PS: We would like to know how KAS Asia is managing this phase of uncertainty?
Virender: Australia has done a tremendous job in managing the virus. We also faced store closures and low customer footfall but business has been extremely good. We have seen good growth in terms of sales numbers. In fact, we were falling short of inventory and the sales were good in May. We were short of goods so we were chasing the orders to be fulfilled and fill the stores. So it was a positive event. There could be reasons for it. We really do not know those factors but so far things have been manageable.
PS: What is the impact of Covid 19 on retail business?
Virender: Harsh reality is that Covid impact is still far from being over. We are already seeing bloodbath in global retail industry as many big names like JCP, Jcrew, Neiman Marcus, have filed for bankruptcy protection and many others are struggling to maintain their cash flow. Retailers are downsizing their teams, cutting their inventory cost, looking at liquidating existing stock and looking at all other venues to cut down their operating cost. All these actions are directly impacting supply chains across the globe, be it garment manufacturers, raw material suppliers or logistics service providers or all other supporting industries. There will be reduction in both demand and supply. On supply side, nearshoring, on-shoring, trade barriers, factory closures, ability of countries to deal with Covid will impact the numbers. Businesses which have a strong and viable customer value proposition will survive and thrive in long run. Things do not look positive for another 12- 24 months.
PS: Are you placing new orders or inventories are posing a big challenge?
Virender: When Covid started we had to put orders on hold and then we again started chasing orders as there was sudden demand when lockdown opened in Australia. Now more orders are there and inventories are less. New FY has started in Australia and things look better.
“Use of PLM platforms, use of digital technologies like 3D sampling, fitting, digital colour approvals, digital showrooms, AI and Data analytics will play a significant role in driving efficiencies. Retail prices are constantly depressing for last many years, so the only way to have a positive bottom line is to constantly invest in improving efficiencies across the supply chain.”
PS: What products will work for India and what is your sourcing strategy?
Virender: India is and has always been on growth radar for us, but it does not imply that we are not having business from Bangladesh or Vietnam but we try to maintain a balance.
We would like bring to as many products as possible but India has a limitation with products. They still work on cotton and non- cotton products or synthetic are still not India’s strength. It is high time that we focus on product diversity, competitive supply chain , improving port infrastructure, investment in automation/technology, collaboration with world class manufacturing companies and last but not the least, Government of India needs to lay out a platform by bringing industry friendly policies which can help investment into this sector and make this textile/apparel industry economically sustainable.
PS: What is the sourcing strategy for these times?
Virender: One of the key lessons that this pandemic has taught us that narrow sourcing strategies are not necessarily the best approach to navigate a global disaster. Companies that relied heavily on one or two nation for any aspect of their products, have found this period extremely difficult. Also the lack of agility in adopting to the fast changing needs has been another key concern in the last few months.
“Suppliers who have deep pockets and good financial strengths, with multi product capabilities, product and fashion sensibility and the most important factor will be relation.”
Building agility in process will become a key metric in supply chain along with price and value. Having said that, we must believe that crisis brings opportunity as well. It is extremely important that industry get their act together, learn and become efficient, right size their product offerings, focus on innovation and all this must be well supported by digital capabilities. The digital business has shown some signs of strength though retailers still need to figure out how to make e-commerce business more cost effective.
PS: Which way production will move and which countries will get advantage and which ones not?
Virender: This is a constant conversation in industry that what is going to be the next cheapest sourcing destination. Countries like Ethiopia and Myanmar are already in play and there are some more opportunities being explored in other African countries. There are lots of conversations around building near shore capabilities like developing central/south American countries to support supply to North America. Also lots of efforts are being put to build onshore capabilities as well. We need to identify where we need speed as everybody cannot be Zara or H&M there are some suppliers who work on different model. Like for basic program can be done in replenish models. Lead times for fashion segments will further shrink.
PS: How will manufacturing industry change in post Covid period?
Virender: I see that people who did not have deep financial pockets will move away. Buyer and seller relation will improve and further consolidation will happen. It is increasingly becoming important that supply chains stay agile and respond quickly to consumer needs. So there is already and will be an enhanced focus on delivering goods in shortest possible time frames. We need to look at engaging more effectively with our supply chain partners to ensure that we build models which helps in delivering things faster. Retailers and brands needs to be a better job on forecasting the demand, working on creating sourcing platform for materials by curtailing as much risk as possible.
“Thus retailers and manufacturers have to offer value and affordability to consumer so that they are able to bring consumers back to stores or online medium and whatever money they want to spend they can spend on their product and buy.”
PS: How will consumer sentiments change?
Virender: Sentiments are really low and in such a situation consumers do spend carefully and even if they spend they will be inclined more towards essentials. Affordability and value chain models will come into play and they will love to have value for money. Thus retailers and manufacturers have to offer value and affordability to consumer so that they are able to bring consumers back to stores or online medium and whatever money they want to spend they can spend on their product and buy. Retailers will have to be very innovative and to attract customers create omnichannel platform. Thinking out of the box is the only solution. Health & safety would be a top priority. Digital and alternative fulfillment models will become must have models.
