1. Global Economy Overview
In the financial year 2015-16, global economic activity continued to remain subdued.
The growth in emerging markets and developing economies, which account for around 70
percent of the global growth, declined for the fifth consecutive year, while the advanced
economies continued to recover slowly. There were few key influencing factors to the
global economy.
Chinas economy witnessed a faster than expected slowdown due to rebalancing economic
activities moving away from investment and manufacturing towards consumption and service
related activities. Energy and various commodity prices witnessed a decline. Lower oil
prices strain the fiscal positions of fuel exporters and weigh on their growth prospects,
while supporting household demand and lowering business energy costs in importers.
However, strain due to oil shock and its impact on investment climate and weak pick-up in
oil-consuming economies due to limited pass-on of lower prices has resulted in global
growth stalling.
The United States has been going through a gradual monetary policy tightening scenario
where the U.S. Federal Reserve lifted the federal funds rate from the zero lower bound,
while monetary easing continued in the euro area and Japan. Prospects of a gradual
increase in policy interest rates in the United States as well as bouts of financial
volatility amid concerns about emerging market growth prospects have contributed to
tighter external financial conditions, declining capital flows, and further currency
depreciations in many emerging market economies.
According to IMF, Growth in advanced economies is projected to rise by 0.2 percentage
points in 2016 to 2.1 percent, and hold steady in 2017. Growth in emerging market and
developing economies is projected to increase from 4 percent in 2015 the lowest since the
2008-09 financial crisis to 4.3 and 4.7 percent in 2016 and 2017, respectively.
2.Indian Economy Overview
India remained a relatively bright spot in the global economy with its growth story
continuing to bloom. One of the contributors to the strong growth experienced by the
Indian economy was the sharp decline in crude oil prices. According to Asian Development
Bank estimates, the Indian economy grew at 7.6% in FY2015 (ending 31 March 2016) . Despite
a weak monsoon for a second consecutive year, agriculture grew by 1.1% in FY2015. While
the industry and private consumption accelerated to a growth of 7.3% and 7.6%
respectively, the services growth moderated to 9.2%.
India continued to remain at the top of Nielsens global consumer confidence index for
the sixth quarter in a row. The Foreign Direct Investment (FDI) inflows increased 40 per
cent during April-December 2015 to reach USD 29.44 billion, compared to same period last
year. Also, Indias foreign exchange reserves remained comfortable at USD 356 billion in
the week up to March 25, 2016.
The regulatory regime witnessed easing and the Reserve Bank of India (RBI) cut interest
rates four times as inflation eased sharply. Rate cuts had been widely called for by the
industry to reduce the cost of borrowing and help stimulate growth. The governments
strong focus on reviving growth was evident from the Union budget, where the Finance
Minister gave relief to small tax payers, nudged the affluent to shell out more while
focusing on the rural economy with much higher fiscal outlays. The Finance minister also
reaffirmed that the government would continue the reform agenda to usher in the long
awaited GST by passing the Constitutional Amendment Bill in the Parliament.
On the government initiative front, the "Make in India scheme", Smart cities
plan", "Jan-Dhan Yojna", Digital India plan", "Skill Development
& Start-up India initiatives", "Power for All", "UDAY",
"Housing for All", "Scheme to revitalise public sector banks",
"Ease of Doing Business (EoDB) initiative" and other ambitious infrastructure
programmes presentsignificant opportunities for investors to be part of one of the largest
development programmes in the world. These programmes are expected to transform not only
the cities and the country as a whole, but also the way business is done in India.
As per the World Economic outlook released by the IMF, India will be the fastest
growing major economy in 2016-17 growing at 7.5%, ahead of China, at a time when global
growth is facing increasing downside risks. Indias growth is expected to continue to be
driven by private consumption, which has benefited from lower energy prices and higher
real incomes. With the revival of sentiment and pickup in industrial activity, a recovery
of private investment is expected to further strengthen growth.
3. Global textile at Apparel Industry Overview
The global textile market is estimated to be around US $1.15 trillion which is nearly
1.8 % of the worlds GDP. Almost 70-75% of this market is concentrated in Europe, USA,
China and Japan. Comparing the major markets, India has the lowest per capita spend on
garment ($37) which is only 3 % of Australia, the highest one ($1,131) . China is the
single largest exporter with a 39% share while India stands at a second with a 5% share.
While the apparel market is still largely dominated by EU & USA, countries like China,
India and Russia are emerging as future destinations for apparel consumption. The high
growth in the market will be primarily driven by the increase in population as well as the
per capita apparel spending of the already large population in these countries. A study by
CRISIL and Wazir Advisors has estimated that the global apparel market will be around US$
2 Trillion by 2020. This high growth in apparel consumption in developing economies will
further drive the growth of textile manufacturing and trade in these countries.
