APPAREL

INDUSTRY

SALES AND DISTRIBUTION MANAGEMENT

Prof. Kapil Khandeparkar

SUBMITTED BY – Group 10
Aishwarya Ramanathan| 2016IPM007
Aman Jain| 2019PGP048
Anish Kumar| 2019PGP055
Nandita Burman| 2016IPM064
Nirjhar Mukherjee| 2019PGP
Rakshita Agarwal| 2019PGP329
Saumya Gautam| 2019PGP367
Sebin Binoy T| 2019PGP373

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Table of Contents – Part A
1. Introduction
2. Market Analysis
2.2 Leading Players
2.2 Prominent Mergers & Acquisitions
3. Current Trends
4. Industry Analysis
4.1 Five Forces Analysis
4.2 SWOT Analysis
5. External Environment Analysis
6. References

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1. INTRODUCTION

The apparel industry consists of companies that design, manufacture and sell garments, footwear &
accessories. This report includes market analysis of the apparel industry, highlighting the initiatives
taken by the Indian government to support the businesses in the industry. The Indian ethnic wear
market is an important segment as it accounts for 32% of the Indian apparel market with 81% of the
market in ethinc wear for women. The report carries an account of the major players like Aditya Birla
Fashion and Retail Limited, Future Group etc. in the Indian apparel industry and the current trends in
the market that arise from these players. Mergers & acquisitions have been an important aspect in the
growth of these players. Industry analysis has been done through the tools of Porter’s five forces
analysis and SWOT analysis. PESTEL analysis has been used to analyse the external environment.

The second part of the report consists of the primary research that was conducted over phone calls with
two apparel stores in Indore - Porwal dresses and its competitor Niloufer by Asif Ally. The analysis
has been drawn from the questions that are mentioned in section 1.5 of part B. Sales team hierarchy
and compensation structure have been duly studied for the retail stores. The manufacturer and dealer
network of Porwal dresses places its foundation on relationship building by providing credit services.
Defect rate as stated by the respondent was nearly 1%. The sales process ranges from the customer
entering the store to the time payment is done. Aspects of advertising have also been fairly covered.

2. MARKET ANALYSIS

India is one of the biggest apparel producers in the world. The Indian apparel retail industry has
experienced strong double figure growth rates throughout history and this is expected to continue.
The Indian apparel industry had total revenues of $ 57.4 bn in 2018, and a CAGR of 11.3% between
2014-2018.The relaxation of Foreign Direct Investment(FDI) regulations has also encouraged apparel
retailers to enter the industry.
The Indian apparel industry is composed of the organized and the unorganized sector. Sales in the
unorganized sector account for a majority for the apparel retail sales in India with the organized sector
contributing a very minor percentage of sales. Around 90% of the apparel sales happen through the
unorganized route and this implies that there is huge scope for growth in the organised sector in Tier-1,
Tier-2 and Tier-3 cities. The menswear segment was the most lucrative in 2018, with total revenues of
$ 24 bn, accounting for 41.8% of the industry’s total value. The womenswear segment contributed $22
bn or 38.4% of the industry’s total value.
The penetration of branded and organized menswear is much more. Womenswear is much more un-
organized, mainly due to the prevalence of traditional clothing and ethnic wear.
A key factor which has had an influence on the apparel industry is the growth of online shopping as
customers have been attracted by variety, low prices and convenience. The online channel accounted for
7.9 % of the industry’s total revenue, although profits of the online retailers have been hurt due to low
prices and heavy discounting. Specialty retailers continue to account for 65.9 % of the industry’s value
and the retailers which have implemented a multi-channel approach of physical presence + online
presence have benefited from increasing sales.

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 • Customer Retention/ Attracting new customers:
For customer retention and to attract new customers, personalisation is becoming a norm. Consumer
brands are focusing on more than just the product and are focusing on the service and the physical
evidence as well to differentiate themselves from competitors.
A few examples:
1. Personalised advertising and marketing campaigns.
2. Special ‘wow’ experiences in stores to attract and retain consumers.
3. Made-to-order and tailored products for customers.
4. Custom loyalty programs providing personalised benefits to the consumers.
5. Exclusive customised products and service offerings for premium and high spending consumers.
Demand has been growing and is expected to grow in the future years.
Rising per capita income, favourable demographic trends, change in lifestyles and the increase
in organized retail landscape and also the emergence of e-commerce has fuelled this growth.
The Supply side has also been growing. One factor contributing to this has been the FDI inflow-FDI
worth $ 3.09 bn has flowed into India for garment industries during April 2000 to December 2018.
Government Policy Support has also been a key ingredient to growth.
• Some recent initiatives by the government in this regard are:

1. FDI: FDI upto 100 percent through the automatic route is allowed.
2. SAATHI Scheme: SAATHI(Sustainable and Accelerated Adoption of Efficient Textile
Technologies to help Small Industries) scheme for reviving the power loom sector of India.
3. Incentives: Textile Ministry of India earmarked Rs 690 crore in the previous budget for setting
up 21 readymade garment manufacturing units
4. Merchandise Exports from India Scheme: The DGFT has revised rates for incentives under the
Merchandise Exports from India Scheme for readymade garments to 4 % from the earlier 2%.
5. National Textile Policy 2000: To increase employment and setup modern apparel manufacturing
sectors in every North Eastern state.
6. SCBTS(Scheme for Capacity Building in Textiles Sector): Scheme to provide training and
upskill workers to create jobs in the organised textile sector.

