Garment surplus comes from three major segments: first, the extra garments manufactured (for exports as well as domestic) to cover up for quality issue; secondly, garments or shipments rejected by the buyers due to quality, timely delivery or any other issues; and third, leftover (unsold) garments of various retailers, brands etc. Rather than sending these remaining garments to landfill, these are picked by the specified firm dealing in surplus garments. It is also being observed that in the name of surplus, few of the manufacturers sell fresh garments similar to styles already selling as hot items in market. From top brands to high-quality unbranded garments, innerwear to blazers and fashion accessories, nearly all products come under this surplus range. Value for money, good quality products and aspirations of brands are a few of the main reasons ensuring the growth of this market segment, which according to industry survey conducted by Apparel Resources and views shared by various stakeholders, can have a market size of US $ 3 billion or even more.
Huge market size
India’s apparel export is around US $ 16 billion, and taking a conservative approach, even if 10 per cent of this goes as the stock lot, the figure stands at US $ 1.6 billion. These sell at a 20 per cent to 30 per cent reduced value from the prices originally quoted by the buyers that translates into an approximate market value of US $ 480 million.
With a similar conservative approach, the surplus from the domestic manufacturing market is more than US $ 1,200 million, considering that the manufacturing market is worth US $ 40 billion.
Another aspect of surplus items comes from retail store perspective. Consider this – a retailer fails to sell a section of its inventory and is then bound to bring these products at much cheaper rate to the surplus market. In general, as reports and retailers state, this unsold inventory at retail level is worth US $ 4 billion in India. These products, when introduced to the surplus firms/sellers, get value depreciation of 70 per cent – 80 per cent depending on the brand value, which makes this leftover inventory worth around US $ 1,200 million in stock lot market.
One of the senior executives of Reliance Trends states on the request of anonymity that whatever remains unsold in Trends stores, they try to sell it at higher discounts on various online platforms. If apparel remains unsold even after a heavy discount, Jio Mart is the last option to sell it directly to the consumers. In worst case, the garment goes back to the stock lot firm. On an average basis, at least 3 per cent of apparel go to the surplus firms.
Markets in India and working of surplus
Nearly all the manufacturing hubs have surplus firms, be it in Delhi, Tughlakabad, Seelampur and Laxmi Nagar. These firms have strong relations with various manufacturing units and approach them time to time for surplus. Agents working with manufacturing firms, brands and surplus firms are also instrumental to this business. A similar approach is followed in most of the hubs.
Priorities to consider while selecting stock lot
Like in fresh products, in stock lot too, quality, price and brand value are important for nearly all Indian wholesalers and retailers. The lot size also matters to a great extent as good wholesale firms prefer big lot orders so that they can have more variety and maximum sizes. Fashion trends and brand aspirations are also highly important as they fetch more value at every stage.
For many, ‘brand’ matters the most as consumers have aspirations to wear top brands and when they purchase a lot of branded garments, quality is not a challenge. And in branded garments, sellers get comparatively good prices too.
If the lot is of good quality, it becomes the priority of surplus firms, but to ensure quality, they randomly check around 10 per cent of products of the total lot.
One segment in this category are into selling apparel with minor defects which is a concern for top brands or established retailers but this does not bother customers as these defects are rarely visible. Such products get good value based on the level of defects or rejection. This is a growing segment for stock surplus sellers as they get reasonably good prices from the customers for such garments.
“Few of the brands are equally preferred across India and such products are easy to sell, so branded garments are always a priority for us,” says Sunil Babber, Director, A Rose Inc. The Delhi-based stock lot company takes surplus from nearly all leading hubs of India and even keeps the stock for 3-4 months if the surplus is of good quality and is expected to sell.
Megha of Delhi-based Western Apparel Hub, a banker who currently runs a successful apparel stock lot business says, “We got a stock lot of 1,000 pieces to 50,000 pieces and prefer to get as big as the lot, so that we can have more options and can serve more retailers.”
Offline is a major market, Online can be good option
Almost all the surplus garments get sold offline, be it specific showrooms proudly selling these as ‘Export Surplus’, or sellers selling at various places randomly including roadside. Delhi-NCR and other metro cities have many such stores whose stock includes a large range of surplus products of menswear, womenswear and kidswear.
Though few of the sellers ‘anyhow’ manage to sell surplus garments online also, but it is minuscule as reputed online platforms prefer selling only fresh garments and they require those in all sizes while surplus doesn’t guarantee providing all sizes. However, industry stakeholders believe that selling such products online can be a good option but so far, it has not been explored well. This process requires minimum investment and return is expected to be more.
Almost following the system of fresh market, surplus suppliers are expanding their business for continuous growth. Adding new product ranges, new clients and new factories to get different types of stock lots are a few major steps being taken up by them to ensure growth. Many stock surplus firms now have the entire range of basic to fashion products which include even lingerie and underwear. Nowadays, stock lot suppliers are also offering accessories like bags and footwear. Few of the suppliers who work mainly for domestic market, are now eyeing the export market also so that they can sell stock lot which are welcomed in the overseas market.
Garment surplus business is semi-organised as well as unorganised but when it comes to selling branded garments in surplus market, legal aspects have to be taken into consideration too. Obtaining a release order from the brands or retailers is the best way to sell branded garments through surplus. In case release order is not there, companies prefer to cut the label to avoid any further issues.
“We try to get a proper piece of branded garment which matches the exact with a surplus. It creates a belief in our clients that they are getting a real branded garment but without a label,” tells a stock lot seller who doesn’t want to share his name.
Getting approval from the brands for selling goods in the surplus market is a long and tedious process. As per market insiders, a lot of fake branded goods are available in the market and to avoid selling their ‘leftover’ garments in such markets, reputed brands and retailers don’t leave any stone unturned to clear their inventories through different channels. Many brands and top retailers clear their unsold stuff in their remote area stores and secondary stores at heavy discounts.