Presently, apparel constitutes more than half of the share of the global textile and
apparel trade followed by fabric and yarn. Growth in global trade will bring about
investments in the countries having strong supply. Textiles exports from India will touch
US $185 billion by the year 2024-25. Growth in exports of certain segments has increased
such as handicrafts (17%) , carpets (15%) and ready-made garments (12%) . India has a
share of approximately 5% of the global textile and apparel trade.
4.Indian Textile & Apparel Industry Outlook
a. Indian Textile Overview The Indian textile industry accounts for about 24% of
the worlds spindle capacity and 8 % of global rotor capacity. Abundant availability of
raw materials like silk, wool, cotton and jute combined with a skilled workforce have made
India, a sourcing hub. The potential size of the Indian textiles and apparel industry is
currently estimated to be around US $108 billion and is expected to reach US $223 billion
by 2021, according to a report by Corporate Catalyst. The Textile Industry is one of the
largest contributors to Indias exports (11%) worth US $41.4 billion and accounts for
approximately 5% of Indias GDP and 14% of overall Index of Industrial Production (IIP) .
It employs over 4.5 crore people directly and 6 crore indirectly, rendering it the second
largest job creator after agriculture in the country.
Domestic textile consumption and textile exports are expected to cross 10% CAGR each.
Indias share in the global textile market is set to catapult to 8% in 2020 as per a
report by Edel Invest Research. China is expected to vacate .USD100bn of textile space
over the next 5-6 years due to appreciating currency, rising labour costs, high energy
costs and sharpening focus on domestic market. Countries like India, Vietnam, Bangladesh
and Sri Lanka are likely to be the key beneficiaries. The total Indian textile exports are
estimated to touch US $ 60bn over the next 5 years. The textile and apparel industry can
be broadly divided into two segments -yarn and fibre, and processed fabrics and
apparel.Increased penetration of organised retail, favourable demographics, and rising
income levels are likely to drive demand for textiles. Rising government focus and
favourable policies is leading to growth in the textiles and clothing industry. The
Ministry of Textiles is encouraging investments through increasing focus on schemes such
as Technology Up-gradation Fund Scheme (TUFS) . As per the 12th Five Year Plan, the
Government plans to provide a budgetary support of US $4.25 billion to textiles. Free
trade with ASEAN countries and proposed agreement with European Union will also help boost
exports.
b. Indian Branded Apparel Market Exciting time is seen ahead for the Indian
domestic apparel sector which is set to double by 2021. Also it is expected that the
branded apparel sector will out space the industry growth rate by 1.5 times. Strong
precedent lies ahead as India moves towards a discretionary demand inflection point of
US$2000 GDP per capita. Top brands have registered 24%CAGR over 2011-2015 setting a strong
precedent for what lies ahead and this growth is sustained over the next 5-10 years as the
highly fragmented apparel market consolidates and consumers continue to upgrade to leading
brands. Menswear market in India was INR 1,05,050 Cr in 2014, and is expected to grow at a
CAGR of 9.2% to reach INR 1,61,570 Cr in 2019 and INR 2,52,550 Cr in 2024. Womens apparel
market pegged at INR 93,080 Cr in 2014, is expected to reach INR 2,49,710 Cr by 2024 as it
will grow at a CAGR of 10.4% during this period. The three fastest growing categories are
Denim, innerwear and T-shirts growing at a CAGR of 18%, 17% and 15%. The following can be
taken as the multiple growth catalysts for Branded Apparel in India: c. Indian
Leisure Wear Market Overview Indian Casual Market is flourishing with the flourishing
consumer sector which is driven by growth in income levels, changing lifestyles and the
entry of foreign players. Casual wear brands in India have shown potential in all segments
of the market- premium, medium, lower and is going beyond the boundaries of urban markets
in major metros, casual wear is picking up pace in mini metros, Tier II and III cities as
well.
The size of mens casual wear market was INR 41,500 Cr in 2014 and is expected to grow
to INR 68,450 Cr by 2019. Owing to the gradual shift of mens apparel market towards
casual wear such as denims, T- shirts/polo and active wear are growing at a much faster
CAGR of 14%, 12% and 14% respectively. This is as a result of growing fashion
consciousness and aspiration beliefs, increasing brandization, and acceptance of
specialized clothing not just in metros, but also in mini metros and tier I and tier II
cities across India.