• Indian Ethnic Wear Market:

The Indian ethnic wear market is worth $ 17.18 billion and accounts for approximately 32 per cent of
the Indian apparels market. The ethnic wear market includes men’s, women’s, boys and girls ethnic
wear. The women’s ethnic wear segment has a share of 81 percent of the total ethnic wear segment. The
rising demand for ethnic wear can also be gauged by the increasing scale and expansion of brands like
Biba, Manyawar, FabIndia etc.
Some anticipated growth drivers for the ethnic wear segment are expected to be:
1. Increasing adoption of renting-based modules:
Increasing demand for ethnic wear has opened doors for brands like FlyRobe, Stage 3, Rent A Closet,
The Clothing Rental. These companies offer ethnic dresses by renowned designers available for renting,

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hence making it available at affordable prices. This option is also attractive for one-time customers, who
want to wear ethnic dresses for particular occasions. This segment is only expected to grow as the
demand for ethnic wear increases with time.

2. E-commerce:
Initially, customers were attracted to online shopping because of the high discounts offered. But now,
more and more people prefer to shop online because of factors like convenience of shopping, wide
variety of collection and ease of returns. In the past few years, e-commerce has seen a boost in terms of
sales and acceptance.

3. Ethnic wear is becoming everyday wear:

In recent years, ethnic wear was considered as occasional wear as it was difficult to wear on a daily basis.
And with customers turning towards western wear, the popularity of ethnic wear declined. But in recent
years, demand for ethnic wear has seen a resurgence as brands brought out fusion wear like kurtas, pants
and leggings which are easy and comfortable to wear.

4. Inclination of youth towards ethnic wear:

With rising disposable income with the youth and their change in preference towards ethnic wear, this
has a potential to be a big growth driver as the favourable demographics will also play an important role
in this.

2.1 Leading Players:

• Reliance Retail is the leading player in India and operates hypermarkets, wholesale cash and
carry stores, supermarkets, neighbourhood stores, convenience stores,mini-marts and specialty
stores. RIL has ventured into e-commerce by launching JioMart in India. The e-commerce
venture will operate under Reliance Retail. JioMart will leverage the technical capabilities of
Reliance Jio InfoComm to connect neighbourhood stores with consumers. Since the Indian online
retail sectors is expected to grow with a CAGR of 30.2% till 2022, venturing into e-commerce
can turn out to be highly successful for the Reliance Group

• Aditya Birla Fashion and Retail Ltd(ABFRL) which is a subsidiary of the Aditya Birla Group, is
a provider of fashion, lifestyle and retail business. Madura and Pantaloons are a part of the
ABFRL group and they also stock a variety of other brands.In 2019, ABFRL joined “Circular
Apparel Innovation Factory”(CAIF),collaborating with Intellecap. CIAF aims to build a circular
apparel and textile ecosystem in India by identifying, funding, supporting and helping to scale
up textile and apparel innovations in India by building and enabling ecosystems of brands,
manufacturers, retailers, and innovators across the value chain. Through this, ABFRL wants to
shift away from the ‘take-make-dispatch’ operating model of the industry and focus on creating
significant social impact. This will also help strengthen its industry position. ABFRL also stands
to benefit from the increasing demand for private label products which it sells under various
brands like MORE, Blueearth, Kruff etc.

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 • Future Retail, a part of Future Group is a multi-format retailer. The company offers apparel
through Big Bazaar and Brand Factory stores and also operates over 300 stores in more than 90
cities in India.

• V.F Corporation( VFC) is a manufacturer, distributor, marketer of footwear, apparel and

accessories and is also a leading player in India.VFC provides support to its brand partners
regarding the design, advertising, marketing, quality control and distribution of licensed products
and the licensees pay royalty fees to VF based on the licensed product sales. Its brand partners
include Vans, Lee, Dickies, Timberland and Wrangler.

