Arvind ltd is one of the most well known global denim companies and its CEO Aamir Akhtar a reputed denim professional . Continuing the series of talks with such important people in the industry, Sandeep Agarwal takes his views and opinion on how our industry is going to react and come out of this crisis and what we should expect in near future.
Sandeep:
Hi Aamir, welcome to our Covidtimes talks. It’s a pleasure to have you with me.
Aamir:
Hi Sandeep, Thank you Sandeep.
Sandeep:
So, how is the situation in Gujarat and Ahmedabad particularly?
Aamir:
The situation is a bit different here as compared to the rest of India. According to the statistics, the number of cases in Gujarat are higher. That is because the testing is higher in Gujarat. The good news is that the recovery is fast therefore people are recovering and going back home.
Sandeep:
People have been talking that by June we should , in some ways,come out of this situation and let’s hope and pray for that. So, are we seeing any kind of restarting of the textile industry in some small way – let’s say for Arvind or for others ?
Aamir:
Government had announced 21st April as a date when they would start allowing certain industries with certain do’s and don’ts. Certain industries which are in export processing zones; Export Oriented Units – those are the ones which have been given permission and especially industries that have people staying within the campus. Certain spinning units have started working and I’m told, there have been exports from some of them. Last week there has been exports of yarns, but the fact remains that unless the whole ecosystem starts it doesn’t become optimal.
Sandeep:
I think basically the bigger units will have a better chance of fitting in as things open up because the smaller units will not be able to follow the SOPs and you know the procedures which the community is asking for. So maybe the government will get more comfortable adding the bigger unit first.
Aamir:
So let’s say each side has its own plus and minus. bigger industries have bigger challenges. There are certain minimum threshold levels that you need to operate with because your boilers are of a certain size, your compressors are of a certain size. So, unless you’re operating within a certain threshold level you will be extremely inefficient.
Sandeep:
This is a huge crisis which no one expected. What is your analysis of how it is going to hit the denim industry in particular and textile industry of course in general in India and around the world?
Aamir:
My analysis cannot be very different from the analysis that all the industry peers have given. All I can say is, of course it is a big black swan event nobody expected, or nobody could have ever imagined something like this to happen. Interestingly it is not a structural macro or microeconomic issue. It is an accident. As we recover from the accident, things will start gradually moving back to normalcy. That’s what I feel.
Sandeep:
In terms of the retail sector in India; do you think that only e-commerce might be the first one to recover slowly and probably the big sectors will open?
Aamir:
Absolutely, that’s a fact. We’ve seen , even before this problem, e-commerce growing because of all the options and convenience it brings to customer’s tables. Even, let’s say, the advantages in terms of pricing it brings to the customers and so on. And as we’ve been seeing all across that it’s these delivery startups, it is these online organizations; that are on the hiring spree right now.
Sandeep:
I mean, even the big stores might be looking at taking their sales to the online stores; though many have already done that.
Aamir:
Both have their own strengths, both have their own spaces. The experience that we get out of brick and mortar stores is very difficult to duplicate in E-commerce. So, it’s more about convenience and it’s more about experiences. Let’s say if you want a cup of tea, you can order the finest tea bags & get tea at home, at a very affordable cost. You can get a cup of tea sitting at your home but then you want to go to a five-star hotel because it’s about the experience. The experience starts the moment you get into a five-star hotel – there is somebody who’s welcoming you and then you get the music, the ambience and then they serve in fine China. So, there is a space for that experience and people look for that experience.
Sandeep:
I think the stores are already planning some kind of safety measures and health measures when they will start opening and they have to think about how the consumers would feel secure. Are they planning to give security to the customers in some way; in terms of sanitization? How can they make customers feel safe? Do you think they are already planning and how they should be planning for this?
Aamir:
It will be a new normal and it will become like a second nature for all of us to accept these new norms of entering public spaces. It’s like if you go back in time you will remember that one could simply walk into 5-star hotels. Nowadays when you want to go to one of those places, first you are asked to open the trunk of the car then they will ask you to walk thru security corner and when you walk in, you have to put your bag and wallet for scanning and then you have walk through security and it has become second nature for us . Same is true for how we used to travel internationally or even domestically – there was never this kind of security checks but of course, due to all the global terror problems and security issues, Now, It’s a struggle when you go through security but then it’s normal now and people build it in their schedules. It has become second nature for you and you get used to it. So it’ll be a new normal . Human evolution is all about moving forward, accepting things and taking things into one’s stride and moving forward.
