The ready-made garment business is extremely significant for the Indian Economy in terms of its contribution to the national GDP, national income, exports, and employment generation. In the financial year 2020-21, it accounted for a 2% share in India’s total GDP, a 15% share in its total exports, and a 7% share in its total industrial output.
According to the Indian Trade Portal, in May 2021, the value of India’s ready-made garments industry was the 6th largest in the world, accounting for nearly 4% of the global share. Its domestic valuation in the year 2019-20 stood at $100 billion.
The industry has managed to amass an enormous and varied customer base, both inside and outside India. The total domestic consumption of ready-made garments manufactured in India was approximately $55 billion in 2019-20, whereas, the total exports exceeded $12 billion in the same period.
Is Opening A Garment Business In India Profitable?
Garment business startups in India have witnessed immense growth and success over years. A few popular foreign and domestic brands in India include Lee, Nike, Reebok, Puma, Zara, Anita, Rupa, FabIndia, Biba, Raymond, and Siyaram. Among these, Raymond, Siyaram, and Rupa have listed their stocks on BSE in April 2022, with a market capitalization of 5,800 crores, 3,600 crores, and 2,600 crores respectively.
Owning a garment business in India is extremely beneficial for several reasons, a few of which are listed below:
- Varied scope of business operations: Garment business owners in India may choose a variety of business ideas for themselves. They may sell, trade, or manufacture generic and daily wear garments, or specific kinds of garments like wedding dresses, traditional dresses, and uniforms, according to their convenience.
- Varied modes of business operations: Garments industry operates in both online and offline modes. E-commerce websites have relatively lower costs of operations as it is not necessary for them to own inventories. However, they are at a disadvantage due to their high cost of distribution, against the retail businesses.
- Varied size of businesses: The industry promises decent turnovers and revenues for both small and large enterprises. It is advisable for owners to start small and then work their way up in the industry as it is easy to expand the customer base in the garment industry.
- Low input cost: India is the largest producer of cotton, the second-largest producer of silk, the 9th largest producer of wool, and the 6th largest producer of denim fabric in the world. The low cost of raw materials in India makes the business operations in the textile and garment industry immensely economical for owners.
- Reduced labor cost– The garment businesses do not require highly educated and skilled labor, either in the manufacturing or the retailing sector. Hence, labour can be hired for such businesses at a relatively economical cost. Moreover, such businesses have the potential to generate immense employment opportunities, especially for the lower socio-economic section of Indian society.
- Independent of location: Garments are an essential need in our daily lives. Therefore, its demand in the market does not depend on the location of your business.
- An ever-expanding customer base: You can expand your existing customer base by manufacturing and selling garments that agree with current trends in the fashion industry.
How To Start A Garment Business In India?
The growth of the Indian Garment Industry is driven by the following factors:
- An abundance of raw materials for garment makers and a robust supply chain for garment traders and retailers.
- Low input cost and cost of production
- Value addition
- Economical labor cost
- A credible source of credit or investment
- A unique brand voice
Therefore, before setting up a garment business in India, owners must follow the following steps:
- Choose your industry: Businesses can be related to manufacturing, designing, trading, and selling garments in India. It is important that you choose the industry that you wish to operate in, carefully and wisely based on thorough industry-specific research and analysis, of the average revenue, net profit, potential investments, potential investors, and competitiveness in local and global markets of the concerned industry.
- Choose your target buyer: Different garment businesses have different target customers. While the retailers sell directly to customers, a manufacturer will either sell garments to the retailer or an exporter. Your target buyer helps you accurately price and market your products, besides determining the extent of quality and standards required to be maintained.
- Choose your location: While demand in the market might not be a concern for a garment business, there are certain factors that you must consider before choosing a location for your business. These include the proximity and affordability of supply chains, low cost of input and raw materials, low cost of transport, low rent on properties, abundant availability of affordable labor, safety, and sanitation of the location.
- Build your supply chain: Based on the cost of transportation, cost of input materials, the abundance of suppliers, and the competition in the suppliers market, you must build the most effective supply chain for your business.
- Choose your niche: The garment industry offers a wide variety of niche products that you may choose to sell and manufacture. You may choose to operate with a wide variety of products or build your brand with specific niches like men’s wear, kid’s wear, party wear, traditional wear, wedding dresses, school, and college uniforms. Niches may also be decided on the basis of the fabric used in the garment products.
- Choose a name and logo: The name of your business should be such that it communicates your brand voice, your area of operation, and the specialty of your product. Keep in mind that it does not deceptively mimic the name and logo of an existing business as that will violate Section 4 of the Trademark Act, 1999. Do not forget to register the name and logo of your company as a trademark, when applying for its incorporation. You may avail of services at SetIndiaBiz which carries years of expertise and experience in registering trademarks for several new companies at an economical cost.
- Choose a mode of operation: You may operate your business in online and offline modes. However, with the onset of the internet and social media in the 21st century, the online sale of products from retailers and manufacturers alike is complementing their offline operations, instead of remaining as a mere supplement.
- Choose a legal status: Based on the scale of operations and the amount of credit or investment for the business, you must choose its legal status. Small-scale businesses that have meager funding or investment, usually get incorporated as LLPs or traditional partnerships to share the burden of liabilities. Their net profits are lower and they have a limited scope for expanding their business. Small manufacturing businesses like The Technique Clothing Company, Laguna Clothing Company, and the Xebec Clothing companies are a few examples of sub-contract manufacturers registered as LLP in India. Other categories of LLP or partnership businesses include small retailers who manufacture and sell their own products, small exporting businesses, and retail outlets.
However, having a potential for quick growth and expansion, private limited companies are also abundant in the Indian garment industry. Popular names include Contemporary Clothing India Pvt. Ltd., Reliance Clothing India Pvt. Ltd., Attire India Pvt Ltd., Sapphire Clothing Company Pvt Ltd, and Blaze Clothing India Pvt Ltd.
Small Scale garment businesses may also register themselves as sole proprietorships or One Person Companies.
- Register and Incorporate your business: To begin operations in India as a separate legal entity, your garment business must be licensed and incorporated. SetIndiaBiz provides you with a one-stop solution for the registration and incorporation of your business.
- Get necessary approvals and licenses: Post registration and incorporation, as a new company you must obtain the necessary licenses, some of which include a Business license, Trade license, GST registration, Tax registration, Trademark registration, EPF, and ESIC registrations. You can avail of our services for all post-incorporation formalities at an economical cost.
- Plan an effective business strategy based on the above parameters.
- Draft a business policy.
- Recruit skilled and experienced employees
- Construct customer feedback and grievance channel.
- Launch your business
Indian customers for ready-made garments have a uniquely diverse taste, which ranges from traditional and ethnic wear to casual and trending wear. Additionally, there are must-haves like uniforms and sportswear which will never go out of style, fashion, and necessity. Despite being one of the most profitable sectors of the Indian economy, the potential for the growth and expansion of the ready-made garment industry is never-ending, both in the domestic and international market.