Indian home textile manufacturers who are mainly dependent on exports for their revenue were struggling to maintain their growth during the last few years. Shift in consumer preferences in terms of shopping style and emergence of e-commerce as a better way of shopping home textiles had taken domestic home textile manufacturers by surprise as they took some time to come to terms with the reality. However, things had started falling in place towards the second half of the previous financial year and most of the manufacturers were seeing growth in exports coming back to the industry. However, COVID-19 breakout saw their calculations going haywire. Lockdown brought their growth engine to a grinding halt.
Quicker recovery in demand
Once the lockdown was lifted home textile manufacturers too faced the same set of problems as other industries – labour shortage, closure of malls and shopping complexes, logistics problems, etc. Further, customers were asking for favourable credit in the initial period of crisis which has normalised now. However, looking at the present condition of the industry one can safely say that home textiles industry is one of the few industries who have been able to come out of the woods with minimum damage. Experience so far suggest that the manufacturers who had placed greater reliance on essential stores were relatively less impacted by those with higher number of non-essential stores in the channel mix.
Our interaction with industry people reveals that home textiles players are witnessing better traction on MoM basis. There have been structural changes which have resulted in increased demand for home textiles product (considered as hygiene product). However, some caution that possibility of this emerging as a pent-up demand cannot be ruled out. Most of the manufacturers have healthy order book who expect a robust second half and don’t be surprised if their revenue surpasses the 2HFY20 level.
Vertically integrated manufacturers get headstart
Producers with vertically integrated facilities having workers township in the vicinity were able to restart their operations much quicker than others. For example, Welspun India was able to restart its operations from mid-April itself which gave the company good head start over others. On the other hand, Himatsingka Seide could start its operations only in June due to labour shortage and supply side disruptions. For most of the suppliers in the domestic market demand started improving since June as the home textile products are considered as hygiene products.
China’s dominant position
China holds a dominant position in fashion, utility and institutional bedding category where it enjoys 80-85% market share as against which India’s market share just 5-7%. However, China+1 strategy being adopted by many international customers may result in part of this demand being diverted to other countries, including India. The only hitch here is that these are man-made fibre products, where the duty rates are higher making Indian products uncompetitive on global platform.
COVID-19 may play spoilsport
One hope is that after the Coronavirus breakout USA and Europe may start spreading their source of supply for home textiles between various countries as the pandemic has clearly brought out the risk of over dependence on one country for supply. This may result is shifting of part of the orders to other countries from China and India is expected to be beneficiary of this shakeout. Its believed that Indian home textile players are in a sweet spot to capitalise on the demand moving out of China in other categories (fashion/utility and institutional bedding). If that comes true, India will further enhance its dominance in the sheeting category. It should be noted that India already accounts for 50% of total US market in sheeting category. However, with COVID-19 not showing any signs of abatement in the country with death toll mounting day by day, India may lose out this golden opportunity to other countries like Vietnam and Bangladesh. According to industry sources, incremental inflow of new customer enquiries are visible but will take time to materialise. However, volatile Indian rupee is a matter of concern for the exporters. Of late, rupee has shown sharp movements on either side which has made price fixation little tricky business.
E-commerce takes centre stage
Within India too life has become unpredictable with various states announcing local lockdowns at will which is hampering movement of goods. Also, malls and hospitality sector have just started opening after the lockdown and footfalls are miserably low which is worrying issue as the festive season is about to start. Unless the situation improves in next few weeks and that too very drastically, another disappointment may be waiting for the home textiles companies. However, online platform may provide some consolation for the home textile manufacturers who may shift their focus towards e-commerce. This may call for reworking of the strategies for home textile manufacturers – not only for this festive season but forever.