Recession’s negative impact on garment makers

Wednesday, 22 February 2012

The impact of slowdown in overall demand due to a weak Indian economy is being felt by readymade garment manufacturers. With inventories piling up, retail chains are cutting down on fresh orders by 10 to 15 per cent. Also low sales during the festive/winter season has led to extended sale and promotion period and these retailers still need another couple of quarters to recover from the negative impact and also to get rid of old stocks.

Apart from the impact of slow economy, apparel retailers also had to increase product prices by 8-10 per cent due to volatility in raw material prices and levy of 10 per cent excise duty on branded apparel. All these resulted in a tremendous decline in retail sales. For instance, Trent’s inventory went up to Rs 210.5 crores in September compared to Rs 130.6 crores in March, and Shoppers Stop’s inventory rose to Rs 652.4 crores compared to Rs 514 crores in March last year.

While all efforts are being diverted to clearing inventories and perking up sales by cutting down on garment prices, experts feel that retailers will have to concentrate on offering value at affordable rates since consumers are looking for such options. A decline in raw material prices has definitely proved to be a breather to the retail sector, but for now, manufacturers will have to hope for better days ahead.

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