Humanity has faced such challenges very often in the past. It has been challenged with diseases which are very easily treatable now –malaria , cholera , pneumonia, tuberculosis etc. When these diseases came to light; that time, people didn’t know how to handle them till vaccines were found. However humanity finds solutions and moves forward.
Sandeep:
Now that we are all working digital – do you think our work processes would get affected in a large way. Do you think this will carry on and the digitalization will increase in terms of industry?
Aamir:
This has been a huge revelation for a lot of people. A lot of people because of their own sense of inertia, for their own reasons of not being able to look beyond what they’ve been doing on a daily basis; they could never understand the power and now that we have been challenged through work from home – that’s when we realize the power. People realize that it is possible to do a lot of things digitally and remain connected and still work, so this again will be a new normal. One will be able to learn how to communicate and to deliver on all your objectives through the digital route. We have also seen valuations of digital players like Zoom go up dramatically; that’s because the whole world is realizing the importance of digital communication. Lot of work will move to digital platforms.
Sandeep:
What changes do you see specifically in different regions – let’s say in India or in this part of the world or the Asian countries? Do you see different consumer preferences cropping up?
Aamir:
I think, one is the immediate situation, where people would like to be safe – they would like to be careful with whatever disposable incomes they have. So, what we see is that consumers would like to move towards the value segment. They’d like to get more value for their money; let’s say things which are less discretionary, so, say for denims – work wear, kids wear are non discretionary. You have to have these things on for your regular usage. I think there’ll be a shift towards these segments but gradually as things sort of improve then people will start getting back to differentiation. Humans are about differentiation, you want to differentiate yourself, you want to look different, you want to look good, so that’s when you start moving towards fashion. There are 2 primal psyches of individuals or consumers –greed & fear . Right now it is about fear; so, you see that playing out at the stock exchange – everyone is investing in gold and other safe havens, However as things improve it will start consumers will start moving from need to want. That’s when the whole fashion and design and differentiation start . Hopefully it is not so distant in future.
Sandeep:
Do you think this will be similar for all regions or different regions might have different perspectives? Consumers might behave differently & have different views?
Aamir:
Western economies, developed economies like the US, like Japan are primarily driven by consumption – eighty percent of the GDP or more is driven by consumption whereas certain other economies and if you talk about our trade a certain geographies which primarily focus on manufacturing. So, there, the behavior is very different versus the economy which is very high on consumption where consumers have been used to consuming a lot.
Sandeep:
So the differences will remain and you’ll see coming out of this crisis. We will see that these differences will come out in different ways. Some consumers might be hearing about revenge shopping if you come out and go at revenge shopping so some of the regions people will evaluate.
Aamir:
This revenge shopping has become a buzz word with Wuhan opening. But we need to see the extent of this, I mean how much of revenge shopping is going on. Let’s say the picture is not as rosy as it seems, when we hear about China, if we see today’s Bloomberg report on China, you still have issues with people not going back to life as we expect them to and the Malls still being empty.
Sandeep:
In terms of cancellations, global cancellations of orders – there have been huge cancellations everywhere. Every region has suffered, India also suffered to a great extent I think. So from what I’ve seen, probably, it is little different from region to region and in terms of fabric and garments there is a difference because fabric is still somehow manageable even and garment is much more difficult. So do you think in India, the extent of cancellations is huge and people are suffering especially the garment exporters?
Aamir:
Sure Sandeep, there has been a strong pushback across all the geographies. People have come back with cancellations with different garment vendors in different geographies, like Vietnam, Cambodia, Africa , that has seen a push back to the whole supply chain. We have seen that happen and it has been a great learning in seeing how people have reacted, how brands and retailers have really acted to the situation. A lot of very interesting experiences in terms of seeing as what really separates men from boys. As there are some prime customers that have been very, let’s say, supportive.
They are very practical about it but there are some really knee-jerk reactions, and which has really created a lot of aggravation across the supply chain and a lot of it was not really merited. If there had been conversations, if there were discussions, it would have been different. I think what really happened was that simply pressing the panic button and simply cancelling – sending cancellation messages that was a major reaction to the situation and it was not really merited because what really happens and here is that these large organizations among the largest players in the ecosystem they have an endorsement value so if they act in a certain manner , people across the supply chain start believing that is the right behavior – it is the right thing to do if someone is doing that. Right or wrong but this is how it works. So you know I’ve seen that for most people their first reaction was to cancel everything & hold back everything, and then when they took stock, lot of people came back and said that okay let’s have a conversation “ I need this and you do this” and some people who even asked ,’if we can you do things a little faster . ‘When do you think things will improve and what will be the lead times when things will improve and when can we ship’.
