The global apparel consumption is forecast to grow at a CAGR of 4 per cent and reach $2.6 trillion by 2025. Market growth rate of developed countries is expected to slowdown whereas large emerging economies will be the key drivers of growth. China and India, with a large population base, will be the fastest growing markets in the segment.

Apparel consumption in 2017 is estimated to at $1.8 trillion, which formed around 2 per cent of the world GDP of $79.3 trillion. EU-28 was the largest apparel consumer market worth $400 billion, which was followed by markets of the USA, China, and Japan. These top four markets together constituted approximately 59 per cent of the global apparel consumption. The next four largest markets were India, Brazil, Russia, and Canada, accounting for an additional 11 per cent share while the rest of the world held a 30 per cent share.

It is expected that over the next decade, domestic apparel market of India and China will attain high growth rates of 11 per cent each, to add a cumulative market size of $393 billion by 2025.

Adverse weather and water scarcity have hit cotton yields in the key growing regions of Gujarat, Maharashtra and Karnataka. Due to the dry and hot weather, kapas bolls opened in the early stages this year. Farmers are getting a higher price for their crop at Rs 5,300 per quintal as against Rs 4,500 reported around the same time last year.

Record-breaking cotton arrivals were registered in October, mainly due to the absence of rain during the last 60 to 70 days in the entire cotton belt of India. Cotton consumption during October 2018 has been estimated at 27 lakh bales, while the export shipment of cotton in October 2018 has been estimated at 2.50 lakh bales.

Stock at the end of October 2018 is estimated at 20.63 lakh bales, including 16.53 lakh bales with textile mills, while the remaining 4.10 lakh bales are estimated to be held by CCI and others (MNCs, traders, ginners, etc). The carryover stock at the end of the 2018-19 season is estimated at 15.25 lakh bales.

Domestic consumption for the season has been estimated at 324 lakh bales while exports are estimated to be 51 lakh bales, 18 lakh bales lower compared to the 69 lakh bales last year.

Bangladesh is likely to get duty-free access to the Eurasian Economic Union (EAEU). This applies to Bangladesh's main export items like readymade garments, leather and ceramics. Members of the EAEU, launched in 2015, are Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan.

Bangladesh has proposed including goods from Chapters 30, 61, 62, 63 and 64 of Harmonized Commodity Description and Coding System in the list of goods originating from least developed countries which are eligible for tariff preferences during its importation into the territories of the EAEU countries. Trade between the EAEU member states has risen sharply. Mutual trade in 2011 was 33.9 per cent more than in 2010.

Cambodia too wants the Eurasian Economic Union to include more Cambodian products like garments, shoes, bicycles and sugar in its tariff scheme. Currently about 900 Vietnamese exporters are active in the EAEU market, with key exports including seafood, coffee, rubber, tea, rice, apparel, woodwork products and confectionery.

In fact, Vietnam-Russia trade makes up 90 per cent of total trade revenue between the country and the EAEU, while trade between Vietnam and Belarus and Armenia in 2016 even recorded decreases from 2015. The reason for this is that Vietnam has a long-time trade partnership with Russia and an inadequate understanding about other EAEU markets.

India’s cotton exports grew 26.8 per cent from April to September 2018. The ongoing trade war between the US and China would possibly open up new opportunities for cotton textile exports from India. Alternate schemes for promoting exports are being devised which would improve the competitiveness of the products. These alternate schemes are expected to be WTO compatible.

India is the second largest textile exporter in the world. Today, cotton yarn and fabric exports account for over 23 per cent of India’s total textile and apparel exports. Banking institutions have been instructed to give in-principle approvals to loans in 59 minutes for small and medium units.

There is a suggestion that cotton yarn and fabrics be included under the ROSL scheme as these products also face the incidence of state levies as in the case of made-ups and garments. The ROSL scheme currently covers only state levies. However, there are also central levies, the burden of which exporters have to bear. To make exports competitive, these central levies are also sought to be refunded under a new scheme.

Other proposals are to include cotton yarn under the MEIS and to hike the MEIS for fabrics from two per cent to four per cent.

