From Distribution to E.B.O's in Textiles

Deepankar Hemnani
Deepankar Hemnani Sep 29 2017 - 9 min read
From Distribution to E.B.O's in Textiles
Snatching its way up to become the second largest producer of textiles and garments in the world, the Indian textiles and apparel industry is expected to grow to a size of US$ 223 billion by 2021, Let's find out the traits of the textile Industry.

The Economy Booster

Snatching its way up to become the second largest producer of textiles and garments in the world, the Indian textiles and apparel industry is expected to grow to a size of US$ 223 billion by 2021, according to a report by Technopak Advisors. This industry accounts for almost 24% of the world’s spindle capacity and 8% of global rotor capacity. Abundant availability of raw materials such as cotton, wool, silk and jute as well as skilled workforce have made the country a sourcing hub.

The textiles industry has made a major contribution to the national economy in terms of generating direct and indirect employment and net foreign exchange earnings. The sector contributes about 14 per cent to industrial production, 4 per cent to the gross domestic product (GDP), and 27 per cent to the country's foreign exchange inflows. It provides direct employment to over 45 million people. The textiles sector is the second largest provider of employment after agriculture. Thus, growth and all round development of this industry has a direct bearing on the improvement of the India’s economy.

Why will it always Boom?

The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand.

The fundamental strength of the textile industry in India is its strong production base of wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool to synthetic /man-made fibres like polyester, viscose, nylon and acrylic.

The increased penetration of organised retail has evolved the retail sector undoubtedly and it will grow more and more rapidly with rising income levels that drive the demand of textiles.

Adding more to the greener side, textiles had a share of 60 per cent of the export market; apparels contributed the remaining 40 per cent and growth in building and construction will continue to drive demand for non clothing textiles.

The Evolving Consumer offer’s Luring Opportunities

Apart from the demographic opportunities, there have been many other new age transformations that lead to a growth in the aspirations and wants of an average consumer.

  • Young population: The median age of the Indian consumer is 26 years with maximum population lying in the age bracket of 15-60 years. It is expected that India will add another 140 million people in this consuming age group by 2020.
  • Higher disposable income: According to the Indian census report, the number of households with an annual income of USD 7000 or more is going to treble from about 30 million today to 100 million by 2020. There will be approximately 400 million individuals in the middle to high income bracket by 2020.
  • Growing media influence/exposure: The role of technology has changed the way people receive/share information. From social networking sites to electronic channels, information travels at the speed of light. The changing lifestyle and “western” culture has also influenced consumer demands and aspirations. People are willing to consume and develop a lifestyle akin to a developed world’s consumer.

  • Rising Eve power: With the growing importance given to a girl’s education and financial independence, there has been a rise in the total number of working women. An estimated 40-50 million working women, in the age group of 20-40 years, will be part of urban India by 2016. There has thus been a surge in women spending in categories such as apparel, grooming, personal care, eating out and electronic gadgets.
  • The Inception of Distribution

    Despite changing the face of how the fabric reaches out to the end consumer by evolving new channels, there was not a better way to move the fabric to a town with a mere population of just 50,000 people than distributing it through middle men’s. India, being such an enormous nation in terms of population needed more and more representatives to reach out to more M.B.O’s as well as wholesalers, which will also further reach out to more M.B.O’s to have a wider reach of the product. This process has garnished from decades because there are markets which still successfully work upon this model and are not ready to adopt the E.B.O format.

    Mohit Dhanjal, Director Retail, Raymonds: “If you look at the 80’s, the only channel you could sell your products through was M.B.O’s and these entrepreneurially driven multi brand outlets would vary from 1000 – 2000 Sq ft.”

    From Distribution to E. B.O’s

    The inception to move the fabric from the mills to the wholesalers and further to the retailers ignited the process of distribution in the country. Way back, when there were no exclusive stores, textile markets or even big M.B.O’s (Multi Brand Outlets), there was only a sales agent who would deliver the fabric to small M.B.O’s which will further use it as per the requirement of the consumer.