Unfortunately this was in hindsight Sandeep . There was aggravation in the system because you see this whole industry is a very unique one; where the products that you make are perishable because it’s for a certain season, for a certain size, for a certain price point and for a certain brand. So if you suddenly put everything on hold obviously the whole system comes under a lot of aggravation and gets affected. The whole supply chain starts taking such decisions.
There are multiple solutions eg. There are governments in various geographies who are giving support. People giving support of bill discounting, they are getting support for bills to get postponed with moratoriums on interest payment. Even in the entire community, even the brands and retailers in the geographies in which they operate, you’ve seen that the government is giving support in terms of compensations for people who have lost their jobs , they technically are on roads and they are being supported by the government. So you should have conversations and find solutions. Lot of solutions have been found but they’ve been found in hindsight after they did some damage.
Sandeep:
I think still some retailers and brands, they came back and they have tried to rescue the situation.
Aamir:
For sure, a lot of them have been very sensible and mature about it. They have been very data driven and were able to quickly analyze and segregate the situation and come back to the vendors and try to solve this and move forward.
Sandeep:
In terms of denim, it has progressed from work wear to casual wear to fashion wear to office wear and so on. Do you think denim can also contribute to global industries as a health and wellness product?
Aamir:
My point of view on this is that every product category has its own strengths. Denim has been into work wear – so rightly said. Even today work wear denim to some extent and Denims with certain FR treatments and things like that might work. I feel that as we came out of this there will be influences of the current situation on denim also. On a denim product, there will be influences where people will want the products which are anti-microbial or will deliver some performance. I believe there will be influences but they will remain temporary influences. A category shift where denim moving into use of personal protective equipment with time – I don’t really see that happening because the demands of that product category are very different. You need fabric which is very light weight, breathable, affordable and low cost because they are primarily use and throw.
If you make an overall for the health industries, it has to be very light weight because they have to wear it for the whole day and they have to keep changing every few hours. So it has to be used and thrown. So that’s why the industries like non- woven where you can make something very light weight and non-woven fabrics, the polyesters with some laminations and treatments – these industries are delivering the values that are required by the personal protective equipment industry.
Sandeep:
But, in some way the denim industry will try that with some products. I have been looking at some of the fashion brands, they have come out with designer masks made of denim. I was reading a report today that Japan has shipped 3.86 billion masks in the last one and a half months. And maybe they will also start making masks with denim sometime.
Aamir:
There are certain things which are influencers and are topical in nature. So what happens is that something is going on, so for that there will be influence in this industry because we are very close linked to fashion and lifestyle but finally what continues something that is more permanent. So when you are offering a really good permanent solution then it becomes permanent . For example ,you can see the whole denim industry moving into a stretch in a big way because that is providing a solution of giving you comfort. So comfort is an essential need, it is servicing that essential need. Similarly if you really see that work wear denim continues because denim is easy to handle , easy for production but in serving an essential need and has still not gone out of fashion. There will be certain influences that will be contemporary but the real thing that will go a long way will be when there will be a real consumer need that you are solving.
Sandeep:
In terms of sustainability, it has been such a big keyword for the last few years. How do you see sustainability changing after this crisis? Do you think becoming stronger or it will be losing its focus in some way? How do you see sustainability going after this crisis?
Aamir:
My view is that sustainability is something that has gained attraction over so many years because it is something which has been sort of driven by the consumers. Consumers are sort of wanting sustainability, they want to move towards a good green planet and that’s why it is a need which is being translated to the brands who in turn are pushing the supply chain.
And if you really see this whole push on sustainability has done good work. For example, this whole thing about zero liquid discharge of hazardous chemicals and you know the denim industry used to have this whole thing about sandblasting which was really bad for health and then it was this whole movement of public opinion against and finally sandblasting was banned. Similarly this whole conversation against using PP spray is getting strong . So sustainability is something which is a big need for consumers and that’s why it will continue to be important . We have seen there are some people who really push the pedal on that. There are some people who have been absolutely not compromising on that and so I think it’s a part of the DNA of organizations .
In certain organizations it is very deeply embedded. Now the thing is that temporarily the focus would probably be on survival on coming out of this situation, so maybe there would be a lesser focus on sustainability . For me it is something like announcement that you’ll hear when you get into the aircraft – in case of loss of oxygen if you have a baby with you, you first put the mask on your face but objective is to save the baby (the objective is not to put the mask on your face and forget it) so there are certain things that you need to do, that you believe in , the things that you really stand for. Let’s say big changes that you’re driving as an organization . At Arvind we have a very strong belief in sustainability.