The womens casual wear market size was INR 4,350 Cr in 2014 and is expected to grow to
INR 8,894 Cr by 2019. A womens casual wear collection largely comprises of fashionable
skirts, tops made out of chiffon, silk, velvet, cargo, cropped or utility pants, capris
and shirts made out of denim, silk and chambray, different washes of denim, leather or
denim jackets etc. Because comfort and effectiveness is of utmost importance, casual wear
is quickly replacing the traditional wear of womans everyday wardrobe. Complimentary
accessories like scarves, hats, mittens, handcrafted belts etc have made the womens
casual wear market much more versatile and dynamic.
Casual Shirts/Tops/Trousers/Skirts
Due to comfort factor, a large number of choices for fabric, designs, fit - this
category of casuals has been quite popular from many years with youth in both urban as
well as rural areas. The market size for mens casual shirts and trousers was INR 21,728Cr
in 2014 and is estimated to grow at CAGR of 7% to reach INR 31,520Cr in 2019. Whereas, the
market size for womens casual shirts and trousers was INR 2,214Cr in 2014 and is
estimated to grow at CAGR of 12 % to reach INR 4,064Cr in 2019.
T-shirts
T-shirts is considered as one of the most comfortable and dynamic categories of casual
wear. Due to its soft knit fabric, the fits, and the versatile use t-shirts comprises of
highly demanded product segment and is acceptable to a huge consumer range. The market
size for mens T-shirts was INR 6,740 Cr in 2014 and is estimated to grow at CAGR of 14 %
to reach INR 11,870 Cr in 2019. And for women, the market size for t-shirts was INR 680 Cr
in 2014 and is estimated to grow at CAGR of 15% to reach INR 1,490 Cr in 2019.
(i) Casual Wear as a Lifestyle product
Indian market is an emerging market for the casual wear, as it suits the changing
lifestyles and fast paced youth of this century and it meets the demand of comfort and
hectic life style other than making them look and feel good. Thus, the manufacturers of
clothes have started to make and offer a vast line of casual wear of different styles and
price ranges. Also, because of the same reason most apparel brand are extending their
formal wear brand and repositioning them into other wardrobe sections like casual wear so
as to turn the brand into a lifestyle label.
(ii) E-tailing
Casual wear market has witnessed a rapid growth in e-commerce due to rising penetration
of internet across India. Owing to its convenience, speed, competitive pricing along with
multiple payment options such as online payment and cash on delivery is expected to aid
the growth of apparel market through online retailing channel in the coming years.
(iii) Growth drivers
There are various growth drivers for success of Casual wear like the rising standard of
living, also people are now left with higher disposable income and there is rise in
casualization of men and womens wardrobes. One of the main keys for success of Casual
wear brands is also constantly innovating new product range which includes wide range of
styles in terms of prints, designs and fabrics, so as to match the changing preferences of
the customers, they are being more creative.
Indias growth driver is the youth and its preferences, and todays youth are
exhibiting more mobility; openness and desire to experiment are opting for cool, smart
casual wear. Basically, the rapid growing urban population has been the reason for changed
taste, preference and trends towards fashion outfits. Due to large part of existing
options, changing styles and exposure to world fashion, the average Indian apparel
consumer has become much more whimsical.
(iv) The Way Ahead for Casual Wear
The Indian casual wear market is poised for promising growth. Factors including a
booming middle class population, a paradigm shift in consumers choices and disposable
income ensure promising future for casual wear segment. There is a high scope for
innovative products in this segment. India has become a market with a plethora of
opportunities and brands and retailers who understand the needs of Indian customers
better are expected to leverage the opportunities to derive growth.
Source: Technopak
d. Indian Sportswear Overview
Todays generation is aware of the fact that different types of fitness activities
require different attire. The products that fall under sportswear are sports bras, running
shorts and tops, track pants, jackets, gym bottoms, socks, etc., which are not widely
available. A limited range is available at intimate wear stores as the focus there is on
innerwear alone and most products tend to get segmented under comfort wear. Hence, there
is untapped opportunity can be cashed in on by brands and retailers. In major cities,
foreign brands dominate this category with great variety along with private labels,
creating sportswear brands visibility through a strong distribution network, even into
tier-II and III cities via EBOs, organised MBOs, departmental stores, and unorganised
stores. Indian brands continue to be available mainly through the unorganised route.
