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After GST, fashion foreign brands targeting India expansion

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.

Rupal Agarwal
8th May 2018
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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 was 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 was 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-peasy solution to showcase their polished stocks. They have benefited 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 like 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 (the US $19 billion) market.

In 2018, Japanese brand Uniqlo 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 documentation. 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 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 for 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 an ease of business through:

· 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 a transplant

· Internal costs of transportation, logistics, and delivery are 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 the bespoke brand experience for the customer.

Article source from:  http://www.apsense.com/article/after-gst-fashion-foreign-brands-targeting-india-expansion.html

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Rupal Agarwal

YRC is a Management Consulting Company, especially for the B-C Sector. Our expertise lies into designing of Standard Operating Procedures (SOPs), Franchise Development, Strategy & Operations services, Process Audits & Training.

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