The Traditional Fashion Industry: Challenges and the Way Forward

Fashion styles have low shelf time & high freshness. This leads to dead inventory or loss of sales. And esp when sold on credit - this dead inventory is sometimes returned to the supplier.

Indian fashion industry is large (> $100 billion annually) but highly fragmented - more than 90% dominated by 20 lakh+ retailers & 1 lakh+ manufacturers & wholesalers. Manufacturers in various hubs make product of a certain category. They supply to wholesalers, typically in district headquarters, who then sell to retailers within 100-200km vicinity.


These manufacturing hubs,  such as Surat, Tirupur, Ludhiana, Ahmedabad, Jaipur, Delhi, Mumbai,  have become complete eco-system themselves, with separate companies doing each step of manufacturing – weaving, dyeing, printing & surface ornamentation. It’s often commercially better for a company to get these outsourced as job work than put on their own factories. We still refer to them as manufacturers because they control the designs, take the risk of inventory & are the starting point of distribution chain.


Some industry challenges:

  1. Job work based manufacturing has reduced the entry barrier for trading manufactuers. Ethnicwear market has been shifting to westernwear, and traditional export houses & international exporters now push products in the Indian market, leading to oversupply.
  2. Fashion trading is fundamentally is inventory led. Institutional credit penetration is low, with wholesalers & retailers relying on credit from their suppliers or vendors. Credit creates a friction between a new buyer-supplier transaction, limits a buyer’s options, and exposes the supplier to the risk of default.
  3. The products supplied are rarely differentiated in design, quality, positioning or brand recall. Hence, fashion manufacturers or traders compete amongst themselves on prices & credit terms, leading to the erosion of margins & seller unfriendly credit terms.
  4. Discovery & product information gaps still exist – the 20 lakh+ retailers do not have access to all the product catalog that maybe relevant to them.
  5. Fashion styles have low shelf time & high freshness. This leads to dead inventory or loss of sales. And esp when sold on credit – this dead inventory is sometimes returned to the supplier.


There a few things a fashion trader can do to counter the above:

  1. Focus on product differentiation. It could be the design, fabric, make or targeted positioning. Instead of a vast product variety, a more selected range is better. A manufacturer, should invest in following trends, working with vendors, and having a strong design team. A wholesaler or retailer must keep track of latest designs & catalogs from manufacturers. Online B2B marketplaces help.
  2. Create digital catalog. A fashion business wants its designs to reach more prospective buyers, and thus needs product images. A business need not invest in a professional model photoshoot - a simple mannequin or a table top shoot of the neatly folded garment, showing of it’s important aspects, multiple colors – set against a neutral background in high resolution often works. Digital draping sites & model image generation tools allow a model shoot quality at a lower cost.
  3. Keep existing buyers updated about product catalog. Organize your buyers into whatsapp & facebook lists / groups, and share recent product catalog with them with inventory updates. Product updates keeps the seller relevant & fresh in the buyer’s mind. B2B Channel sales platforms help manage existing offline sales.
  4. Create digital presence. Creating a facebook or instagram page, and keeping it updated with one’s catalog is a starting point. Registering on B2B, social selling or B2C marketplaces / platforms , or creating one’s website a merchant to be discovered by new buyers.
  5. Specialized credit partners. NBFCs, FinTech companies or even B2B platforms now arrange credit for retailers, thus reducing the friction in retailer’s purchases without compromising his choices. For a manufacturer or wholesaler, the credit partner takes over the buyer’s risk of default. Insurance companies also offer custom credit default insurance policies.
  6. Keep track of product movement data. It’s hard to predict demand for a specific style. While an inventory led trader takes a bet on future trends, market often throws up surprises. Keeping close watch on downstream sales data of fast moving & non-moving styles even before repeat orders or returns helps a merchant plan liquidation or repeat production. Talking regularly to buyers, skip channel surveys or using some of the new upcoming multi-level channel sales platforms help.
  7. Digitize internal systems, processes, inventory & accounts. Garment manufacturing requires multiple raw material & manufacturing steps. Product lifecycle management (PLM) software manages designs & production processes – preventing delays due to less or excess raw material. Mature accounting software do auto-reminders on receivables overdues, inventory thresholds & more. Good warehouse systems allow accurate inventory, preventing order cancellations & leading to an improved buyer experience.
  8. Result oriented team management. Fashion traders need to institute result based ownership amongst the employees, defining the key metrics, ground rules of execution, and link their compensation to results.

While the fashion industry faces challenges, innovation in technology & business models, opens up options to handle them. Industry must be open to & make the best use of these innovations.


The article has been penned down by Arvind Saraf, Founder & CEO, Wishbook

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