2.2 Prominent M&A Deals in the recent past:

Source: IBEF 2019 textiles and apparel industry report

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3. CURRENT TRENDS
The value of India’s apparel market will be $ 59.3 billion, come 2022, making it the six largest in the
world and comparable with the likes of the UK and Germany. The aggregate income of people in the
annual income bracket of $ 9500+ is expected to triple as per a McKinsey report published in 2019.
More than 300 international fashion brands are expected to open stores in India in the next year. To
attract people to the conventional stores, Indian retailers are using technology to enhance their in-store
experience. For example, they are using technology to improve the checkout experience and are also
using augmented reality to display outfits on consumers. Increasing technological penetration in India is
also helping e-commerce players to implement solutions based on artificial intelligence wherein
suggestions are given to the customers based on their tastes and preferences.
On the supply side of the industry, the growth of textile and apparel exports is also expected to
increase. According to a 2017 McKinsey survey, 41 percent of chief procurement officers said they
expected to increase their share of sourcing from India due to low labour costs( lower than China and
comparable to Vietnam) and availability of raw materials(like cotton, wool, silk and jute) which enables
participation in the entire fashion value chain.
Some things which brands entering India have to keep in mind are that the north, south, east and
west part of India have different tastes and experience slightly different climates. They have to
understand the Indian consumers-which designs work, which touchpoints can be personalised and the
preference for traditional clothing among the population.

• Government initiatives:
1. Textile parks: As of 2019, 59 Textile Park Projects have been sanctioned under the Scheme for
Integrated Textile Park(SITP) out of which 22 parks are operational.
2. SIAM(Incubation in apparel manufacturing): To promote entrepreneurs in apparel manufacturing
by providing them an integrated workspace and reducing operational and financial costs.
3. PPP: To establish institutes under the PPP model to encourage private sector participation in the
development of the industry.
4. Promotion of Khadi: Plan to generate employment for 50 million women in Indian villages and
to promote Khadi clothes.

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 • Infographics:

1. Indian apparel retail industry market value(2014-2018)

2. Indian apparel retail industry market segmentation

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4. INDUSTRY ANALYSIS

4.1 Porter’s Five Forces Analysis

Buyer Power
The buyers in the market can be segmented into two categories :- customers and retailers. Both categories
of buyers experience different amounts of buyer power.
The customers experience low costs of switching and their tendency to switch is very high since the
factor that allures customers the most is ongoing offers and discounts. The products are not very well
differentiated therefore, the customers find it easy to switch between brands. They do not make large
purchases hence their power to bargain is reduced.
Retailers on the other hand have invested in the infrastructure of the retail outlet and training the
workforce, hence their cost of switching is high which also reduces their tendency to switch. Retailers
always place bulk orders therefore they have a tendency to bargain. They are able to negotiate better
prices for themselves and a player who receives a major amount of revenue from these retailers would
not want to lose their profit. Price, design, variety and quality in apparels is valued more than brand
loyalty even though major players are coming up with loyalty schemes and offers which induce a
behaviour of buying more.
Buyer power has increased as the trend of shopping online has increased. Since, the buyer has the option
to check prices on various websites before making the purchase, a price war has erupted among players
to offer the best deal.
Thus, the buyer power is high.

Supplier Power
Presence of a large number of suppliers has reduced supplier power. In a rapidly changing market, the
players are open to experimenting with the fabrics which takes away the power from the supplier to
quote a higher amount. Since a large pool of suppliers has the ability to offer similar kinds of fabrics, the
switching cost for players is quite low. The players would not necessarily be interested in backward
integration into the process of supplying fabrics due to high machinery costs and specialization required.
Few areas where supplier power takes a higher bench is when the players require higher quality fabrics
or due to the shift in the mindset of the customers towards a more sustainable clothes. The players are
left with less choice of suppliers in these cases.
Thus, the supplier power is moderate.

New Entrants
New entrants face high entry barriers. The requirements range from highly trained workforce,
infrastructure and machinery costs, and creative capabilities. It is difficult to compete with big players
in the market unless the new entrant has deep pockets. An efficient way to enter the market is by
exploiting a market trend or niche market segment. Eg - apparel for plus size customers, apparel made
of sustainable fabrics etc. In countries like India and China, labour costs are very low due to huge
availability of manpower. Thus, entering the market with less machinery and more manual work on the
apparel seems to be beneficial in such countries.
Thus, the threat of new entrants is moderate.

Availability of Substitutes
Major substitutes in the apparel market are home-made apparel or small to medium size boutiques. They
are a weak substitute since customers usually look for low cost options on a regular basis and it is only
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occasionally that customers make purchases from a couture store, specially for highly differentiated
products.
Another substitute is counterfeit clothing. First and second copies of products available for a lesser cost
do take away a large portion of the revenue of the players. The US economy undergoes a loss of an
estimated $600bn every year due to counterfeit products. According to OECD, the US apparel industry
was the most affected country by counterfeiting in 2016 (the latest available figure).
Thus, the threat of substitutes is considered moderate.