Micro, small and medium enterprises (MSMEs) in India have been granted a host of benefits like a portal which is empowered to grant them loans of up to a crore in less than an hour.Access to credit, access to the market, technology upgradation, ease of doing business, and a sense of security for employees are some of the other benefits.

It is expected these will go a long way in mitigating the problems of small businesses. GST-registered enterprises will get a two per cent rebate on an incremental loan of up to a crore. The interest subvention on pre and post shipment credit for exports by micro, small and medium enterprises has been increased from three per cent to five per cent.

A Rs 6000 crore package has been announced for technological upgradation of these enterprises. About 20,000 hubs and 100 tool rooms will be developed around the country for this. Mandatory sourcing by PSUs from small enterprises has been increased to 25 per cent from the previous limit of 20 per cent.

Pucblic sector companies have to buy at least three per cent of their purchases from women entrepreneurs. All companies with a turnover of more than Rs 500 crores have to join the Trade Receivables e-Discounting System so that MSMEs don’t face troubles in cash flow.

The like-to-like sales of Fast Retailing’s Uniqlo chain in October 2018 plummeted 10 per cent as did its total sales figure. The higher-than-expected temperatures in Japan dented demand for its autumn/winter collection. It also seemed to have depressed customer footfall and the number of items each shopper who did buy actually went home with.

It’s become almost a tradition that October causes headaches for fashion retailers. In 2017, a number of otherwise-buoyant businesses around the world saw their autumn season turning negative as summer-like temperatures continued while their coats and knits appeared on store shelves and stayed there.

And the extent of the impact of the ‘wrong’ temperatures can be seen clearly when chains that are otherwise-successful, such as Uniqlo, suffer as much as those who are struggling generally.

Last year marked the seventh year of DyStar’s journey towards reducing production footprint by 20 per cent for every ton of production. This goal encompasses the resources used for production including energy, water, and raw materials as well as addresses their corresponding outputs – greenhouse gas emissions, waste and wastewater.

Intensive efforts are underway to ensure that the company’s less efficient acquisitions are provided the essential support to align with the rest of the company. As a part of DyStar’s long-term goal to imbed sustainability across the industry, the company will also be focusing on expanding its sustainability services. This includes the opening of more Texanlab offices, an ISO 17025 certified, specialised testing laboratory across South Asia to provide end-to-end solutions throughout the whole supply chain.

To encourage and facilitate sustainable practices among its suppliers, DyStar also conducts sustainability-related supplier surveys. To help meet clients’ demand and demonstrate its responsibility and care in the food and beverages industry, DyStar is implementing a supplier diversity program to support businesses in the US that are at least 51 per cent owned by minority groups, women, veterans and people with disabilities.

The latest latest Better Buying survey reveals apparel brands are hammering suppliers on price harder than ever. Prices received for orders do not cover the cost of social, environmental, quality, and other compliance requirements. Retailers and brands don’t realize increased financial pressure on suppliers raises the risk of business failure, supply disruption, and environmental and human catastrophe. They don’t realize it is impossible to make tangible improvements to things like living wages and working conditions if they do not ease the financial pressure placed on suppliers. Better Buying is a global initiative that provides retailers, brands, and suppliers a cloud-based platform to obtain data-driven insights into purchasing activities. The latest dataset shows that 55 per cent of suppliers had been affected by high-pressure cost negotiation strategies.

One way forwards is retailers and brands stop focusing on reducing costs while ignoring the implications on suppliers. The use of questionable negotiation strategies has also increased. Some of the negotiation strategies include: not paying for samples, not paying on time or not paying the full price as indicated in a purchase order. Fewer than 80 per cent of orders received from retailers or brands are priced to cover the cost of social, environmental, quality, and other compliance requirements.

North American retailers forecast more consistently and accurately than European retailers, which enhances the ability of suppliers to plan their production. What’s needed is for retailers and brands to work on streamlining their operations, create stronger partnerships with suppliers and monitor their efforts over time.

"Katie Smith, Retail Analyst and Insights Director, Edited points out the shift towards more comfortable and functional clothing led to an increase in activewear as a trend. According to the Cotton Council International & Cotton Incorporated’s activewear study, about 3 out of 5 consumers have adopted activewear as their new casual wardrobe. Additionally, 90 per cent consumers wear activewear for purposes other than exercise. And 66 per cent consider athleisure as a more casual way of dressing that will be around for a while."

