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Retail problems hit apparel suppliers

Apparel manufacturers, who supply to organised retailers, are having a tough time. The global financial crisis has hit exports hard and now, the domestic scenario has also worsened, reports Saurabh Turakhia.

business Updated: Dec 07, 2008 22:02 IST
Saurabh Turakhia

Apparel manufacturers, who supply to organised retailers, are having a tough time. The global financial crisis has hit exports hard and now, the domestic scenario has also worsened.

Retail apparel sales shrunk in November and large format retail chains, faced with rising inventory, have stopped placing new orders. Most of the retail chains are also seeking extension of credit period. Arvind, Shoppers Stop, Lifestyle and Pantaloons are among the large retailers affected by the slow sales.

An industry sources said the credit period is getting extended to 60 days from 45 days. The financial crisis has made it difficult for large players to fulfil their payment obligations and new orders are blocked or postponed as consumer demand is also falling. Additionally, with shopping malls or stores not coming up as fast as expected, retail players are not taking delivery of many consignments that were due and executed.

“Between April and October, apparel business in the organised retail grew at 15 per cent per annum when compared with the corresponding period last year in value terms,” said Rahul Mehta, president, Clothing Manufacturers Association of India. “However, November has seen a fall of 10 per cent when compared to November 2007.”

In India, apparel constitutes about 10 per cent of the $37 billion retail consumer market.

A supplier to Arvind Ltd, doing an annual business of Rs 3 crore domestically and about Rs 20 crore in exports, said: “New orders with Arvind have been deferred till February 2009. There have been no payments since the past two to three weeks and things don’t seem to be encouraging for the next few months as well.”

A spokesperson at Arvind admitted that growth plans have gone awry. “We are not growing as planned but still growing specially in the value retail segment of Megamart.”

However, he denied that payment cycles were extended.

When contacted, a Pantaloons spokesperson also denied that the payment cycles have been extended with its suppliers.

Shoppers Stop spokesperson was travelling and could not be reached for a response.