Rivalry among existing players

There are a large number of players present in the apparel industry globally therefore the rivalry among
the players is very high. The market requires a huge amount of capital investment along with specialised
machinery and highly trained workforce. Exit barriers are very high since a player would be required to
divest specialised machines and equipment.
Rivalry can be reduced by utilising advanced technology which consequently leads to less skilled
workers and the production capacity can be increased whenever the need arises in the market.
Rivalry also depends on the growth of the economy of specific countries a player exists in. For example,
a developing economy like India would face lesser rivalry because now the customers have higher
disposable income and each player in the market would benefit from it.
Thus, rivalry among players is assessed to be strong.

4.2 SWOT Analysis

Strengths
Looking at the strong players in the market, R&D capabilities along with a strong distribution network
top the list of strengths in this market. Research and development capabilities are essential to bring
innovation in the existing supply chain and processes, create more versatile fabrics, and be a leader in
creating trends in the apparel industry. An efficient supply chain, that procures good quality raw
materials from local suppliers and delivers finished goods to its retailers and wholesalers on time, simply
aids in increasing the margins gained by the players. It leads them up the ladder of big players in the
market.
A strong network with influencers, celebrities, fashion designers, athletes etc. enhances the capability of
the players to gauge their latent needs and build new products in that direction.

Weaknesses
The apparel industry is overdependent on cotton as a raw material which clearly is a weakness as the
trend towards sustainable fashion is growing fast. The lack of technological skills of the workforce can
also be seen pulling down the ability to create an efficient supply chain. Small scale players lack the
ability to innovate due to the huge amount of investment required. Modernization of the production of
local fabrics is least paid attention to. All these factors weaken the apparel industry on a varying scale.

Opportunities
The apparel industry has a huge opportunity to grow in developing economies since the regulations for
Foreign Direct Investments in some countries are being liberalised and communicated clearly. The
population in developing countries has grown 21% and retail sales in such countries has increased more
than 350%. The online marketplace has opened up new space for small players to showcase their niche
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and local fabrics across the globe. It has brought an ease for small players to collaborate with larger
players. Recyclable and sustainable fashion is an area less explored but is gaining momentum. With
more and more women going out to work, office apparels for women is another area where players can
build their niche and grow.

Threats
A major issue that players can face is regarding the existing working conditions of the labours. The
awareness of humanitarian treatment and sufficient wage to the labours is increasing and customers are
concerned that the factory, from where their apparels are coming, is not exploiting the labours.

5. EXTERNAL ENVIRONMENT ANALYSIS

Political and Legal Factors

These factors typically involve how and to what extent a government intervenes into the happenings of
an industry in an economy. This enables organizations to gauge ease of doing business in any economy
as it includes environmental laws, government policies, political stability, labour laws, taxation policy,
trade restrictions etc. Further, legal factors include safety, health, equality in opportunities, advertising
methods and standards, labelling etc. Companies need to regularly update their policies based on these
factors so as to avoid legal trouble and also adhere to prescribed standards. Prior to the pandemic, the
online apparel sales was booming due to massive discounts and varied choices but these online apparel
companies must adhere to rules and regulations by the Competitions Commission of India for fair trade
practices.

Economic
Economic factors include growth of an economy, employment, income, availability of raw materials,
labour costs etc. In the apparel industry particularly, companies outsource labour to countries such as
Bangladesh due to the low-cost manufacturing which helps cut labour cost as well as production. On the
other hand though, water is an important resource used in this industry which is becoming increasingly
scarce and may lead to rise in prices in the future. Internationalisation of brands in the apparel industry
is expected to be highly profitable as the industry is growing by 10% annually while women's apparel
would increase by 50% in the next five years. One way for companies to increase their prices is to show
better quality. This is affordable by those who are employed while the higher the unemployment in a
country, lower the affordability of such apparel.

Social
In recent times this has become a very important influencer in the apparel industry across the world. This
includes population growth, purchase made by various age groups, awareness etc. The apparel industry
is highly influenced by socio-cultural trends. In India for example, a significant part of our population
lies between 18 to 35 years of age implying that higher competition lies for clothing for this age group
rather than for the older population. Similarly, in recent times, more and more people in our country are
interested in buying clothes made in India using our material such as khadi or indigenous cotton. People
are also ready to pay more for products that undergo sustainable processes and are made through
regulated labour laws. Therefore, only those companies that abide by these laws get picked by most
people rather than just their collection.

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Technology
Technology has always played a major role in the apparel industry, from use of charkhas and hand-
weaving techniques to mass production at extremely cheap rates. In current times, the internet has taken
up a big chunk of apparel sales due to online purchases and discounts. Latest trends and information are
readily available online thereby creating a market impulse. This has also increased customer demands.
Apart from online shopping, newer methods of low-cost advertisements are creating waves amongst
those on social media. Despite many technological enhancements, the apparel industry remains labour-
intensive to this day due to constant demand/trend changes.

