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Textile Sector Reacts To Impact By COVID-19

Published: April 1, 2020
Author: TEXTILE VALUE CHAIN

The textile and clothing industry employs over 105 million people and also earn around the US $ 40 billion forexes, apart from substantial revenue under GST and other taxes. While the textile exports had impacted the companies across India, the government’s directions to close all the malls and retail outlets with a view to controlling the situation at an early stage, but it has resulted in a substantial reduction in the sales of the domestic textiles and clothing.

If reports are to be believed, around 70% of orders in the apparel sector have been postponed or canceled and since this is a season-dependent sector. Also, those apparel meant for export will likely go waste. India exported $1.28 billion worth cotton yarn last year, which, incidentally, was a steep fall from the previous year’s $2.09 billion — the fall was because of the US-China trade war. As much as 40 percent of the exports go to China.

The textile exporters had sought an increase in pre and post-shipment credit duration to 180 days from 90 days now, besides getting international couriers to function, to fight their challenging times ahead of the COVID -19 virus. It is suggested that banks should be advised not to levy any charges on the exporters while canceling forward contracts in those cases where the export orders are canceled by the overseas buyers.

Hence he said that they have asked the government for a moratorium for repayment of principal and interest amount to the banks for four quarters (1st April 2020 to 31st March 2021. Textile Value Chain spoke to some of the key stakeholders in the Indian textile industry and here is what their views on the current scenario.

Sandeep Kapoor, Chairman, and Managing Director, Shree – The Indian Avatar

Due to the temporary shutdown of all non-essential industries and businesses, some short- and mid-term distress is expected to the retail and apparel industries. Being in the midst of rolling out our Spring and Summer collections, we have now been forced to freeze all our production and supply chain-related activities. We have also lowered our sales forecast for the season and we believe, that this will have some impact on the following seasons as well.

We welcome the repo rate reduction and the three-month moratorium on term loan repayments offered by the RBI but given the temporary nature of this relief, we expect an economic downturn after the pandemic is over. In addition, with the uncertainty surrounding the pace of resumption of activity post lockdown as well as the stress on cash flows, we believe that we will need a solid and innovative recovery plan to tide over the crisis.

Vikash Pacheriwal, Co-Founder, Raisin:

With malls and retail outlets being shut for 21 days, our sales will surely see a drop-down, in this scenario our best and safest bet is online platforms. We’ve decided to increase our marketing spending to the tune of 10-15% and push our sales through various online platforms and our official website. Branding plays a major role in this scenario since all the brands will be vying for customer attention what is important for us is to stand out and provide our customers with the most engaging content.

The overall commerce cycle will see an acceleration at the end of the 21 days but the footfalls and the sales will take up some time to resurge even once the lockdown is over. During this time our come-back strategy would be to maintain consumer retention and entice them by introducing various offers.

Yogesh, Founder and CEO, XYXX Apparels,

The effect of Covid-19 is devastating across the world and the impact is almost sector agnostic. Ecommerce while on the front end requires minimal human interaction and is tech-driven, the backend heavy lifting is done by the ground force with technology taking the back seat. Warehousing and delivery still remain the biggest challenges. The workers in the supply and delivery chain remain vulnerable and they need to be protected. Consumer sentiment has plummeted because of growing uncertainty. Even if the consumer demand picks up in e-commerce, there is no clarity on how it will be fulfilled. If these restrictions, no matter how reasonable, continue then a massive drop in e-commerce sales is inevitable even if the customer demand exists. There is enough global evidence to believe e-commerce sales are not likely to be higher across the board, although some industries are seeing significant upticks. This is especially true for online sellers of household goods and groceries since people are stocking up on essentials. That said, the situation is extremely dynamic and people are making buying choices based on new and ever-changing global and local circumstances and with that the product categories that are being purchased are also changing so trends and data are neither stable nor sustainable.

Prashant Bhatia, Third Generation Brand Custodian, Cambridge

With the current shut down our concerns are manifold. One is from a legal compliance angle which is payment of government dues like GST. Another is payment of monthly installments to financial institutions which usually fall in the first week of every month. Then comes the customer’s concern. Our first customer is our retailer and the retailer will not be able and willing to lift stocks committed for the SS 20 season. This will lead to stockpiling at our end. What this also does is slow down production moving forward due to muted demand too. All these will lead to a liquidity crunch in the entire market. If the end customer is unwilling to come to the stores anytime soon then reaching out to that customer through the online medium will become imperative. I think this is that time in the market wherein brands will have to evolve and not merely adapt to the new customer.

