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Winters are getting shorter and warmer in India

Winters are getting shorter and warmer, hitting winter wear makers hard, particularly in the key markets of north and north-east India. Over the last two years, winter wear sales in India are estimated to have fallen by at least 10-12%, as per the Clothing Manufacturers Association of India (CMAI).

The collections are getting smaller and fabrics lighter. Woollens are increasingly being ousted from winter wear collections. Logistics are getting disrupted, as is production. There is leftover stock, price-cuts and clearance sales. Margins are under-pressure and revenues are plummeting. But, “there is no record of all this,” says Rahul Mehta, president at CMAI. “No consulting firm or research agency has been tracking winter apparel, let alone the impact of climate change on its sales.”

Of course, India isn’t the only country with shrinking winters. There’s the United Kingdom, where unseasonably warm weather can cost non-food retailers $51.3 million per week for each degree rise in temperature, according to an analysis by Met Office and the British Retail Consortium (BRC). In New Zealand, winter has gotten shorter by a month over the last 100 years, while unseasonably warm European weather has led to the decline in the sales of one of the largest fast-fashion brands Hennes & Mauritz AB, better known as H&M.

All of this impacts business. The Ken spoke to more than half a dozen apparel companies to look into the changes such brands have gone through and the challenges that await these businesses in the near future.

Out with the woollens, in with the linens


The year was 2015, the fifth-warmest year in India since the early 1900s and the first one when distributors of Ludhiana-based apparel brand Monte Carlo saw a drop in sales of woollen sweaters. A first in the company’s 34-year history. While the impact was small, its ripples continued to be felt in 2016; distributors were left with the previous year’s stock. In fact, 2016 was the warmest year in the recorded history of India, and 2017, the fourth-warmest. “The winters in India are down from a five-month period to just two months. Winter temperatures in November are above normal and post-January start rising again,” said Mahesh Palawat, chief meteorologist at weather services firm Skymet.



In the process, outerwear retailers such as Blackberrys, Woodland, Numero Uno and Kapsons have struggled to keep up with the warmer temperatures. While overall winter sales have continued to grow for most brands on account of the high value of winter apparel—a common estimate says that the value of four summer t-shirts equals one sweater—Monte Carlo said that fabrics have undergone a change after 2015. “There are cotton jackets and full-sleeved t-shirts that are being increasingly sold. We have introduced cotton sweaters and now, we are adding linen sweaters to our collection as well,” said Rishabh Oswal, executive director at Monte Carlo.

$46 billion

The size of the fashion retail market in India, of which, menswear accounts for 41%, women’s 38%, and the rest is held by kidswear, according to a report by consulting firm Technopak Advisors.

This fabric phenomenon is not limited to Monte Carlo. Over the last two years, at least 15% of heavy woollens in Numero Uno’s collections have been replaced with lighter ones like cotton and linen, which have been excessively in demand. For instance, sleeveless jackets, an old product of Numero Uno, has seen a sudden rise in demand in recent years, “following which, the company has expanded the product line to accommodate multiple lighter fabrics (such as cotton, linen, and denim),” says Narinder Singh Dhingra, chairman and managing director at Numero Uno Clothing Ltd.

In the case of Bengaluru based-Arvind Lifestyle Brands, 70% of the new fabric is light. Even the heavy cotton jackets are being replaced with some gentler fibres. “There is a higher width of light warm clothes, rather than a wider selection of heavy winter wear,” said Alok Dubey, chief executive officer-lifestyle brands division at Arvind Lifestyle Brands Limited. The company operates five apparel brands—USPA, Ed Hardy, Flying Machine, True Blue and The Children’s Place.

While a lot of this has to do with the weather, the business also has to contend with other changes.

The first of these is better air-conditioning in offices. As more and more offices move to air conditioners, temperature control is no longer a problem. Then there’s the evolved fashion of layered clothing—dressing up in lighter garments, one over the other—which leaves little room for large, woolly sweaters. And finally, the increasing price of woollen wear itself. “Wool prices have gone up by 25% since last year because of wool supply shortage in Australia, which is a major exporter,” said Oswal of Monte Carlo. This, he explains, is on account of drought in Australia.