Environmental
This includes factors such as use of raw materials, pollution, environmental targets set by the government
such as carbon footprint, climate change goals, sourcing of goods ethically etc. Lately, a massive number
of customers expect the products they use to be ethically sourced and sustainably processed. Therefore,
companies are scrutinised like never before, increasing the pressure to be environmentally conscious
from all sides including shareholders. Global warming and climate change play a big role in influencing
the processes and sourcing of any industry let alone apparel. Environmentally, the apparel industry is
not doing very well as there is a massive amount of water being used even for the production of a single
t-shirt. Statistically speaking, 1 cotton t-shirt requires around 25 litres of water. This is a major challenge,
particularly for developing countries such as India wherein resources are being pushed to their limits
despite regulations. More and more unpredictable weather changes such as droughts, tsunamis etc,
hamper the growth of cotton or any other material used for making clothes.

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6. REFERENCES

1. MarketLine Global Apparel & Non-Apparel Industry Profile Report January 2020
2. MarketLine Global Apparel & Non-Apparel Industry Profile Report January 2018
3. MarketLine Global Apparel Retail Industry Report January 2020
4. MarketLine India Apparel & Non-Apparel Industry Profile Report January 2020
5. MarketLine Indian Apparel & Non-Apparel Industry Profile Report January 2018
6. MarketLine Indian Apparel Retail Report January 2018
7. Research: Market Analysis Ethnic Wear in India, Images Business of Fashion
8. https://www.mckinsey.com/industries/retail/our-insights/how-indias-ascent-could-change-the-
fashion-industry
9. https://www.ibef.org/download/textiles-and-apparel-jan-2019.pdf
10. https://www2.deloitte.com/content/dam/Deloitte/in/Documents/consumer-business/in-
consumer-RLS-2019-noexp.pdf

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Table of Contents – Part B
1.1 Introduction

1.2 Distribution Network

1.2.1 Retailer Distribution Network

1.2.2 Manufacturer Distribution Network

1.3 Sales Management

1.3.1 Sales Team Hierarchy

1.3.2 Compensation Structure

1.3.3 Sales Process

1.4 Competitor Sales & Distribution Management

1.5 Questions Asked

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Acknowledgements
We would like to take a moment to extend gratitude to all those who have been an integral part in the
making of this report. We want to thank Professor Kapil Khandeparkar for giving us this opportunity
which added to our practical exposure and industry knowledge. We are also grateful to all the people
who have extended their support for our primary research (on call interview), namely Mr. Sagar
Porwal – the owner of Porwal Dresses and Mr. Taher Dargaiwala – the owner of Niloufer by Aasif
Ally.

To mention the least, this report would not have been upto the mark if not for the sincere efforts of all
our team members.

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Apparel Industry – Part B
PORWAL DRESSES, INDORE

1.1 INTRODUCTION

Our group has chosen a local apparel retailer from Indore, Madhya Pradesh. We have gone through
detailed analysis of their supply chain and sales management network, and found out peculiar
observations for the industry that have been illustrated in detail in the below sections. Our choice of a
local retailer has allowed us to have authentic data about their networks and best practices. Moreover,
the seasonal nature of the industry (viz. the ethnic wear industry) coupled with stiff competition has
given us interesting insights. The choice of Indore as an industry location has been instrumental in our
study as the landscape is quite competitive here and helped us effectively in our study.

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1.2 DISTRIBUTION NETWORK

1.2.1 Retailer Distribution Network

To get detailed insights about the distribution network, we talked to the owner of the retail firm Mr.
Sagar Porwal who gave us a sneak-peak into their ethnic wear apparel network. Porwal dresses is an
apparel retailer with distinguished outlets across Indore which are operated by staff hired/owned by the
hiring team. The staff consists of both managers, salespersons, and helpers. We also talked about their
supplier network and the how-abouts of their supply chain.
Given below is a diagrammatic representation of their supply chain (vertical network) -

Manufacturers
A wide network of manufacturers from across Delhi, Mumbai and Calcutta serve as major soucing routes both directly and indirectly
(through suppliers)

Suppliers
Suppliers based out of Mumbai, Delhi, Indore and
Calcultta serve through the direct route

Retailer-owned Warehouse

Retail Outlets

Outlets owned by Porwal Dresses based across various locations in Indore

End consumer

According to the owner of the company, the manufacturers serve as a major source of supply both
directly and indirectly. The percentage of sourcing done through the direct route is around
approximately 30%, with the remaining being sourced through suppliers. As far as the manufacturers
are concerned, most of them have been popular in the local market and have been in place since the
inception of the company. Relationship building has played an integral part in the sourcing of
readymade ethnic wear in the form of both added discounts and goodwill enhancement.

