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Business News/ Opinion / Online-views/  Branded apparel loses sheen
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Branded apparel loses sheen

Branded apparel loses sheen

Graphics: Shyamal Banerjee/MintPremium

Graphics: Shyamal Banerjee/Mint

Did you know that men have been buying fewer shirts? Manufacturers of branded apparel and retailers of private labels claim that men’s garments have seen a significant drop in sales over the past year.

Take Shoppers Stop Ltd, for instance. In its last quarter results, the company reported an overall sales volume drop of 9%. For the full year it saw a volume drop of 6%. The drop in apparel sales was much higher than that, according to Govind Shrikhande, managing director of the retail business run by K Raheja Corp.

Graphics: Shyamal Banerjee/Mint

The biggest reason for poor sales is obvious. Branded apparel prices went up 20% (one retailer claims its selling price rose by 25-35%) as a result of the 10% excise duty that was levied on the category in the Union budget for fiscal 2012. Minor concessions made by the government following protests were of little use. Around the same time, cotton prices also rose pushing the branded apparel companies to pass on a chunk of the cost to their customers.

It was a double whammy for retail brands such as Pantaloon or Shoppers Stop as well as manufacturers and retailers of brands such as Color Plus or Arrow. According to Hemant Kalbag, partner, head of retail and consumers at consulting company AT Kearney, the excise duty came like a bolt from the blue causing a shift in the cost structure of these companies. And, yes, their same store sales remain flat.

Large retail chains have been the worst hit as apparel as a category constitutes nearly 60-70% of their total sales. Besides, they enjoy better margins on apparel and any sales decline in this category would affect their overall numbers.

Sales have been flat for makers and retailers of shirt brands, too. However, they claim they have done better than big retail chains as they deal only in apparel through their stand-alone stores. While large retail chains deal in different product categories, branded menswear stores focus solely on one product and can foresee demand better, claims an executive working for a company making premium shirt brands.

He holds the general economic slowdown partly responsible for poor sales growth. While Kalbag insists that the government must focus on initiatives to drive consumption, Shrikhande of Shoppers Stop is pinning his hopes on the Budget for getting an exemption from excise duty on branded apparel.

However, retailers must pick up some lessons from these hard times and dwell on the behaviour of their consumers as both men and women responded differently to the price increase in apparel. Surprisingly, men were quick to postpone shopping for clothes, resulting in a steep decline in volume sales.

But women shoppers seemed far more resilient. Although the price of readymade garments for women went up too, they continued to spend. The volume growth in women’s apparel was marginal but the value growth hit double digits, especially in western wear. Experts tracking income and consumption patterns attribute the phenomenon to more and more women working and earning their own money. The percentage of women working in the 24-30 years age group is the highest—higher than that in the age group of 30-40 years and 40-50 years, explained one. Increasingly, college girls in India’s top 20-25 cities are looking at career options and will further swell the number of women consumers, she explained.

Clearly, the young workforce is spending both on clothes and accessories—a fact borne out by Shrikhande, who agreed that non-apparel sales volume growth was good for the company. Of course, what may have helped is that the non-apparel prices went up only by about 2%. So at his retail chain, handbags, footwear and beauty products sales volumes grew by between 8% and 12%. Women are shopping more and shopping deeper, he said.

The good news is that a Boston Consulting Group and Confederation of Indian Industry report released earlier this month predicts apparel sales will quadruple in the next 10 years with an estimated consumption expenditure of $225 billion by 2020. Apparel constitutes 10% of the consumption basket of affluent consumers, compared with 5% for small town customers—people with basic education and small businesses or low-paying jobs who live in smaller cities, towns and rural India.

Shuchi Bansal is marketing and media editor with Mint.

Comment at whatwebuy@livemint.com

Also Read |Shuchi Bansal’s earlier columns

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Published: 23 Feb 2012, 10:10 PM IST
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