Mansi Gupta, CEO & Founder, Tjori,

The pandemic is as scary as it sounds and not just specific sectors but the whole economy and supply chains are slowly deteriorating and the situation is slightly less bad for the e-commerce sector on paper but the harsh reality is that everyone is bound by unforeseen circumstances, the best advice at this point would be to make a smart decision of the stay safe and indoors and clearing out the situation before things get worse. Meanwhile, people need to let the necessities work so that no panic situation is created.

The most important thing is to inform the customers about the exact reality of the scenario and give guarantees and assurances about the safeguarding of their money and products. Nobody loses anything because of this and all people need to realize that we are just at a halt for the next 21 days’ post which all activities would resume better than normal.

Dr. Roopak Vasishtha, CEO, AMHSSC

As the situation across the world remains the same, Indian Apparel and Textile industry also is getting affected. International Buyers are either reducing intakes or are stressing on heavy discount in Payments. Factories in domestic as well as in exports are closed due to Lockdown. The impact of this Lockdown would certainly be felt in Apparel and Textile industry. However, I see a sharp dip in Apparel exports from China in coming days, post normalization of situation. Considering that as against US$ 20 billion worth of exports from India, China exports US$177 billion worth of Apparel, this situation could result in big gains for India. So what I see is a temporary set back to Apparel trade but post normalisation, this could result in big gains for Indian Apparel and Textiles industry.

Meghna Kishore , Co-Founder, Greendigo Organic Clothing

The COVID-19 crisis is proving to be a test for businesses with rampant supply chain disruptions, logistical delays and jittery consumers. With sales estimated to be zero during the lockdown period and rising order cancellations from consumers, brands will definitely experience a pile-up of inventory. On the supply side, with manufacturing coming to a standstill, not only are ancillary businesses like those supplying buttons, trimming etc., feeling the heat but also the large number of workers employed in this sector.  The financial fallout of this crisis will have a far-reaching impact on the livelihoods of daily wage earners who are employed in large numbers by the industry.

For brands and retailers, the need of the hour is to ensure safety of their staff, manage cash flows, adjust sales forecasts, revise inventory projections, examine marketing strategies and introspect how operations will be carried out. It’s time for businesses to think on their feet and make quick decisions basis the market sentiment and customer requirements. At the end of it, hope that this will only be a short-term upset for the apparel industry.

Madhu Sudhan Bhageria, Chairman & Managing Director, Filatex India.

“Right now everything looks alright but we don’t know what will happen in the next couple of months. After the Govt’s abolition of the anti-dumping of PTA one of our key raw materials, the market was kind of picking up but due to the Covid-19 scare again there are disruptions in the supply chain due to economic slowdown. Export people are asking to delay the shipment or even cancelling it. Indirectly, it would hit us also. People would not buy and whole chain reaction will be coming back. As everywhere in the world it is kind of lockdown situation and retail sales are also not happening.

Luckily for us, we are working in full capacity with utmost precautions. Outsiders are not allowed at the plants, people are being screened, thermal check-ups are done. We have supplies for next month, but if it continues then production would be affected. We have to wait and watch as the next 20 days would be crucial.”

Siddharth Grover, Director, Groversons Group

In particular, the innerwear industry all markets are closed, all manufacturing facilities are closed, no sales imply no payments which means the stress on the business to keep the staff on board and take care of them in this time of difficulty, keep up with the rentals, electricity bills, interest costs of the finances, taxes to be paid, the govt will soon have to ease and announce more economic support for our industry in order for the survival of businesses.

The coming future is going to be tough for all, and in these tough times, we all as an industry and as a nation must come together and support the economy.  In my personal opinion what I feel is that as soon as the govt is sure of containing the cases of this virus, and it is safe to resume all businesses, we all must not slow the buying and selling cycles, people must spend money and not hoard it, help the economy get momentum and start the velocity of money. This can be a major factor in recovering from the damage. As far as the trading of stocks is concerned, people need to stop shorting stocks and be clam and optimistic that the market will recover their positions.

Yashraj Bhaiya, Director Varsha Fashions

In these times of crisis, it is necessary to follow  the advice of our government and industry professionals. Please take social distancing seriously, and help your staff in equal measures. These 21 days are crucial for our busineHss sector as it will take a minimum 15 days to get everything back on track. However, we have overcome so many troubles in the past and have found our way out of them, I am confident we will find our way out of this one as well.

By- Swaminathan Balasubramanian , Associate Editor

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