By Sapna Dogra Singh

Business Standard

New Delhi December 07, 2008

Lack of an apex body, along with the absence of time-bound deadlines, are being cited as reasons behind the poor implementation of the scheme for integrated textile parks (SITPs), which is the textile ministry’s flagship scheme, according to industry experts.

The objective of this scheme launched in 2005 was to create jobs and world-class infrastructure. However, so far, out of the 40 sanctioned parks, just four have become operational.

"It is a grand plan but actual execution is very slow," said Devangshu Dutta, chief executive officer of Third Eyesight, a consultancy firm which has worked with some of India’s leading textile companies. There are multiple stakeholders, including the central government, state governments, district authorities and several companies. "Bringing them together is a difficult job," said Dutta.

Under the SITPs, the government provides up to 40 per cent of the cost of setting up a textile park with a ceiling of Rs 40 crore. Till now the ministry has contributed Rs 450 crore. The industry has pitched in with nearly double this amount. The combined investment is expected to touch Rs 2,000 crore by 2009-end.

The Parliamentary Standing Committee on labour has also made similar observations in September. While ruing the slow pace in the progress of SITPs, it has recommended that a time-bound action plan should be drawn up to ensure that the sanctioned textile parks become fully operational as any delay in this regard may not only involve the cost overrun but could also result in weaning the entrepreneurs away from scheme.

According to a senior textile ministry official, the reasons for delays are local issues which involve land deals, pollution and environment clearances in case of processing parks and sometimes there’s conflict amongst the entrepreneurs, which could result in the cancellation of the park.

The four parks, which have become operational are — Palladam HiTech Weaving Park at Palladam in Tamil Nadu, Brandix India Apparel City at Vishakhapatnam in Andhra Pradesh, Pochampally Handloom Park at Pochampally in Andhra Pradesh and Gujarat Eco Textile Park, Surat, Gujarat.

Most of the parks are progressing smoothly and by year end about five to seven more parks would become operational, informed the ministry official and added that the progress has also slowed down now because of the financial constraints that people are facing in view of the current economic slowdown, added the official.

Incidentally, an inter-ministerial Project Approval Committee (PAC) for SITPs is meeting in the third week of December to review the progress of the textile parks and also to take a call on cancellation of some of the parks. At least three projects are likely to be cancelled and be given to other interested parties, said the official.
The committee meets on a quarterly basis.

By Zainab Morbiwala
Images Retail
December 2008

THE HISTORY OF CATALOGUE RETAILING IS INTERESTING. WHAT BEGAN OUT OF NECESSITY, SOON DEVELOPED INTO A CHANNEL OFFERING CONVENIENCE OF SHOPPING FROM HOME. WITH THE TREND OF CATALOGUE RETAILING YET TO GAIN MOMENTUM IN INDIA, MOST RETAILERS – STILL FOCUSSED ON THE BRICK AND MORTAR FORMAT- ARE YET TO FULLY EXPLOIT THE TRUE POTENTIAL OF THE MEDIUM.

THE ROOTS
As the name suggests, Catalogue retailing is a non-store retail format where the retail offering is communicated through a catalogue to the consumers. Mail-order catalogues debuted in 1856 when Orvis began selling fishing gear in USA. In 1872, Aaron Montgomery Ward made an arrangement with the National Grange, America’s largest farming organisation, to offer 163 items of merchandise under ‘The Original Wholesale Grange Supply House’. Ward’s catalogue was followed by one published by Richard Waren Sears, who started selling watches in 1886 through mail-order business. Elaborates Devangshu Dutta, CEO, Third Eyesight, “Catalogue retailing evolved in the west to meet the needs of far-flung towns and rural settlements since regular retail stores could not be established or profitably run in each area.

Since then, catalogues and other forms of non-store retailing including television and the internet marketing have evolved in different markets.

Adds Dutta, “Very often, retailers use catalogues as a complementary channel to store retailing. UK’s Argos, now also in India, evolved its unique catalogue-stores, that turned the model upside-down, making physical stores a walk-in opportunity for the much bigger catalogue from which customers could place orders.” Sharing the success of Argos UK, Andrew Levermore, CEO, HyperCity, says, “Argos UK has annual sales of close to 2.6 billion Pounds annually and the catalogue is present in over 70 per cent of UK homes.”

