The Ligo Group owns and operates the luxury
lifestyle brand Escaro Royalé, which offers elegantly handcrafted shoes,
exquisite premium bags, perfectly augmenting belts and high street fashion
accessories. Fashion-technologist and founder-chief executive officer Ambud
Sharma spoke to Fibre2Fashion about the fallout of the COVID-19 crisis.
In which specific areas are you facing major issues?
We currently operate in three countries. Our raw materials are procured from Italy, Spain, Brazil and Argentina. In our luggage business, we have a heavy dependence on Chinese polyester. That said, all major functional areas have been adversely affected. The entire supply chain is disrupted. We did have a hunch about the supply chain situation and had stocked for six months of production, but the uncertainty of re-opening of factories (and COVID compliance thereof) is keeping solid decision-making at bay. Additionally, our channel sales are distributed in coordination with many channel partners selling from their own warehouses. Our business has been affected by about 30 per cent, or by about ₹15 crore. We have not seen much cancellation, but have seen general reduction in order volume.
What steps are you taking or have taken to face the challenges like order cancellation your have cited above?
First, we anticipated the raw material supply chain management (SCM) issues upfront and stocked our raw materials well in advance. Having consultants in China helped a lot as we were getting early indicators of factory closures. Second, we did fire drills for our staff to be working from home. We did three days of fire drills, and ensured our enterprise resource planning (ERP) and networks were well oiled. We even rehearsed mock conference calls over Google Hangouts to ensure we were cent per cent productive even during a lockdown. Third, we build a task-pipeline for our team so that we have enough work for everyone, and thus, don’t have to lay off any staff. Fourth, we shipped bulk shipments to our third party warehouses to ensure that the sales channels were well fed when the lockdown is lifted and general buying sentiment is restored.
How critical would be the anticipated loss or reduction of trained manpower on fronts like manufacturing, warehousing, supply chain etc. for your business? Such functions could be in house or outsourced.
We are a heavily automated organisation and are not very labour intensive in general. That allows us to remain lean and apply best practices that allow for greater efficiency. Our in-house ERP system LERP is a blessing. Additionally, our dependence on software and processes, rather than human gut-feeling, allows us to anticipate challenges well in advance and conserve resources as needed. We don't believe in outsourcing critical functions irrespective of the cost as we believe it generates strategic advantage upfront.
Have you quantified your projected losses, the basic anticipated work loss, etc?
We have analysed historic metrics and extrapolated with six factors that we use for projections:
a) business growth factor
b) opportunity cost in material procurement
c) opportunity cost in production gaps
d) increase/decrease in operational costs
e) demand forecast
f) new product anticipated acceptance
Are there any thoughts within individual members, trade associations to come together and work cohesively so that losses can be minimised?
The fashion industry in general is relatively unorganised. It does seem to be organised but in reality, there is hostile competitiveness and general stinginess in investments in software, processes, systems and talent. Because of that, the Indian fashion industry, including footwear, is not competent in terms of quality and quantity. The general trade organisations are headed by a trading community that neither has the vision nor competence to deliver world class products with reliability compared to China, Vietnam, Indonesia and even Brazil. It is high time that the industry moves towards larger vision under an able world-class leadership or board that can define world class vision to consolidate competent players for developing world class products, machinery and raw material included.
Second, for the losses to be minimised, it is required that the entire industry works on a shared-efficiency model with the sole goal of ensuring no loss to its members. What is causing losses? Competition—healthy or otherwise. If the demand and supply can be fine-tuned and regions can be defined, it will lead to low or no competition and the margins can be controlled for no profit no loss. Additionally, high demand products like masks and PPEs can be manufactured to ensure stop-gap measures and survival.
I anticipate about 30 per cent of industry members will be wiped out due to incoherent efforts in illogical directions, no matter what the effort may be.
By when are you expecting the revival process to commence?
The revival process timeline prediction is a gamble right now. It is too early to say the least. I anticipate at least two years of stop-gap and lower-priced products. I think the industry will be in survival mode for over 18 months. Some companies that will hold on to their talent pool and processes in this chaotic time will win.
Is your business entity expecting any specific measure from the government or its nodal departments?
No company is cash negative. Good companies always account for May days in their budgeting and forecasting. Only inefficient entities will be asking for government measures. The more frugal organisations will ride this wave with little to no problems. Companies expecting handouts would most likely not survive. For the Ligo Group, we are not looking for any government assistance as we are cash positive with record taxes paid for fiscal 2019-20.
There is a lot of talk about rewiring businesses to arrive at the new normal. Any thought process towards this at the company level or collectively as an industry?
Companies that have generally ‘worked their way around’ the three essential Ps of efficient business operations will find themselves struggling. The 3Ps—people, process and product—will be paramount in the new post-COVID reality. More data-driven companies will have an edge. Companies will realise that going directly to consumers without middlemen would be the new normal. Internet marketing and digital sales will become a new mantra for top organisations. Overall, adaptation of technology as a strategic advantage will be a clear requirement for survival.
A whole lot of enterprises have begun manufacturing of masks and other personal protective equipment (PPE) required in bulk today. Has any such step been taken by anyone in your sector? Is the industry or cluster mulling over any such initiative?
There are two factors to this temporary shift. First is the emergence of hygiene products and protective gear as a viable and solid business or product category. Many companies will realise that India lacks high-quality manufacturing of this class of products, and therefore, will shift their product mix entirely to this rather new and lucrative class. The government would come up with all sorts of assistance and subsidies to support this.
Second, several companies will see this as a stop-gap measure to keep their cash flow from crashing. There will be a short surge in supply and commoditisation of these products in the long run—more than six months from now. Profits for unbranded products will erode fast and the companies that will invest in marketing and visibility may see lucrative long-term profits.
Published on: 04/05/2020
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
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