These are transformative times for the business of fashion. Consumer behaviours, digitalisation, supply chain snags and sustainability demands are challenging profitability and pushing business models towards change. And a rebirth is called for. It’s time for fashion businesses in India to find sustainable routes around the pitfalls of excessive discounting, supply chain inefficiencies, talent crunches and fragmented customer experiences.
A panel consisting of Manas Singh, Head D2C E-Commerce Business, PUMA Group; and Anshuman Aggarwal, Co-Founder, Increff spoke on the subject – an inspiring conversation on resilience and adaptation in times of economic downturn, and the future of fashion retail.
Puma is one of the largest sportswear brands in the world and a category leader in India. Increff works with fashion brands and retailers on two fronts – helping them optimize their merchandise (merchandise planning, buying and allocation) and on Omnichannel order fulfillment. They work with more than 700 brands across 15 countries.
The chat was moderated by Rajat Wahi, Partner, Deloitte. He started the session by saying that while the retail segment as a whole spoke a lot about using technology to put together an end-to-end supply chain for better consumer experience, he felt that the biggest challenge today has been the built up of inventory over the last one year.
“The retail sector came out of COVID with a bang. After being stuck at home for two years, people went on an offline revenge buying spree. While the sector lost two years, it also caught up pretty quickly post pandemic. Aside from this, there was reverse migration, which made an impact on the purchase patterns,” Wahi stated, adding, “E-commerce grew a lot during this time. Also, changed habits post pandemic as well as a higher cost of living – since people moved back to lower tier cities – had an impact on consumption patterns.” He wanted to know from the panelists how these factors had led to an inventory built up.
Inventory Built Up
Post Covid, there was massive exuberance in the consumer. There was a lot of pent up demand.
People had not been outside for a long time and so there was heavy growth in categories like sportswear, fashion, quick service, restaurants and food etc. This growth was supported by purchasing power since salaries hadn’t taken a cut in the short term.
Head D2C E-Commerce Business,
PUMA Group
Manas Singh said that since proportion of spends during the pandemic reduced including on travel, there was just a lot more capacity to spend.
“A lot of the categories that would compete with fashion and sportswear and the like weren’t really demanding anything. And so that naturally, this led to a huge exuberance in categories like footwear which were growing at 25-30% CAGR from 2020 to 2022. Puma doubled its business from 2019 to 2022.”
He said that across brands and retailers, there was a massive build up of inventory in anticipation of this continued growth, which however didn’t happen in 2023.
“There was just excess buying post Covid which spilled into 2022 and then didn’t continue after that. Factors like cost of living going up due to reverse migration led to a slowdown in consumption and discretionary spends,” he explained.
“The push from the government came only in certain categories and so brands and retailers are trying to figure out how to plan for the future now. Do we push inventory or pull inventory right now?” he said.
Changes in Retailer Behaviour
At this point, Rajat Wahi asked Anshuman Aggarwal to weigh in how retailer behavior is changing in terms of forecasting and demand planning cycles.
“Pre Covid, most retailers in India and globally as well had very long planning cycles. They would mostly work on excel models and would take their own sweet time to collect data, clean it up, crunch it etc. The frequency of swings post Covid basically forced them to react faster and the older excel models of working became non-viable,” Aggarwal explained.
Most retailers, he said, have moved on to using planning tools, which can help them crunch the time taken to make decisions, as well as make their planning process more agile and reactive to market swings.
He added that bigger retailers like Aditya Birla have shortened their planning cycle a lot. “These retailers are happy to be out of stock rather than being stuck with tons of unsold inventory.”
“Another factor, which has pushed the fashion sector towards faster planning cycles in fast fashion. Consumers are used to shorter time windows for new styles due to fast fashion, so thus, changing consumer behaviour comes into play here,” he added.
He said that earlier brands were building dedicated inventory for different channels – online, offline etc. “The swing in consumption patterns forced retailers to re-assess this model. Retailers no longer want to expose 100% of their inventory to every channel that they have. Instead they study the data and let the customer decide the demand rather than predicting where this demand is coming from themselves.”
He explained that the thought behind both offline and online orders coming from a common pool was to make inventory more efficient by not blocking it fully for all channels and make brands agile enough to react to demand across all channels.
“The kind of technology that is available today lets retailers develop a common pool of inventory and yet expose it to 10 different channels in real time. It also lets them react to demand without having unfulfilled orders, without order cancellation and without negatively impacting customer demand,” he stated.
Data Management
“For Puma,” said Singh, “we have a singular customer view whether the customer is online or in store. We study and understand buyers across customer geographies, across pin codes and across platforms – what’s the frequency of their buying and what are their preferences. This allows us to have more degrees of freedom in planning and allows us to plan better. This also allows us to have leaner inventory levels as well as faster re-order rates.”
He said this also helps brands and companies become razor sharp on capital allocation.
The Premiumisation Trend
Singh added that the post Covid economic downturn also allowed brands and retailers to think more on long term trends and bets that will not go away due to temporary setbacks. One of these clear trends in the Indian market is premiumisation.
“India has always been an aspirational society. Our per capita income is increasing and there is a bigger proportion of people in the higher income category now. So, while brands are strategizing on how to retain the vast value conscious consumer segment, they are also planning for servicing the small but massively high growth premium segment in the market,” he said.
Singh said this planning leads to extensive investment in product development and to better and more significant brand and asset collaborations.
Aside from this, brands are also increasing their investment in local production and manufacturing – the Make in India push – which helps reduce turnaround time as well as planning cycle. There are also less logistical constraints with ‘made in India’, he stated, adding that this leads to lowering of costs, saving monies which can then be pushed back into brand growth and marketing.
The Aditya Birla team, he said, connected 80% of their stores to customers which pushed up to 25% of their in-store business online.
Puma, he said, exposed its entire inventory – both the B2B inventory and the e-commerce inventory – to all channels, which resulted in exposure to a much larger customer base and the turnaround time for inventory became much faster.
“This resulted in like-for-like business growing almost 15-20%, but at the same time we had a faster delivery time to the customer at a lower cost,” he concluded.