INDIA STORY
It has been only about 10 months since the launch of Argos in Mumbai. HyperCity Retail India Ltd, along with Shopper’s Stop Ltd, entered into a franchise agreement with Home Retail Group, UK, to offer a unique multi-channel shopping experience under HyperCity Argos. Currently operational only in Mumbai, the concept will be introduced across India when HyperCity debuts in other parts of the country. Talking about the HyperCity Argos operation, Levermore says, “For us it is the retailing of products through the medium of a book with more than 300 pages, listing over 4,000 products. Catalogue retailing is ‘not’ a promotional leaflet of a few pages that is inserted in the newspaper. It still requires the customer to visit a physical store to purchase the product.” Apart from HyperCity Argos, there is Lovy Khoslfs Elvy, which offers high-end home decor and interior products through a catalogue. An offshoot of export major, Stalwart Creations, Elvy introduced a mail-order catalogue in India three years ago. While HyperCity Argos’ catalogue is currently restricted to the customers in Mumbai, Elvy facilitates customers across India to place orders through their catalogue. Kh9sla says, “Catalogue retailing in India did not really exist when Elvy started out. It was very demanding’ and a very challenging task. We had to be thorough with our processes to meet the high expectations of our customers. “Prior to Argos and Elvy, Otto Burlington was operational in the Indian market (about 15-17 years ago) with Catalogue Burlington. Despite being a pioneer in India and popular in UK, it was phased out very soon. Explaining the reasons for Burlington’s failure, Khosla says, “The three infrastructural properties required to support catalogue retailing – effective telecommunication, easy mode of payments (e.g. credit cards) and a structured distribution set-up – were not in place.” Dutta observes, “Catalogue management sciences are probably not being applied effectively. The shopping dynamics and the operational success factors differ in home shopping and physical stores.”

PHYSICAL PRESENCE
It is interesting to observe that both HyperCity Argos and Elvy have their standalone stores as well. Shares Levermore, “Having store presence cements the brand in the consumer’s eye and allows the customer to feel the product. When starting out, store presence ensures credibility and safety in the consumer mind.” The catalogue stores of HyperCity Argos offer customers the facility to browse through the catalogue and view the products before making the purchase. High involvement and high investment products across categories such as furniture, technology, jewellery etc. are available on display. Customers also get to see other products at the special viewing and demonstration areas in the store. Sharing whether catalogue retailing can survive without a physical store, Khosla feels, “Yes, it possibly can. However, it might take longer to penetrate the larger database present in the country. For us, a combination of both works.” Commenting on the catalogue design, Levermore says, “There is much science around this and can be learned only with years of experimentation.” As for Elvy, Khosla has made sure to bring out a catalogue based on international standards. Both Elvy and HyperCity Argos launch their catalogues every six months.

INTERNATIONAL PERSPECTIVE
According to Khosla, the resistance to catalogue shopping is much higher in India than in any other country. “We need to work much harder to build a comfort level for our customers.” Adds Levermore, “For the Indian consumer, going out for shopping is still very much a leisure activity as there is little competition for leisure in the form of sports clubs or parks. In the West, shopping is often seen as a necessary but somewhat painful experience. This will evolve to be the case in India, but only eventually.”

CHALLENGES
According to Dutta, the primary challenge to successful catalogue retailing is logistics. “Merchandising, space management, frequency of mailings, offers and promotions need to be managed differently. But possibly the biggest challenge is logistics. Most modern retailers in India are still establishing their logistics framework around the country; and their entry into catalogue retail would take the complexity to a whole new level. Not to underestimate the issue of handling returns. In fashion merchandise, for instance, catalogues can run a return rate of as high as 40 per cent in some products,” he points out. Pumendu Kumar, associate VP, Technopak Advisors, says, “Any kind of non-store retailing, of which catalogue is also a part, is based on the credibility of the seller. The second thing is the range of products being offered and its prices vis-à-vis the market operating price. Unless the retailers are established as strong retail brands, customers will not be very experimental with catalogue retailing. And since prices change constantly in India, printing of catalogues at regular frequency is also a challenge.” Samar Singh Sheikhawat, VP-marketing, Spencer’s Retail Ltd, underlines the two key challenges, “Lack of domestic expertise to run catalogue retailing as a function, and the right merchandise – stock needs to be available to run catalogue retailing as a profitable business proposition and the right category of product needs to be chosen for this format.”

GETTING IT RIGHT
Levermore feels that furniture and large-ticket appliances are the strongest categories for this type of retail. Khosla, on the other hand, believes that as long as the customers have confidence in the brand, the movement of a specific product category is of no relevance. “For a brand to be a part of a catalogue, it must fit the target consumer profile, offer products that fit the assortment and should be able to deliver sufficient margin for the retailer to be profitable,” Levermore states. Dutta observes, “Brands internationally consider catalogues as a retail environment, which is in someone else’s control – so while the additional market footprint is welcome, the margins could be lower and the brand’s image is impacted by other brands in the catalogue.” Giving a brand’s perspective on being a part of HyperCity Argos’s catalogue, Nilotpal Mrinal, brand manager, Remington, says, “Argos is Remington’s largest catalogue retail partner in the UK. We are happy to work with them in India too. However, the concept of catalogue retailing is yet to take shape in India to the levels where it can contribute a considerable share to Remington.”