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Let’s look at the distribution system of the firm (the retailer) in detail –

• The supplier network is quite extensive with 70% sourcing of readymade garments done
through suppliers (as mentioned above) and hence they form a very important part of the
supply chain. As far as the payment (credit) cycles are concerned, the cash-credit payment
ratio is reported to be around 0.66 (40-60%) and the credit terms ranging from 5/30-net-60 to
10/90-net-91 (as per supplier convenience).
• The supplier network is based mostly out of three major cities – Delhi, Bombay and Calcutta.
For most of the orders, physical visit is the first step to ensuring quality and accuracy for the
product as ordered by the end consumer and once regular network is established, delivery
networks are utilized for the same.
• The ordering cycle is bi-seasonal, i.e., orders are placed separately for the summer and winter
season (given the seasonal nature of the industry). All orders are sent to the warehouse which is
owned by the company itself and the transfer of products to the stores takes place through the
warehouse on a weekly basis (or sooner if required).Various processes that take place at the
warehouse are labelling, packing and barcoding of the final product/garment.
• The order fulfilment is done on a monthly refill basis with a lead time of 15-20 days across
all categories of products (men and women).
• Currently, the retailer does not have e-commerce presence and is only selling through offline
channels. The retailer told us that they tried to sell through online channel (listing on Amazon)
but experienced loss of sales. The reason for the same is that the apparel industry, especially
Indian ethnic wear is characterized by consumers who want to touch and feel the product
before they buy it, thereby closely examining the fabric quality, the detail in the garment design
(even focusing closely on prints and borders).
• Dealing with defective goods is quite an easy-to-go process as the defect rate is close to only
1% and the goods are returned as-it-is to the supplier on a full repayment basis.

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1.2.2 Manufacturer Distribution Network

We also talked about one of their manufacturers to get insights into their sourcing and distribution
network (to figure out the differences/similarities and peculiarities as to how sales and distribution is
managed). The network of the manufacturer is a little different as the factors include more focus on
raw material finish and yarn/fabric quality. The manufacturer is said to be one of the big wholesalers in
Calcutta and hence distributes to suppliers on a wholesale basis. The brief of the investigation can be
summarized as below –
Retailer

Inputs/Raw
Manufacturer Supplier Retailer Customer
Materials

Raw materials form a very integral part of the entire chain and both quantity and quality are an
important consideration. According to the manufacturer the industry is characterized by changing
trends, fads and fashions incoming every season, and hence the supply chains (including sourcing)
have been continuously modified such that it enables easier and cheaper procurement and reasonable
pricing to both the end consumers and suppliers to ensure profitability and brand development in a
constantly changing scenario.

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Given below is a brief overview of the supply chain from the manufacturer’s point of view -

• The manufacturer in our case sources readymade fabrics, aesthetic add-ons (zari, gota, etc) and
has a factory based in Calcutta for the production of ethnic wear.
• They get raw material from suppliers both in Calcutta and other cities, with lead times ranging
from 10-15 days after which they begin the manufacturing of garments for men and women
categories on a bi-seasonal basis – off season and on – season.
• Working on a make-to-stock basis, they report approximately 70% of their inventory to have
been consumed/sold off within 10-12 days on the basis of order fulfilment post which new
orders are taken and proceeded for fulfilment.
• Most of the distribution network of the manufacturer is composed of direct suppliers (70-80%)
who further sell to retailers as discussed in the previous section.
• They have one manufacturing facility wherein all the production (manual and machine) takes
place.
• In all, the distribution network is spread across 10 states and 26 cities wherein distribution is
taking place both through freight deliveries and in-person visits by suppliers and retailers.
While freight deliveries are common for regular customers with generic demand, physical visits
constitute a larger portion of their sales as the touch and feel of the fabric as well intricacy of
designs are of utmost importance to both the retailer and the end-consumer.

1.3 Sales Management

The sales management system is quite extensive as well, given the nature of the product and industry.
The end consumer needs to feel confident about the touch and feel of the product and the appearance
of the garment as he/she tries it on. This is why salespeople at Porwal Dresses play a very important
role in generating revenues.