Most retailers The Ken spoke to found it difficult to put a financial value to the drop that has occurred in woollen sales in the last few years since their operations are pan-India while winter is limited to certain regions only. For most brands, winter wear sales come from northern and north-eastern states, as well as cities like Bengaluru whose IT professional population frequently travels internationally.

50% off: Goodbye, pretty penny


The two-month winter is increasingly being experienced in the months of January, February, and some days of late-December, a time, which, for years, has marked the beginning of festive sales and hence, discounting on winter apparel.

“The beginning of winter coinciding with that of discounting season hasn’t been good news for retailers. A five-month winter, divided pre and post-discounts, used to help in maintaining a balance in revenue,” said Mehta of CMAI.

Winter clothing stocks pile up through November and December and end up getting sold at discounted prices further putting pressure on the margins of retailers. For many of the apparel companies such as Monte Carlo and Jalandhar-based Kapsons, winter wear is a cash cow, given its high value. Warmer temperatures, thus, result in a double whammy. “One, lesser products get sold, and two, whatever does get sold is at a discounted price,” said Mehta. “Consequently, winter wear sales are estimated to have taken a hit of at least 10-12% over the last two years.”



Sustainable fashion

Ironically, for an industry impacted severely by climate change, apparel manufacturing is one of the most polluting sectors, accounting for over 5% of global carbon emissions.

The clearance sales and piled-up stock phenomenon can be different for e-commerce platforms that have their own discounting seasons, and, at times, have older stock to sell (depending on the agreement with the retailers).

The financial impact is much worse globally. According to Planalytics, a US-based research firm that tracks the impact of weather on businesses, warm temperatures cost apparel stores in the US an average of $572 million between 1 November and 31 December in 2015, compared to the same period the year prior.

In the UK, the negative impact on retailers, in the same period, was estimated at around $120 million. Increasing price-cuts and clearance sales are now adding to these woes. Earlier this year, as mentioned above, H&M shares fell to their lowest point in nine years after it declared a second straight quarterly sales decline in March due to warmer temperatures. H&M had slashed prices to get rid of unsold winter garments after unseasonably warm European weather in December and January, eating into the overall revenue of the firm.

In 2016, American department store chain Macy’s had to cut 4,500 jobs and close 36 stores, following significant sales decline during the holiday season; the company had attributed 80% of this decline to the lack of sales of cold-weather gear such as coats, sweaters, boots, and scarves.

“It’s no longer a seller’s market; consumers are taking a bigger cake and margins are under pressure with retailers witnessing a drop of 6-8% in the recent years,” said Darpan Kapoor, vice-chairman at Kapsons. There’s little doubt that retailers are struggling to adjust and are cooking up plans to make peace with Mother Earth’s new ways.

Coping with the heatwave


Monte Carlo has a new collection this year, one that changes the age-old norm of four apparel seasons in a year. A pre-winter collection that would sell general T-shirts, shirts, and denim. That’s one way to go, supply what you trust the most. The other is to adjust logistics and production to keep up.

“Winter as a category is growing but the summer's contribution in our overall revenue is going up.”

RISHABH OSWAL OF MONTE CARLO

A few of the international brands that are heavy on winter apparel have reportedly started working with meteorologists and weather specialists to get back in form. Back home, companies like Arvind and Woodland are, for now, focusing on the supply chain to avoid carryovers of one year being passed on to the next. “It is getting more and more difficult to plan the year. We watch the weather closely and have reworked our logistics to focus on a faster turnaround in production—keep the fabrics and raw material ready for as and when the winter hits,” said Harkirat Singh, managing director at Woodland.

According to another report by Planalytics, pre-season inventory optimisation alone can return hundreds of basis points of the total revenue to a retailer. On average, retailers see 5% of their total annual revenue affected by the weather, with seasonal businesses experiencing a much greater impact.

Weather changes can no longer be ignored, nor can their impact on businesses. While globally, apparel companies with operations in Europe—which has and is expected to witness intense floods, droughts and heat waves—have seen a whopping decline, Indian retailers are just beginning to witness and accept the change.

As the impact of climate change worsens, apparel companies are expected to feel the heat. The future of winter garments, without woollens, is already unfolding in India and it would take a lot more than some lucky hunches to identify and keep pace with the changing patterns of winter and winter wear. “It’s not that sweaters will just die away; it’s just that the fabrics that we knew of may not remain,” said Oswal of Monte Carlo.
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