Smaller local and regional players have greater presence through unorganised stores, in
regions closer to the manufacturing units.
e. Indian Sleepwear Overview
The sleepwear category for women includes chemise, pyjamas sets, short length and long
robes, tube dresses, nightgowns and nightshirts, top-pyjamas night suits. Sleepwear
constitutes a fairly significant part of all lingerie outlets, with lower product width
and depth compared to intimate wear. In comparison, for men its shorts, t-shirts, and
pyjamas that form the core product range. In this category, consumers are not very
brand-driven but are design, style, and comfort-driven. Indian and foreign brands, as well
as private labels, are available in metros and mini metros through department stores and
EBOs. Local, smaller players display a retail presence similar to that for active wear,
with product availability concentrated regionally. Departmental stores enjoy a good
standing with customers; however, it is the local unorganised stores which are most
popular for this category.
f. Indian Kidswear Market
The kids Apparel market in India that is for children as young as one year to as old
as 14 years, is witnessing a CAGR of 9-10% and set to grow from INR 90,000 crore now to
INR 100,000 crore by 2020. The volume of market share of kids apparels in the total
apparel market is at 24.9%, as against a 15% share in 2005.
Kids Apparel Market is the fastest growing industry in India. Since Indian market is
moving more towards international look also in terms of childrens apparel, there is an
excellent opportunity for the players to lay the strong foundation. Branded kids apparel
market is in its nascent stage in India with a handful of national and international
brands. Industry analyst estimate that market size of branded kids wear in India
(including brands like Ruff Kids, Ruff Baby, Planet Kids, Gini & Jony, ZAPP, Lil
Tomatoes and Weekender Kids) is estimated to be around INR 1,000 crores. Today Indian kids
wear branded market is growing at 15% per annum. The presence of international brands like
Barbie, Mothercare, Benetton Kids, Pepe, Lee Kids, Tommy Hilfiger and Adams Kids in Indian
market witnesses the growth potential.
Some major changes in trends are taking place which are:
1. There is shift taking place on account of rise in the disposable income of the
people and the increasing influence of western world.
2. The emergence of kids as an independent buyer group. Influenced by mass media and
peer pressure, todays kids are more informed and self-conscious.
g. Indian Innerwear Market
The Indian innerwear market is worth INR 17,750 crore (2013) , which is estimated to
grow at a CAGR of -13% to reach INR 59,540 over the period of 2013-23 and women innerwear
market is estimated to grow at a CAGR of —15% to INR 44,000 crores over the same
period. Higher disposal income, consumers shifting focus from a price sensitive category
to a brand sensitive category coupled with growing number of working force and the
increasing demand of western wear continues to drive growth in the sector.
Source: AUM Report, Technopak Advisors.
Source: Technopak
(i) The womens innerwear market
The womens innerwear market is worth INR 10,880 crores contributing to around 60% to
the market and growing at a promising CAGR of 15%. With the increase share of working
women, there has been an increase in the share of western wear in their wardrobe. Also,
with the increase in exposure, there is an increased demand for better fits and quality
alongside the demand for a wider range of colours, styles and accessories.
Brand consciousness is no more restricted to external apparel. Women are increasingly
getting conscious about the brands and styles of their intimate wear too. In fact, this
changing preference is no longer restricted to just the metros, but has spread to mini
metros, tier-I, II and III cities. This openness to indulge in branded lingerie has led to
a growth in the number of international and domestic innerwear brands present in India.
On the basis of product pricing, the innerwear market is divided into super-premium,
premium, medium, and economy segments. Due to the increased awareness, the increase in
number of brands, and rising discretionary spending, all segments have registered growth.
Foreign brands have brought in variety through international styles and fabrics. Indian
women are also willing to spend higher-than-before amounts on innerwear. This has provided
an exponential boost to premium and super-premium innerwear brands. Mid-segment brands
have started extending their product portfolios. In womens innerwear, the mid-premium
segment makes up 52 percent of the market and is expected to grow the fastest, at a CAGR
of 22 percent over the next 5 years.
Within the womens innerwear segment, there is potential of growth in maternity wear
segment. Currently only selected brands, mostly international ones, offer multiple styles
of maternity products.
(ii) The mens innerwear market
Mens Innerwear market is roughly INR 6,870 crore which is growing at 9 per cent
includes products like vests, briefs or boxers, basic t-shirts, shorts, pyjamas, sleepwear
and active wear. Various apparel brands and retailers which were predominantly focusing on
active wear, casual wear and formal wear have extended their product portfolios to mens
innerwear segment to leverage its growth.
Mens innerwear can be divided into super-premium, premium, medium, and economy
segments. Within that the economy segment is the highest contributor at 55 percent, the
mid-price segment contributes 36 percent, and the premium and super-premium segments
together constitute 14 percent. It is expected that the premium and mid-price segments
will grow fastest, and exponentially, in the next few years. This is largely due to
consumers becoming more informed and they seek high fashion quotient along with comfort,
hygiene, brand image and smart prices.