Sandeep:
Arvind has a very strong DNA to serve the community through CSR. Please update a little more on how currently things are moving in this regard?
Aamir:
CSR has a very broad definition and we all know that. I would like to share with you; our personal experience in these current times which was very interesting. As Arvind; we are doing a lot of activities but recently a very interesting study in human nature came to our notice.
On campus where we have large operations in Ahmedabad there are villages around, there are many people who are coming from those villages. So we wanted to see if we can help people who are not able to come out of their home and to see what we can do. So we approached those villages and basically worked with the government.
There is this local administration and then there is the panchayat. So we approached the panchayats and the panchayat said that yes we are keen and we would like to run community kitchens. So we said that we would like to work with you and are happy to give you provisions for the community kitchen. Interestingly they came back to us and they said that you’re doing this good work, but we have approximately 10 days of provision with us, so please hold.
We will work with these 10 days of provision that we have with us and then we will come back to you when we need more. Now this is such an insight that people in these times can think like this. Normally one would think, in such a situation, if you’re getting something; take it, keep it as you l never know when you’ll need it. It really speaks so well about these poor people. People in these villages have this amazing approach that hangs on let’s try and see whatever we have – can we manage with this. So, on a certain philosophical level there are a lot of people who have gone out and asked for help, but my heart goes out to those people who find it difficult to ask for help. Many people who are so high on their esteem, they find it difficult. Having said that , 10 days later those people came back and they said that you know now we’re running out of rations can you please help us. So our team went to those villages and gave all support. So we have tied up with those villages and we have tied up with sarpanchs and we are working with the government and then we are also sort of working with delivery organizations who are being able to deliver stuff.
So that’s what has been different and also we have been working more on personal protective equipment which comes certified from certain organizations. We have developed these kits and those are being given to the government.
Sandeep:
Yes, I saw that in the news and of course Arvind has always been obviously very strong in the community development and its wonderful. My next question is related to positives coming out from current situations. What are the strongest ones you see coming out from this crisis?
Aamir:
I feel that when we look at the numbers , 8 trillion dollars already have been committed by various governments like Germany and Italy-40% of their GDP , US – 10% of their GDP (2 trillion dollars), Japan-20% of their GDP( 1 trillion dollars) So 8 trillion dollars have already been given by various countries and there is more coming and this has been given in the form of direct transfers, small and medium enterprises, form of equity and all kinds of support. So a huge amount of liquidity is going into the system.
So as things improve I believe there will be a lot of liquidity, there will be fueling of demands. So as this problem settles down, in Germany and China stores have started opening, New York has opened stores, Zara has opened stores in Spain. In the US stores have already been open in some states . By 15th of May more states are getting back to work. So we see things will start. Of course, nobody has got a crystal ball, nobody can say with certainty. Even in India some kind of openings are happening over next few days , some more industries are opening and hopefully along with that better testing better equipment and more medical help will be there. So, let’s say with so much of liquidity being given to economies all around the world. Hopefully, things will be good, and we’ll see some good action as we come out of this.
Sandeep:
I am sure we will come out of this very soon and now let’s try to take up some questions from our Instagram viewers. First one “How fashion will change for denim posts for COVID 19 and what will run and what will not?”
Aamir:
For some time I think , it will be basics, necessities , workwear , kids wear that’s where the focus will begin. Then gradually as things settle, people will start focusing on fashion.
Sandeep:
Second one from the viewers “In India, we have been looking at excess capacities, will COVID rationalize this?”
Aamir:
For sure, that’s not only true for us but for all industries. One will definitely see that there will be some rationalization of capacities and across the supply chain, I feel that one has already seen customers filing for chapter 11.
Sandeep:
Do you want to add something else from your side regarding Arvind or for industry or for so many people who are watching this talk. Would you like to say something else ?
Aamir:
No , I just want to end with a couplet “ Sitaare doob ke karte hain anware sehar paida “ it is a couplet in Urdu which means that , once the stars go down, then the beauty and light of dawn emerges. I just want to end on a positive note and as things go along we will see our industry bouncing back. Denim is a very resilient industry It has been around for close to 150 years. It has a great future to look forward to.
Sandeep:
It was a wonderful couplet. Thank You so much for coming for this talk.
Aamir:
Thank you so much
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