The market for streetwear, despite the advent of new players, luxury collaborations and high-end designers, is still going strong. In fact, it may take quite a long time before the market, with so many crossovers and creative licenses, reaches its zenith. Brands like Nike and others continue to drive demand by producing limited quantities.

Growing popularity of activewear

Katie Smith, Retail Analyst and Insights Director, Edited points out the shift towards more comfortable and functional clothing led to an increase in activewear as a trend. According to the Cotton Council International & Cotton Incorporated’s activewear study, about 3 out of 5 consumers have adopted activewear as their new casual wardrobe. Additionally, 90 per cent consumers wear activewear for purposes other than exercise. And 66 per cent consider athleisure as a more casual way of dressing that will be around for a while.

A survey by Cotton Incorported Lifestyle Monitor Survey reveals nearly 3 out of 5 consumers prefer cotton activewear for athleisure activities like running errands or hanging out at home. A number of brands already incorporate a significant amount of cotton into their athleisure/streetwear offerings. For instance in the Fall/Winter collection of streetwear favorites like cotton tees and sweatshirts are joined by denim, a cotton corduroy shirt with flannel hood, printed and oxford button-front cotton shirts, and cotton twill shirts and pants.

As per the Monitor Survey, 9 of 10 consumers (92 per cent) believe better quality garments are made from natural fibers like cotton. And almost two-thirds of these are willing to pay more for natural fibers like cotton.

Marrying luxury to streetwear

Luxury brands like Gucci and Burberry are jumping onto the streetwear bandwagon; while other labels are bringing streetwear designers to their brand. This mixing of high and low brands and price points might seem like an illusion, but it’s been done before to great effect. Today’s young consumer has grown up on limited run, high/low collaborations between luxury designers and fast-fashion retailers. This lending of a hint of luxury to streetwear offers a sense of achievement to shoppers without hurting the designers’ names. Collaborative streetwear operates in much the same way.

While straight up streetwear often doesn’t cost much, it can be difficult to obtain, requiring waiting on lines for in-store purchasing, or paying attention to social media to plan for the next drops. Luxury labels offer streetwear both because that’s what consumer want to wear and it increases recognition among young consumers. Playing a role in every facet of the industry, streetwear is constantly evolving and shaping the world of fashion.

"CMAI’s Apparel Index for Q2 (July-Sept FY 2018-19) indicates growth has fallen to almost a no growth level and touched 0.18 points. It is the lowest ever, in last five years. Small brands are the big losers with negative growth of -1.71 points. However, big brand’s (Mid, Large and Giant together) cumulative growth of 3.39 points (much lower than 6.55 points in the last quarter) also failed to pull up the index significantly. It is important to observe, if Sales Turnover was to be considered as the only parameter for determining Apparel index, this quarter overall Apparel Index would have been negative at -1.80 ."

CMAI’s Apparel Index for Q2 (July-Sept FY 2018-19) indicates growth has fallen to almost a no growth level and touched 0.18 points. It is the lowest ever, in last five years. Small brands are the big losers with negative growth of -1.71 points. However, big brand’s (Mid, Large and Giant together) cumulative growth of 3.39 points (much lower than 6.55 points in the last quarter) also failed to pull up the index significantly.

It is important to observe, if Sales Turnover was to be considered as the only parameter for determining Apparel index, this quarter overall Apparel Index would have been negative at -1.80 .

CMAl's Q2 Apparel Index recorded a meagre growth of 0.18 points, whereas Small brands (turnovers of Rs 10 to 25 crores) is negative at -1.71points. For Mid brands (turnover of Rs 25-100 crores), growth stands at 1.03 points, almost five-times that of overall index; Large brands’ growth is 3.61 points, 20-times that of overall index. Whereas, last quarter Large Brands growth was just three-times (2.95 times) that of overall index.

As usual, it’s the Giant brands that grew the most at 8.36, 46-times that of overall index. Giant brands have consistently been doing well every quarter, their rate of growth this quarter is much more than others while being higher than the previous quarter.

