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Organized apparel retail grew at 12% CAGR in India: Report
03
Dec '13
The organized apparel retail sector in India has grown at 12.29 percent compounded annual growth rate (CAGR) from a size of US$ 6.3 billion in 2007 to US$ 11.3 billion in 2012, according to a latest report “Fashioning a Winning Trail: How to build sustainable business models in Indian apparel retail”, prepared by management consulting firm Kanvic.
 
However, the players are still looking for a winning formula to establish a successful and robust business model in India’s organized apparel retail sector, according to the report.
 
It says, “The first decade of the twenty-first century was a turbulent one for India’s apparel retail industry. In a few short years many of the industry’s brightest stars rose and quickly faded into oblivion, while others were dimmed under the burden of heavy debts.”
 
From the pre-crisis peak, retailers representing less than half of the total retail space in 2008 have survived and been able to improve their business performance over the last 5 years, on major indicators such as like-to-like sales, EBITDA and inventory. But, even among these survivors, business models of a majority of players were found to be not sufficiently robust to withstand future crises or deliver sustained profits in an increasingly competitive environment, states the report.
 
The report mentions two inter-related factors—the pursuit of high risk growth strategies and a crisis of leadership at apparel retailers—as the root cause of the high failure rate during the period until 2013.
 
Kanvic’s analysis shows that lower gross margin, as a result of higher cost of goods sold, is the root cause for Indian players’ weak and unsustainable business model.
 
It identifies six key steps to enable industry leaders to take a new approach and fly through the current turbulence in Indian apparel retail and emerge a winner. The steps are: improving the business economics, getting the growth strategy right, stress testing the business model, making the right entry decisions, demonstrating boldness in exiting, and looking at the right metrics.
 

Fibre2fashion News Desk - India

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