Arvind Singhal, founder of Technopak Advisors, expects the Indian textiles industry to be worth about $220 billion by 2020. In an interview with DNA he spoke on the emerging trends in modern retail and why allowing FDI in retail would work in favour of Indian consumers. Excerpts:
What kind of growth is the textiles and apparel industry poised for?
From a current size of about $70 billion, the textiles industry is going to be about $220 billion by 2020. We are talking about growth of `6-7 lakh crore here. Exports itself will provide a huge opportunity — about $80 billion of the growth will come from exports by 2020. Many things are coming in favour of India — China is getting more expensive and its domestic demand is becoming very strong.
Labour rates in Bangladesh have also gone up by almost 100-200% and Sri Lanka has lost its duty free access in EU (European Union). India remains competitive because domestic demand is attracting more and more investment.
How are Indian companies in the textiles and apparel space faring?
About 6 or 7 very large companies have emerged in recent years… Soon we will have at least 7 multi-billion dollar textile companies in India, which was never the case earlier.
In recent years, Vardhaman and Arvind Mills have been the two largest textile groups, followed by Raymond.
All of a sudden, Alok has become India’s largest textiles group. Abhishek Industries, Trident, Welspun, Bombay Rayon, SKNL these are some of the new kids on the block. They all have made good investments in recent years. These companies are going to be multi-billion dollar in size. This is good for the country.
Also, these companies are diversifying their fabric base, which should be a growth driver. India was known largely for cotton textiles; that has been one big limitation for Indian textile industry.
Is apparel overpriced in Indian retail?
I would say that there is a much bigger opportunity at the value end of the market and there are very few players there.
We need more players addressing the value, affordable fashion kind of a segment. We require more players like Koutons, Cotton Countys, more equivalents of Primark in the UK, of H&M in Europe. Every sector has seen growth in the value segment, be it automobiles, telecom or durables.
Why organised textile players in India have not looked at the value segment is a mystery I would never have an answer to. I’m sure it’s a question of time when we see growth coming in. I only hope that the government opens up FDI in retail. The moment an H&M comes in to India, you will see 20 other players enter the same value segment.
Is FDI a way for cash-strapped retailers to exit the business?
I don’t think so. I think FDI is needed for a variety of reasons. Retail is the only sector that doesn’t get FII (foreign institutional investor) money. Retailers may not necessarily seek to exit — it is a way of seeking capital. In some cases, it is access to know-how on supply chain, sourcing.
Whether it is Walmart or a Reebok operating here, almost their entire team is Indian. This is not about trade-secrets but about disseminating the know-how.
How are we perceived by international players?
There is a very positive sentiment about India outside. I think there is more of a negative perception within India. International players believe the opportunity in India is real and, therefore, they will all be very happy to be here. Yes, there are challenges on the infrastructure front that we all talk about everyday.
Is there a guarantee that, with FDI opening up in retail, product prices will go down?
Absolutely. The prices will go down significantly. I don’t know why the government is talking of protecting the kirana stores, because they are the ones that cause inflation. If you just see the prices for fruits and vegetables at your local shop and check that with the wholesale market price, you will see a difference of 50-70%.
Who is making that margin? Unless we bring in competition, consumers will pay more. Clothes in India are today more expensive than those in Italy. Even USA is cheaper.
Is food becoming an even bigger category for retailers?
Food and food services are going to be big. We are moving into a time when more and more women get into the work force and there is less time spent in the kitchen. And consumers are ready to experiment with food. Players who are not present in the category will enter the category and eventually crack it. It is a very rapidly growing category.
What emerging trends do you foresee in retail?
The first one is value retail; specialty retail is another one. For top 20-30 cities specialty retail is a huge opportunity. The third big trend is, in another 4-5 years the biggestchallenge in selling will be the internet. A lot of people will be able to sell and service online. Cellphones are becoming payment gateways. People will prefer to buy a lot of things from their mobile phones, desktops and laptops.
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