Indian footwear sector to take a hit at least till Oct
Indian footwear and accessories brand Pelle Albero was founded by its chief executive officer Pramod Mittal in 2014. Known for offering bespoke luxury footwear with Italian elegance, the brand sells through franchise stores, exclusive brand outlets and online. Mittal spoke to Fibre2Fashion about the impact of the lockdown resulting from the COVID-19 pandemic on the company and the Indian footwear sector.
In which specific areas are you facing major issues?
Due to complete lockdown, we as traders were forced to completely shut down operations, which has resulted in the loss of monthly sales of approximately ₹1.5 crore and the effect of loss is multiplied due to the existence of fixed expenses like salaries, rent, interest on finance, etc, which is nearly ₹30-35 lakh per month.
We are worried that the market won’t recover anytime soon and will make the task of keeping business operations viable a big challenge. We are dealing in fashion products and given the situation of the economy, people, in general, are believed to cut down their budget on fashion products first. So the market for this sector will have an impact that would last for long. We are not expecting demand for our products going back to old levels anytime soon. Almost 70 employees are working as part of our company and fulfilling their needs during these desperate times while ensuring the viability of operations is a challenge for us. The dilemma between moral obligations and economic constraints has arisen. The stock of products locked in warehouses will also become obsolete and will cause a major dampening effect on the operations cycle of our business.
Several new measures will be required to bring businesses back on track, which will require more finance and in current market conditions, it will be really difficult to procure finance at a viable cost. All these problems will persist at least till October this year, and may extend further if appropriate assistance from the government is not received.
Are there any thoughts within individual members, trade associations to come together and work cohesively so that losses can be minimised?
As stated earlier, all the partners contributing in any way towards movement of goods from manufacturers to ultimate consumers will need to stand together to ensure collective good for all and in view of long-term sustenance.
The losses need to be divided among all for ensuring sustainability for all, or else one by one all of them would have to wind up operations. The whole system for all will collapse if in the short term, burden of losses is imposed on any one party.
All the unions will play a critical role in bargaining with the government for its help in reviving this sector because lack of government assistance would make every task impossible and would jeopardise the sustenance vision of this sector.
By when are you expecting the beginning of the revival process to commence?
No matter how aggressively revival steps are undertaken, the sector will have to face consequences at least till October 2020, and if the above suggested measures are not pursued, then this may continue till the next fiscal and in successive fiscals as well. A slight revival is expected till October if businesses are able to resume operations by May and the pandemic ends completely during the same month.
October is the prime season for fashion industry and that is why the sector hopes for revival during this period. This revival will just make operations sustainable and it should not be confused with sales being restored to the levels before the advent of the pandemic. The actual restoration of sales will take at least 15 months given appropriate actions are undertaken by the government to uplift the economy.
What steps are you taking or have taken to face the challenges like order cancellation that you have cited above?
During these difficult times, the whole industry needs to stand collectively and back each other in whichever way possible. We all are dependent on each other and the downfall of one will make others trace the same path. We have no other option but to reduce our fixed costs accordingly. If business operations become unviable then everyone will be at a loss because landlords would lose rental income and employees will lose their employment. We all need to think long term and will have to face short-term difficulties together. That is why we have urged employees as well as landlords to work for a certain period of time on revenue sharing basis (the most effective solution in our opinion) along with some other options. We have urged them to stand by us during these difficult times and we promise to restore them back to old position soon. We will also be requiring longer credit periods from the suppliers to stabilise the operation cycle of the business. We have also asked retailers associations to come up with a proposal and plead the government to help this sector, which is a major contributor towards the gross domestic product of the country.
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.
In the business of trading, warehousing cost, rental of spaces for operations and salaries of front-end employees are the main costs and all these are fixed. If no concession is received in these costs, then operations would become unviable leading to closure of business. In our line of business, in-house help is almost none while outsourcing of task will lead to huge costs, and again make operations unviable. Resources in this sector will always be available in abundance, but it is the cost factor that poses the real threat.
Is your business entity expecting any specific measure from the government or its nodal departments?
Any kind of assistance from the government would be appreciated. The government can take the following measures to help all in the industry:
✓ All commercial electricity bills should be cut to half for the next quarter
✓ Companies should be allowed to retain 10 per cent of goods and services tax payable for next 12 months
✓ Moratorium on interest payments for next six months
✓ All equated monthly instalments to banks and noon-banking financial companies to be put on hold for six months with no interest or delayed payment
✓ Employee share of provident fund (PF) and Employee State Insurance Scheme (ESIC) not to be paid by the companies but to be borne by the government for at least six months
✓ Property tax for fiscal 2020-21 should be reduced to half.
All these suggestions are based on popular public opinion being shared by all through various social media platforms and we also strongly agree with them. The government also needs to focus on flow of cash in the economy that would not lead to inflation and still would be able to cope with dampening effects of the pandemic.
There is a lot of talk about rewiring businesses to arrive at the new normal. Are you thinking about this at the company level or collectively as an industry?
There are no suggestions regarding this as of now.
Have you quantified your projected losses, the basic anticipated work loss etc?
As per our estimate, if the situation does not improve till October 2020, we will be facing a minimum loss of ₹2 crore (excluding loss of revenue of approximately ₹9 crore) and these figures are based on initial estimates and might vary with detailed estimates and the further impact of the situation.
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?
Such enterprises are responding as per demand and we believe such demand is short-lived, i.e., till the pandemic ends. If the industry can cater to such demand with an effective solution, then it should definitely pursue it, however we believe there is not any much scope for fashion industry, particularly the footwear industry, to meet this demand.
As traders, we can help in the distribution of these products and can do our part in standing against this pandemic and beyond this we do not believe the footwear industry can be of much assistance in this situation.
Published on: 15/04/2020
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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