Apparel market outlook is promising

Even though India’s overall inflation rate has steadily increased, Indian clothing shoppers can now see some signs of price easing.

Indian apparel manufacturers and retailers plan to reduce clothing prices by 10-15% in the spring and summer next year, beginning in February in spring and summer. Reasons for price cuts are: sales are decreasing, raw material (cotton) prices are adjusting.

Apparel manufacturers and retailers, such as Pantaloon retailers and shoppers, have been raising prices by 8 to 18% due to increased consumption taxes and higher cotton prices. Retail companies also reduced their net profit by 2% in the first quarter of 2011-12. This was due to the decline in same-store sales after apparel prices rose and consumer demand weakened.

In last year’s budget, the government imposed a 10% consumption tax on branded apparel, forcing manufacturers and retailers to raise prices.

Similarly, in the past 8 months, cotton prices have fallen by nearly 50%. Cotton prices have plummeted from Rs 63,000/candy to the current Rs 39,300/candy.

Rahuermeta, president of the Indian Apparel Manufacturers Association, said that the real clothing price will fall in the spring and summer of 2012. Since then, garment manufacturers will consider the factors of falling raw materials prices. He expects the price to fall by 10%.

Some companies, such as apparel makers and retailer Provogue, have seen prices drop 12-15% after cotton prices have fallen.

However, Arvind Singhal, chairman of the consulting firm Technopak Consulting, believes that the price reduction plan is more related to the decline in consumer demand and less relevant to cotton price adjustments. Consumer demand is declining. If businesses and retailers want to maintain sales, they must cut prices. Even Diwali sales are not as expected.