Apparel Online India Magazine March 1st Issue 2019 | Page 36

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design the movement of goods to the stores, deploying
hub and spoke methods thereby making sourcing and
supply chain processes more efficient and cost-effective.
The benefits of GST are expected to be accrued by
formal apparel brands in the value segments because
the price advantage of unorganised apparel retail over
these brands will cease to exist allowing a level playing
field further aiding the growth of formal retail in value
segment.
In the overall
apparel
market, men’s
apparel
constituted
more than
41 per cent
and women’s
apparel share
was ~38 per
cent of this
market (the
balance is
contributed by
kids apparel).
While
organised
retail, primarily
bricks-and-
mortar, has
been in India
for 2 decades
now, its
contribution
to total retail
is low that
is at 10 per
cent (US $
81 billion) in
2018.
2. Growth of Fast Fashion or Value Fashion
Since the financial crisis of 2008, the global apparel
industry’s fashion cycle has undergone a tectonic shift
in favour of value fashion. Consumers the world over
have become selective about paying premium for fashion
while brands like Zara and H&M have reconstructed the
supply chain of fashion business offering fresh fashion
at mass pricing. Therefore, while brands in the premium
segment have struggled for growth, value fashion brands
like Primark, H&M, Zara and Uniqlo have seen sustained
period of growth. This trend of growth of value fashion
has played out in India well and it will continue be so in
foreseeable future. In India, this trend has manifested
with the growth of retail brands like FBB, Reliance
Trends in major cities of India. This trend has also seen
a profitable growth of value fashion labels like V-Mart in
Tier-2 towns and beyond. In the coming decade, growth of
apparel retail will continue to rest on the disproportionate
growth of value fashion segment in India.
3. Women Ethnic Fashion for Dailywear
Indian urban women consumers have a heterogeneous
wardrobe that comprises both ethnic and
Western apparels. The Indian women’s apparel market
(US $ 19.4 billion) is a growing segment and is dominated
by ethnicwear fashion (sarees, SKDs, kurtis etc.) and it
contributes to 73 per cent of the overall women’s apparel
market. The significantly high share of ethnic fashion is
driven by the usage of ethnic in dailywear (home, work
and general purposes). This broadens the appeal of the
fashion play beyond special occasionwear purposes such
as festivals, weddings etc., and allows a complimentary
existence of Indian ethnic fashion. This market construct
of Indian women ethnic fashion is unique to India and
presents sustainable opportunities to Indian retailers and
brands because it is insulated from direct competition
with international brands/retailers and fashion. Currently
27 per cent of Indian women’s ethnic fashion market
is branded, however it is poised for growth driven by
leading Indian retail brands that will continue to expand
their share through organised retail channels and that
comprise exclusive brand outlets (EBOs), large format
stores (LFS) and e-commerce.
4. Growth of Private Brand
The rise in disposable income of the young population in
India is driving the growth of the organised retail sector.
In such a growing market, every company is trying to
create a niche in an endeavour to sustain its business.
36 Apparel Online India | MARCH 1-15, 2019 | www.apparelresources.com
The share of brands in India’s retail consumption
has been historically low and that pushes the onus on
retailers to create private brands to bridge the gaps in the
market in terms of prices and range. Organised retailers
across categories recognise this trend and have increased
their focus and effort to build private brands. In-store
labels or share of retailer-led brands across food, apparel,
home, jewellery is therefore poised to aid the growth of
organised retail. Also, over time, consumer behaviour
towards branded play across categories has witnessed
a shift and now consumers are willing to trade-off brand
perception for better value and that has also added to the
growth of private brands of retailers. Successful Indian
retailers that have achieved scale and profitability will
naturally progress to build private brand portfolio that
have also given incremental gross margin additions. The
growth of organised retail in India will therefore go hand-
in-hand with the growth of private brands in the coming
decade.
5. Optimum Store Size
In the last few years, successful Indian retailers have also
found their understanding around store sizes. From the
earlier thrust of retailers always chasing maximum retail
space and investing to do so, successful retailers have
discovered their sweet spot on store size and location.
Retailers now look at smaller but efficient store size across
formats as large floor plates in high potential catchments
are difficult to get due to limited availability and high
rentals. This understanding has helped them to reduce the
store launch time and improve the various success factors
of the unit economics of the stores such as sales per square
feet per day (SSPD), operational cost etc., aiding in the
growth of organised retail. This learning will further aid
sustainable growth of apparel retail in India.
6. FDI in Apparel Retail
Allowing foreign capital investment in Indian retail has
always been a debatable topic. The FDI muddle in Indian
retailing needs to be viewed in three groups. Firstly, 100
per cent FDI is allowed in cash & carry formats and that
has enabled the growth of Walmart’s best price and Metro
cash and carry in India. Secondly, 100 per cent FDI is also
allowed with caveats in single brand retail and that has
seen entry of retailers like H&M, Decathlon and IKEA.
FDI in the largest play that is multi-brand retail is still
at 51 per cent with many riders and it is here the policy
has taken a myopic and failed to take a holistic view on
retail. For this reason, India has not seen any traction
in this category of FDI in multi-brand retail. However,
within the apparel segment, 100 per cent FDI in single-
brand retail has benefited the development and growth of
fast fashion and athleisure segment with the expansion
of international retail-led brands like Decathlon, Zara,
Marks & Spencer and H&M. This trend is expected
to continue with more international retail-led brands
either firming up their plans to enter India like Uniqlo
or existing brands reviewing their existing partnership
arrangements in India.