The Hindu Business Line : Apparel retailers face-off against cos over margins

THE retail boom in branded apparel is beginning to show its flip side. The Delhi Apparel Retail Association (DARA) has intensified demands for at least 33 per cent retail margins on branded apparel even as major companies, including Madura Garments and Arvind Brands, dubbed it "unrealistic."

Mr Manoj Aggarwal, President of DARA, said, "The demands raised by our association are justified. We end up making a net profit of less than 3 per cent under the current system." DARA comprises the most influential multi-brand outlets (MBOs) operating in Delhi and is, perhaps, the first association of apparel retailers anywhere in the country. It has been at loggerheads with top branded apparel companies over the issue of better retail margins in the last few months. At the heart of the matter for MBOs is that established brands were moving ahead with a retail strategy that is detrimental to their existence.

Mr Aggarwal said their campaign was definitely on.

While DARA has been able to force most mid-priced brands in the kids and ladies apparel category agree to a 33 per cent retail margin, its attempts to flex muscles with the major players hasn't succeeded. Industry sources said the big brands were unlikely to succumb to the demand for better retail margins, as they were not in a financial position to comply. It is learnt that most leading brands currently offer retail margins between 19 to 24 per cent, which the big players think is reasonable.

The tension between MBOs and the apparel companies has been brewing for a while, with the latter pushing for large format exclusive stores in the metro.

Some constituents of the association said that the big buck retail strategy of the leading brands were antagonistic to the survival of MBOs, which helped stabilise these brands in their fledgling days. The latest stand-off between the association and the big players would benefit smaller labels from North India operating in the mass market, especially since the MBOs continues to retain some clout.

An official with a leading apparel brand said DARA would not be in a position for a full-scale battle as there existed divisions within the association. He said the association had threatened to boycott some leading brands after last year's Diwali, but could not carry it out due to internal differences. Moreover, most of the MBOs, except for select price sensitive outlets, cannot wish away the leading brands, which hold sway in a consolidating menswear market.

Importantly, the big players in the apparel industry fear that giving into the demands of DARA could spawn similar associations elsewhere in the country and mar the retail landscape.

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