FUTURE EDITIONS
Technopak Advisors’ Kumat asserts that the catalogue business in India will have higher potential in the years to come. “The key enabling factors will include: customers having less time for shopping, established retail brands, better customer service etc. As the Indian market is spread over a large geography, brands can target thousands of consumers through a catalogue.“

Dutta adds, “Product integrity, predictability, and customer service are key success factors at the ‘frontend’. Customer service needs to be process and systems-driven. And with so many BPOs today, India is probably better geared for back-end customer service infrastructure and management practices to support catalogue retailing. From the point of view of standardisation, products such as mobile phones or durables meet the criterion of standardisation but price dynamics vary hugely – a catalogue can become non-competitive as soon as it is launched.” Levermore feels that India is still very much in the experimental stage and it will not be not possible to clearly predict the model’s full potential for some time.

Sharing suggestions for those in the business of catalogue retailing, Dutta says, “Most Indian retail catalogues have the look-feel of a business-to-business order guide, with a limited grid layout and no excitement! If retailers want to succeed with a catalogue, they should consider it as much a living environment as a physical retail store. In fact, it is a bigger challenge to create a catalogue that is as dynamic and alive as the store itself, considering that the customer’s only interaction with the brand are the pages.” Kumar’s checklist of do’s and don’ts for retailers reads as: “Do’s – price benchmarking with the market, good product range, dynamic catalogue, delivery on time and after-sales service; Don’ts – focus only on building the catalogue without proper attention to fulfilment.”

By Aniruddha Basu

MUMBAI (Reuters)

Friday December 5, 2008

Textile companies may not benefit much from the rupee’s weakness as a slump in global demand and prior currency hedges trim bottomlines in an industry dominated by exports, officials said.

The partially convertible rupee has fallen almost 21 percent in 2008 and hit a record low of 50.65 rupee against the U.S. dollar on Tuesday. But demand from some large retailers overseas has slowed, company executives added.

"Because of the recession, what is happening is that demand for products are going down," said Jayesh Shah, chief financial officer, at apparel maker Arvind Ltd, which gets half its revenue from exports to the United States and Europe.

Export growth "this year is going to be flat ..next year, its too early to predict," he said, adding he will wait for a clearer picture on demand trends from the West to emerge after Christmas, but is not expecting any growth in exports for FY09.

Others like Bangalore-based apparel exporter Gokaldas Exports have hedged currency risk till early 2009, leaving them with little gains from the rupee’s recent drop.

"Most of the exporters have done forex hedging forward covers, so we are not being able to encash on present rupee levels," said Gokaldas’ Managing Director Rajendra Hinduja.

"In a month or two when people finish their exposures a rupee at this level will definitely help. We will finish our exposure by Feb-March," he added.

Mumbai-based textiles maker Alok Industries which has not "hedged substantially" before is looking to hedge at the rupee’s current levels, said its Chief Financial Officer Sunil Khandelwal.

CREDIT WOES

However, the global credit crisis, which triggered the rupee’s fall in the first place, is also leading to slump in global textile demand.

"The weak rupee hasn’t really given us any advantage, when the rupee became weak, came the subprime crisis," Gokaldas’ Hinduja said, adding that the industry’s exports could drop 15-20 percent this year.

India’s total textile exports for the fiscal year ended March 2008 stood at $22 billion, below the government’s stated target of $25.06 billion.

"The general prediction is that orders would slow down because retail market is not doing too well," Arvind’s Shah said.

The worldwide slowdown has prompted buyers at retail chains to tighten inventory management and slow buying, said Devangshu Dutta, Chief Executive Officer of Third Eyesight, a consultant to textile and retail firms.

"The main fall-outs of this are that they cut back on quantities or delay order placement to closer to the season," he added.

Alok Industries’ Khandelwal said some players may benefit from the recession as US retailers would seek to consolidate their sourcing by choosing fewer vendors.

But Indian firms would have to make products more price competitive as the product mix in the US and European markets have shifted towards cheaper ones, he said.

To cut down their procurement costs the retailers would want to negotiate bulk orders at bulk prices, Arvind’s Shah said

"We may be able to reduce prices…but that may not necessarily result in increased exports," he added.