PS: How according to you fashion retail business would change post Covid period?
Virender: One thing is for sure that clothing industry in general will be severely impacted. It’s not that world has not seen economic shocks in the past like great depression, but the more complex aspect about Covid is that it has kept consumers homebound for months fearing infection and this was not the case during great depression. This has not just taken lives, it has serious impact on livelihoods for many. Consumers are anxious and there has been a historic rise in unemployment. Consumers are cutting back on spending. There are lots of uncertainties around us.fashion.
PS: What will be the new normal in fashion and retail?
Virender: The seasons will be lesser now and mainly two big seasonal developments will exist, read and react and test and chase models will work now onwards. Right quality at right time has been a big concern during last few months.
PS: As a retail chain what do you foresee?
Virender: For the US Retail, Thanks giving / Christmas are big period where they normally see an upswing in sales, but now in Covid environment, consumers might still be wary of gathering in large crowds. So retailers will have to adjust their marketing calendar and look at creating fewer pressure points on sales days and ensure speedy digital fulfillment capabilities.
PS: What type of vendors you will be working with now?
Virender: We are looking at diversifying our sourcing to different countries, but we are looking for vendors who have the same thinking and are on the same page like us. For instance suppliers who have digital sense and vision in terms of having PLM platforms, 3D capabilities, Digital colour pool capability, etc. Traditional ways of working will not be valid and automation will be the future in demand. Suppliers who have deep pockets and good financial strengths, with multi product capabilities, product and fashion sensibility and the most important factor will be relation.
“We would like bring to as many products as possible but India has a limitation with products. They still work on cotton and non- cotton products or synthetic are still not India’s strength. It is high time that we focus on product diversity, competitive supply chain , improving port infrastructure, investment in automation/technology, collaboration with world class manufacturing companies”
PS: How are you working with suppliers in these times?
Virender: We are engaging with our partners on their plans to come back on full scale operations. If they are too aggressive then it can back fire too, few Covid cases in the factory can put them on back foot and they will be forced to shut down which will put all plans in jeopardy. So we are our suppliers also to have a little cautious approach, maintain proper hygiene in factories to ensure that they are able to run their operations keeping health & safety of workers / staff in mind. We are helping them with additional production time wherever possible. A large portion of our business is on self -certified inspections, so we have put in more trust in our partners to allow them to be taking more responsibility. Better demand planning, efficient inventory management through replenishment models. Building digital capabilities, assessing right work at right place Australia & China are good growth markets apart US and EU.
PS: What type of products will work in the long run?
Virender: Value proposition will be very important and they have to be offered. With WFH being the new normal, the biggest growth we have seen is in active, leisure and casual apparel categories. Performance finishes are in demand and if you talk about general merchandise, soft home segment is growing. In apparel, Woven shirts / bottoms, along with Suiting, dresses has been on decline, in fact even before Covid, these categories were under pressure due to changing consumer preferences. These categories will be compressed for a while, but once things get started normalized, I am sure these categories will bounce back. Sustainable fibers, sustainable washes will continue to gain momentum.
PS: What will be the role of technology in coming times?
Virender: Sometime back, during a sourcing conversation, one of the leading sourcing experts actually made a key statement that next big sourcing destination won’t be a country, it would be digitisation. He was right as everyone is now feeling the serious need of building digital capabilities and digital assets. This is going to be biggest capability which retailers and manufacturers need to build on as this will help in driving efficiencies and help in transformation of the industry which is long due.
In manufacturing side also digitalisation will be the key. The focus will remain on increasing automation / robotics in manufacturing process. Use of PLM platforms, use of digital technologies like 3D sampling, fitting, digital colour approvals, digital showrooms, AI and Data analytics will play a significant role in driving efficiencies. Retail prices are constantly depressing for last many years, so the only way to have a positive bottom line is to constantly invest in improving efficiencies across the supply chain. It is not just related to product, it involves process as well. Product and process sustainability will drive financial sustainability.
Some of the more innovative models in play are use of autonomous robotic vehicles for contactless delivery.
PS: Do you think that sourcing might shift away from China? And which countries will gain the advantage out of it?
Virender: In general, a lot of retailers are de-risking their China exposure and the biggest beneficiary of this has been Vietnam so far and I believe they will continue to grow, since they have scale, multi product capabilities and most of the large operations are controlled by seasoned Korean and Chinese experts. Indonesia has the potential to grow with investment in supply chain capabilities. African countries like Kenya, Ethopia and Egypt will continue to grow gradually. Central and South American business will grow as well keeping in mind focus on near shore and proximity to the US. Bangladesh has been growing in past against all odds and I feel a lot of retailers are looking at de-risking Bangladesh as well. But I don’t see Bangladesh getting reduced in years to come. Cambodia will be declining due to their human rights situation.