After GST, Fashion Foreign Brands targeting India Expansionby Your RetailCoach YourRetailCoach
On global cues of the fashion industry moving towards the Orient, in India the success story of any international brands lies in understanding the pre and post GST era. Exclusive European and US brands have extended their business in many Indian metros. The young and aspirational crowd, classic middle aged bunch throng the freshly smelling new stores with enthusiasm. Who says, GST has been a spirt dampner, should check out a few stores like Levis, US Polo Association, Charles & Keith, H & M, Zara, Mango and Uniqlo, the latest entrant in the growing apparel industry in India. Each brand is changing the social fabric of the country with their retail experience.
Here is a quick overview of how some brands have gained
after GST implementation.
Pre-GST tax structure
Not many players in the apparel
trade are likely to forget the unorganized taxation regime as it hurtles into
the dustbins of history. Manufacturers, retailers and all stokers in between
knew they had to pay 4.5% VAT along with 2% excise duty. Added to this were the
new way of serving consumers-via e-commerce portals. Many branded retailers
were also giving heavy discounts and it added confusion to the pricing
structure. Various portals and even showrooms offered schemes like ‘buy 2 and
get two free’ schemes. Added to them were the end-of-season sales that made
customers wonder the actual price of the garment. Now all that has changed.
Before, GST came into force, branded clothes above Rs.1000 were being taxed at
flat 12%. The problem was accelerated by
the technical and technological glitches that accompany with the new systems.
As foreign brands are used to the system for them it has been an easy-pesy solution to showcase their
polished stocks. They have benefits the most by the technological ease and GST
software compliance. It is now left to the locals to match their fabrics and
brands with them.
Post GST structure in 2018
As e-commerce also chips in, the foreign brands are able to add more muscle to the local industry by giving employment and introducing global norms. The Indian apparel industry is shaped by growth from three main divisions-men’s’ wear, women’s’ wear and kids wear. They all come under the same GST ambit. Shirts, trousers, and denim wear hold the Rs 1,24,423 crore (US $19 billion) market.
In 2018, Japanese brand Unilqo,
has entered India and plans to go solo with the brand. Their main global rival
is already in IndiaHeinz and Mauritz (H&M) have already taken large retail
space in leading malls. It is touted to become the fast fashion brand like
Mango, ZARA and Forever 21 to get the benefit of the new GST regime of Asia’s 3rd
largest economy. It is all geared to cater to the young and aspirational class
with its fresh stocks. They aim to open 10,000 stores by 2022 all over India. As
FDI in retail sector improves, one tax system is contributing at a national
level. There is no confusion over different tax slabs. This is a relief to all
players as a level playing field has emerged.
GST is re-shaping the retail industry
Currently, the foreign fashion brands that have entered the
country have bought ready stocks from their manufacturing units. There is no
additional paperwork or documentations. There is no additional burden of double
taxation because they are coming from another country. Ultimately it is the
consumer who stands to benefit. For example, if a person a paying the same
price of the garment no matter where he buys it from. It makes sense to make a
local purchase where he will be allowed fitting, trials, and options of
choosing sizes and colors and touch the garment. It may be hard for the
consumer to understand that even if he is paying a slightly higher price, the
benefits are enormous. The scissors have already been used to cut a lot of
wastage in terms of many other business processes. In making the high couture
trade more appealing to the Indian consumer the brand conscious consumer does
not feel cheated as one price rules across the country.
For the companies that have already made the foray the
experience is better and fairly competitive. They find ease of business
· Control right from the warehouse for the inventory
· With technology it is easy to monitor stocks in various showrooms across the country
· With the use of cashless transactions, every deal is transplant
· Internal costs of transportation, logistics and delivery is more organized
· In every state, the taxation is uniform and unburdened with different payment structures.
· With GST, there is no delay in any supply chain, payment to vendors, distributors
· Employees are being trained to utilize their time to focus on customer engagement rather than on the ‘sale’
· The PoS system ensures that the potential consumer eventually comes to the counter and makes the purchase
· Different payment schemes have added the impetus to buy apparel at no extra cost
There is no reason why a brand’s equity will not improve
with the bespoke brand experience for the customer.
About YRC: YRC is a Management Consulting Company with head office in Pune, India. We work across 03 verticals, Startup, SME & Corporates. Our expertise lies in developing Standard Operating Procedures (SOPs) for companies and helping them organize and expand. We have a cumulative experience of more than 15 years. Our holistic approach helps us to devise the best of the management practices for the organization.
Created on May 7th 2018 02:50. Viewed 159 times.