    Looking at the changing trends and the attempts to reach out to the consumer, the manufacturers observed that despite using a remote model to distribute the textiles, there was still a majority of population which wanted to explore the fabric and not just see it as a utility. This led to the inception of E.B.O’s (Exclusive Brand Outlet) in the textile segment to give the consumer a wider range of the fabrics.

    Mohit Dhanjal, Director Retail, Raymonds: “The Cognitive thinking of some visionaries in this business led to an experiment to open an exclusive Raymond’s showroom in King's Corner, Ballard Estate in Bombay in the year 1958. This made us realize the real power of our brand and a positive response to believe in this concept to take it forward.”

    The peculiar Demand

    One more specific approach through which textile firms generate business is the ‘made to order’ approach. This protocol is usually followed by big firms who look for specific requirements in the fabric that should be delivered by the firm.

    Ankit Trivedi, Head Knitwear Apparel, Arvind Limited:”We search for firms who are looking for specific fabric for their brand through our sources and identify the requirements to create a detailed fabric matching adequately with the demand of the company.”

    The Impeccable Textile Industry

    The majority of the leading players in the Indian textile industry too have decades of experience and setting up a textile mill is not at all a normal entrepreneurial journey.

    The major drawback is a fortune that is required to become a manufacturer and an appropriate space to start the production. Apart from this, there are various regulatory practices that a manufacturer has to take care of. The uprising stake of opportunities in this sector has many other ways to grab a droopy piece of the textile pie.

    How to become a Textile Distributor

    Starting a successful business of textile distributorship means you will play a crucial role to get the products which the brand supplies from the point of origin (the factory) to the points of purchase provided by the retailers. Steps for starting are:

    Search for retailers

    You will choose the retailers you would be servicing and research if their needs are in order to satisfy their demands or not.

    Storage area is important

    Practically, you will also need storage area for large amounts of products. So better start looking at warehousing options.

    Knowledge of fabric is ‘must-to-have’

    Textile and fabric distribution business is based on your knowledge of fabric. What you have to do is:

    1.Having a keen eye to spot fabric trends

    2.Negotiating production cost

    3.Stocking your warehouse with the right quantity of fabric yardage.

    Running business as a distributor in textile sector also means developing a broad portfolio of skills: From researching, to customer care and sales skills

    You need to understand the logistical and financials aspects of the operation including knowledge of setting up a warehouse. In short, it means that any distribution business which aims to grow beyond a narrow local region should be needed to hire a team with those skills.

    The Policy Support

    Policy support has been a key growth driver to enhance the face of this sector and provide a helping hand to the people venturing in this industry.

    TUFS (Technology Upgradation Fund Scheme): • USD0.39 billion has been allocated for TUFS scheme for FY15

    National Textile Policy: The policy was introduced for the overall development of textile industry. New draft for this policy ensures to employ 35 million by attracting foreign investments. It also focuses on establishing a modern apparel garment manufacturing centre in every North Eastern state for which Government has invested an amount of USD3.27 million.

    Foreign Direct investment: FDI of up to 100 per cent is allowed in the textile sector through the automatic route.

    Scheme for Integrated Textile Parks (SITP): SITP was set up in 2005 to provide necessary infrastructure to new textile units; under SITP, 40 projects (worth USD678 million) have been sanctioned

  • Out of these 40 projects, 27 have started production. 16 projects has been completed and
  • as on November 2014, Government has invested a total of USD21.96 million for 21 new textile parks and the remaining 13 textile parks has been given the in-principle approval under SITP.

    The Conclusive Note

    Growing domestic market and increasing opportunities in Global trade will create enormous scope for Indian players. In addition to favorable demographic dividend and relatively stable economic conditions, increasing disposable income, greater media influence, higher brand consciousness are acting as growth drivers for India’s domestic market. Kidswear, innerwear, work wear & uniforms, online apparel retailing and home textiles are evolving as promising segments for Indian players. To tap the above opportunities and sustain businesses in this changing consumption scenario, companies will need to align themselves with the market requirements and develop required competencies. Without a doubt, there are ample opportunities that exist in the textile and apparel space.

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