1.3.1 Sales team hierarchy

At Porwal stores, the hierarchy is quite detailed with an average of 12-13 people staff and varying
salaries drawn across the hierarchy. They have sales managers and salesperson along with support staff
with the below hierarchy –

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 Sales
Manager

Store
Manager

Salesperson Helpers Designers Cleaners

Since the stores are only located in Indore city as of now, they have one sales manager for all their 6
stores located in different parts of the city wherein each of those stores are managed by a store
manager with the 5-6 salespeople and 3-4 helpers per store, along with 2 cleaners. A detailed
description of each of their duties in the sales process is given below –

• Sales Manager/Manager – He is the person responsible for tracking the sales progress at
various stores and managing the requirements at each store in terms of stock availability,
personnel support and inventory management.
• Store Manager – There is one manager for each store whose job is to ensure meeting the sales
target of the store and taking care that inventory is managed such that after the end of each
month, there are more orders placed than inventory remaining, along with previous orders
being met within a period of 20 days. Other responsibilities involve taking care of assigned
store advertisements and marketing campaigns along with serving as an interface for customers
for greeting, billing, etc.
• Salesperson – The salesperson is responsible for closing the final deal with the customers and
this involves gauging the customer needs and making sure that customer is able to see the best
design in store which meets both his budget and requirements. The salespeople at Porwal stores
also take orders from customers who want to customize their garments further or those who
want completely new designs. The new designs can be given by the customer or can be
suggested by the salesperson as per their latest catalogue and fashion knowledge. They also
have to close the final deal with the customer which includes follow – up after a customer’s
first store visit.
• Helpers – The helpers at stores are given miscellaneous responsibilities, viz., maintaining the
desired look and view of the store (as instructed by the store manager), assisting salespeople in
their jobs, etc.
• Designers – Designers are only present at 2 stores where the footfall is the highest (as per the
sales data) and their job is to make sure that customer demands and availability of products fall
in congruence, to make sure that latest fashion, fads and trends in ethnic wear are stocked in
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 inventory and to make further suggestions to customers if any of them want to customize a
readymade product or give a new order which is then stocked from the suppliers/manufacturers
themselves.
• Cleaners – As is suggestive, the cleaners are responsible for cleaning of stores before and after
the sales day begins each day.

1.3.2 Compensation structure

As already mentioned, the sales team is the main way of generating revenues through end
consumers, their job is very crucial and so is the compensation structure which is different for
various levels as tabularized below –

DESIGNATION COMPENSATION
1. SALES MANAGER
BASE SALARY INR 50,000/-
INCENTIVE 5-6% of sales of leftover inventory
2. STORE MANAGER
BASE SALARY INR 40,000/-
INCENTIVE 5-6% of sales of leftover inventory
3. SALESPERSON
BASE SALARY INR 15,000/-
INCENTIVE 3-5% of sales of leftover inventory
4. DESIGNER
BASE SALARY INR 25,000/-
INCENTIVE -
5. HELPER INR 4,000/-

1.3.3 Sales Process

The sales process is quite simple due to the small size of the firm and being a local retailer it works a
lot on goodwill and brand building, along with relationship building with end consumer. The detailed
sales process can be summarized as below-

• The sales are divided into two seasons – on season (wedding season) and off season. All the
procurement and sales are characterized according to these seasons and the typical number of
pieces sold per season depends completely on the footfall along with the overall macro-
economic scenario which influences the market moods. The wedding season entails the
maximum number of sales with average of 3500 pieces per month and the off season average
goes around 700 pieces per month. The seasonal cycle is half yearly and so are the revenues.
• The range of products/garments starts from INR 5000/- and goes as high as INR 50,000/- where
the average sales revenue is around INR 8000/- per piece.

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• Since Porwal has been very popular in the men’s segment, this is a major revenue drawing
segment as compared to women’s which is said to be picking pace recently (with increased
popularity of the brand).
• The orders are placed end consumers are entered manually by salesperson into their paper
records (there is little tech-interface as of now) and the sales which are made on the store are
paid for then and there by scanning the barcode through cash payment or online transactions.
• Along with incentives for salesperson and managers by the end of season (if inventory is left),
Porwal stores also have characteristic Loyalty Programs for customers with loyalty points
being earned during each purchase made at any of their stores. These points can be redeemed as
100% cash points during their next purchase and extra points are added on festivals, or special
customer specific events (eg. Birthdays). Other than that, there are discount practices/categories
which can be listed as –

Birthday/Anniversary discounts (10%)

End of season sale (upto 50%)

Loyalty points discount (based on level

unlocked)

• Customer feedback is also an important part of the sales cycle and right now it constitutes of
word of mouth feedback and through feedback form filling.
• Advertising and marketing at Porwal mostly happen through word of mouth and newspaper
ads, as it is a very old local brand in Indore and has high reputation among the masses for
ethnic wear.