At 0.18 points, overall Q2 index is much lower than previous quarter’s (April-June FY 2018-19) 3.24 points and Q2 of previous year, which was 1.87 points. While Big brands together have grown at 3.39 points, individually Mid, Large and Giant brands have grown at 1.03, 3.61 and 8.36 points respectively (previous quarter figures were: 6.35, 5.95 and 8.07 points). Only Large brands have shown some buoyancy. Mid and Large brands grew much lesser than previous quarter.

Much like all previous quarters, the biggest brand group -- Giant brands are continuously growing at the highest level, outgrowing any kind of recessionary trends. The gap this quarter is huge, in fact, its the highest ever.

Small brands, at -1.71 points, seem to be in a bad phase unable to pull along and reflect growth. They are not in a position to outsmart their business practices. Overall growth index is being pulled down by small players. In fact, Small brand’s continuously falling index is certainly a point of concern.

Sales Turnover dips but investment on the rise

The cumulatives Sales Turnover in Q2 reflected a dip for the first time at -0.72 (previous quarter was 1.88 points). Around 32 per cent brands reported an increase this quarter. Perhaps for the first time almost 45 per cent brands have reported a loss in sales turnover. Incidentally, besides Large and Giant brands, both other Small and Mid Brand groups reported sales losses. A whopping number of respondents who reported a loss in Sales Turnover were among Small brands. ‘’We were able to get a good number of bookings. This has helped us increase Sales Turnover,’’says Cantabil’s head of marketing Deepak Singla .

Sell Through recorded an Index growth of 1.14 this quarter, lower than 1.23 in previous quarter. Maximum growth in Sell Through was reported by Giant brands, followed by Small brands. ‘’Sell through has increased as cost realization is less. We were not able to make great profits as raw materials have become costlier but we have kept our prices constant. Hence, Sell Through has increased,’’ explains Manu Chawla, Propreitor, Taiga Kids .

While 53 per cent brands reported an improvement in Sell Through. However, 37 per cent brands saw no change and around 10 per cent recorded a dip in growth. As Dare Jeans owner Paresh Dedhia points out ‘’There is an increase in expenditure as everything is correlated. Inventory Holding and Sell Through has gone up as the prevailing market is slow. Buying and placing orders has come down and the cash flow is slow, hence, expenditure has increased.’’

Inventory Holding growth was at 2.1 points, higher than 1.58 points recorded in Q1. Almost 64 per cent respondents across brands have said their Inventory Holding moved north this quarter, indeed a significant number and they were responsible for pulling down overall apparel index value. Increase in Inventory Holding impacts overall index negatively. Higher Inventory Holding indicates longer holding of inventories in warehouses or shop shelves.

Investments one positive aspect of Q2 is that fresh Investments have gone up by nearly 1.80 as against 1.70 points last quarter. Highest investments came from Mid brands, followed by Giant brands. Overall nearly 86 per cent respondents reported a rise in Investments which is much higher than 77 per cent in previous quarter, indicating most brands had to invest to manage and grow which means growth is not coming easily. ‘’We are expanding and since we are venturing new markets, we need to advertise to make our presence felt and this incurs cost. There are also some fixed expenditure in opening a new store etc, hence the expenses have gone up compared to last year,’’ points out Mayank Jain, GM, Monte Carlo.

Outlook for next quarter

Around 50 per cent brands say the outlook for next quarter is ‘average’, while 38 per cent believe it will be ‘good’. Only 6 per cent feel the quarter will be ‘excellent’. However, another 6 per cent believe it will be ‘below average’. Comparatively the outlook recorded in previous quarter was ‘Good to Excellent’. Generally, in Q3 of the financial year a number of festivals come up with sales picking up, the overall mood is positive. However, this doesn’t seem to be reflected this time due to the lacklustre performance of Q2.

CMAl's Apparel Index aims to set a benchmark for the entire domestic apparel industry and helps brands in taking informed business decisions. For investors, industry players, stakeholders and policymakers the index is a useful tool offering concrete and credible information, and is an excellent source for assessing the performance of the industry. The Index is analysed on assessing the performance on four parameters: Sales Turnover, Sell Through (percentage of fresh stocks sold), number of days of Inventory Holding and Investments (signifying future confidence) in brand development and brand building.

The Apparel Index research is conducted by DFU Publications.