus on diversifying both markets and products. With depressed prices of raw materials like polyester, cotton, etc textile and apparel companies can also look at hedging raw material prices and wherever possible stock raw material which will be helpful once the market opens again,” advises the Wazir report.
With countries’ increased focus on healthcare, medical textiles is likely to see a surge in demand. So, companies could also explore emerging product categories such as medical textiles (surgical gloves, personal protective masks, gowns, wipes, etc) and other textile items required for healthcare facilities like hospital bedsheets, mattresses etc, the report suggests.
“With the current lockdown in place factories are shut and it is unpredictable when the operations will start again. However, textile and apparel companies need not lose all hope and need to be patient and be ready whenever markets open again, hopefully well in time before the festive season,” the report concludes.
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