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Let’s have a look at the revenues and profits of Porwal dresses as per the reported figures –
Revenue
Average revenue per piece = INR 8000/-
Average number of pieces sold per store
in on season = 3500
Average number of pieces sold per store
in off season = 700
Total number of pieces sold per store the
year round = 4200 (3500+700)
Number of stores = 6
Total revenue/year = INR
20,16,00,000/-
Revenu
Cost Profit Margin
1) Procurement costs :
Average cost per piece = INR 3500/- Revenue/year = INR 20,16,00,000
Total number of pieces bought per store Cost/year = INR 11,66,88,000
per year = 1.2 times of sales = 1.2*4200 = Profit/year = Revenue - Cost =
5040 20,16,00,000 - 12,86,88,000 = INR
Total Procurement costs = 3500*5040*6 = Profit Margin = 36.17%
INR 10,58,40,000
2) Salary Expenses :
Salary per salesperson = INR 15,000
Number of salesperson per store = 5
Salary for salesperson per store = INR
75,000
Total salesperson salary =
75,000*6(stores) = INR 4,50,000(A)
Salary per store manager = INR 40,000
Total store manager salary = 40,000*6 =
2,40,000(B)
Salary per designer = INR 25,000
Total designer salary = 25,000*2 =
50,000(C)
Salary for sales manager = INR 50,000(D)
Salary for helper = INR 5,000
Total helper salary = 5000*3(number of
helpers)*6(stores) = INR 90,000(E)
Total cleaner salary = 2(no of
cleaners)*2000*6(stores) = INR 24,000(F)
Salary expenses per month =
A+B+C+D+E+F = INR 9,04,000
Yearly salary expenses = 12*9,04,000 =
INR 1,08,48,000
3) Rent and electricity = INR 2,00,000 Per
month per store
Total expenses = 2,00,000*12*5 = INR
1,20,00,000
Total cost = (1) + (2) + (3) = 10,58,40,000 +
1,08,48,000 + 1,20,00,000
= INR 12,86,88,000
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1.4 Competitor Sales and Distribution Management
We have picked another local retailer as one of the competitors of Porwal Dresses – Niloufer by Aasif
Ally. Going through the same set of questions, we found out about their best practices in sales and
distribution management. We found out the following peculiar similarities/differences in their
management of sales –

• Distribution – They have a distribution network characterized by both wholesale and supplier
sourcing only for raw material and the finished product is manufactured (stitched) at their
warehouse facility (factory).
• Sales process – Most of the sales process is similar with word of mouth playing a very
important role here as well, and advertising and marketing is done through newspaper ads,
pamphlets, and word of mouth.
• Designer’s role - The designers play a greater role in their manufacturing process as they sit at
the factory and supervise each design at hand. Hence, their salary structure is also greater.
There are designers who sit at stores as well.
• Relationship building – It has been observed that relationship building is a peculiar feature of
this industry (present in both companies) and are important determinants of customer and
supplier networks.
• Discounting Practices – Practices like end of season sale, special event (birthday/anniversary)
discount, etc are followed here as well, while the Loyalty Program is more informal and
discounts to customers are based on relationships and word of mouth.
• More focus on designs – The designs at Niloufer are more intricate with active role of designer
(since they manufacture their own designs as well) and hence the price ranges are a little on the
higher side as compared to their competitor.
• Sales team structure – They have a similar sales team structure but they do not have helpers at
stores and the owner himself plays the role of the store manager. They pay incentive only to
salespeople and designers (5%) and hence have a simpler cost structure.

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1.5 Suggestions for improving the channel management of the company

Following are the possible areas where Porwal Dresses can explore :

A. Expanding the Clothes Category:

Since the attraction among women customers for the ethinic wear is increasing, it is an
excellent opportunity for Porwal Dresses. This can be done by showing the products to the
women while men are looking for their clothes, as one important aspect of consumer behaviour
in ethnic wear is that the families usually come together to shop for traditional clothes.

B. E-Commerce:
In the case of E- Commerce, Porwal Dresses must understand the potential of it and the kind of
product to be sold on the E-Commerce platform. Only the high selling product must be chosen
to be put on the Online platforms.

Also, choosing the right kind of online platform is key over here. Platforms like- Amazon are
perceived to be cheaper in the minds of the customer and thus Porwal Dresses products are
seemed to be too expensive by the customers. Platforms like- Myntra, Jabong that focus on
selling only the clothes can be deemed as a prudent choice in case of Porwal Dresses.

C. Customized Dresses:
In the industry where trends are constantly changing, making clothes that are customized
according to the wants of the customers can give a competitive advantage to Poswal Dresses.
This will give them Product Differentiation.

However, in case of Customization, only the 30% Direct channel can be used. Instead of giving
orders bi-annually, these orders can be given over the span of the entire year.

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1.6 Questions Asked

1. Partnership with distributors/retailers?

2. Trade/consumer promotions?
3. Inventory lead times, management of unsold inventory?
4. Reverse logistics in case of defective goods?
5. Supply chain network?
6. E-commerce presence?
7. Frequency of new fashion in garment sold?
8. Customer segments?
9. Product Innovations?
10. Advertising/Marketing process?
11. Sales team hierarchies and compensation structure?

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