Consumers residing in tier-I, II and III cities are not necessarily fond of premium
brands alone, they straddle all segments including the mass segment. Premium brands are
still aspirational for these consumers. Price, comfort and easy availability form the
basis of any purchase for this consumer.
5.TRENDS IN THE INDIAN FASHION MARKET
a. Changing consumer trends and preferences There has been an exponential change in
the trends and preferences of the consumers taste, needs and wants. The price sensitivity
population has been replaced by quality, brand recall and stylish. Rising demand for
readymade garments is replacing stitched clothes along with higher comfort level.
b. Fast fashion creating innovative disruption Fast fashion implies quickly
capturing the latest fashion and catwalk trends and replicating them in a retail format.
This requires an efficient supply chain and quick & inexpensive designing and
manufacturing. This philosophy of quick and outsourced manufacturing, replicating latest
designs at affordable prices with a short shelf life, is used by some of the apparel
brands as new products are launched every week, existing products have a short shelf life,
inducing shoppers to visit stores often, generating higher volumes. As the inventory is
fast moving, the need to discount products to clear out stock is low, keeping margins
stable.
c. Modern retail key to success Explosion of malls, high streets, large format
stores and multi-brand outlets has spurred preference for branded apparel and thus,
relatively minuscule and unknown domestic brands have also started growing rapidly as they
gained visibility in the modern retail milieu.
Their success prompted many international brands to enter India. Hence, in recent years
there has been increasing traction in organised retail. Apparel players opt for the
franchisee format to grow, as franchisees operating on reasonable scale with control over
their working capital are capable of generating free cash flows.
d. E-commerce revolution a blessing in disguise Due to retail space, infrastructure
and operational challenges, most retailers had to look for other avenues to reach out to
consumers. [-commerce provides this platform anchored by rising internet penetration and
jump in the number of Indians owning an internet-enabled smart phone. E-commerce offers
consumers attractive discounts on good quality trendy products, a larger bouquet of
products & brands to choose from, convenience of cash on delivery and ease in
returning products. The online retailing market is expected to grow to USD44bn by 2018
(USD13bn in 2014) with apparel being one of the biggest beneficiaries (31 % online retail
presence already) .
6.CHALLENGES FOR FASHION RETAIL IN INDIA
Some key challenges faced by retailers and fashion retailers in general, have been
addressed through innovative thinking by f. some retailers, but many of these issues need
to be addressed by collective bargaining and mutual collaboration at industry level.
a. Heterogeneity of the Market
Heterogeneity is a key characteristic of the Indian retail market in general. The
Indian retail market is characterized by a diverse spread of customers with unique
preferences. From a retailers perspective, this requires a thorough understanding of
consumer preferences across the country and of the similarity and differences in consumer
buying patterns.
b. Evolving Customer Needs
Indian retail fashion markets requires rediscovering the customer within a short time
span and then rearrange the organizations structure, retail formats, and product
portfolios accordingly. It has to continuously focus on the process of learning,
unlearning, and relearning. Again, this alone is not sufficient; the insights gained in
the process must be translated into actionable business decisions.
c. Rising Real Estate Rentals
High leasing costs resulting from mispriced commercial real estate is a major concern
for Indian retailers. Additionally, it is very difficult for retailers to find suitable
commercial retail space in most Indian cities. Real estate rents and space availability
are characterized by fragmented ownership, irregular auctions, inappropriate store
designs, etc. Retailers have to push governments to allocate more retail space which can
be rented/leased- out at reasonable cost.
d. Complex Tax Regime
Thanks to multiple tax enforcement authorities, varying tax rates, duplication of taxes
at different points the current tax regime continues to be complex and also the taxes
charged by different states vary from one another, and so a national retailer needs to
understand state-specific tax rules and plan retail models accordingly. The Goods and
Services Tax (GST) , which aimed to enforce a uniform tax regime, is yet to come into
force.
e. Infrastructural Bottlenecks Indian fashion retail is hit by infrastructural
bottlenecks due to the poor conditions of roads, highways, etc. which creates supply chain
constraints and increases inventory costs.
f. Demand of Fibre & Polyester based products
There is lack of fibre neutrality. Customer demand for manmade fibre-based apparel is
growing globally.
It is unfortunate that India lacks to manufacture and process manmade fibre-based
apparel in general and polyester-based apparel. This bottleneck is partially caused by
government regulations that impose high excise duties and import duties on polyester.
There is thus a need to overcome the deficiencies in the polyester-based fashion products
segment as it is difficult to resist the growing demand for manmade fibre-based clothing.
7. CONCLUSION
The opportunity in this market is immense for those who can visualise the future and
reinvent them at par with changing consumer preferences and associated challenges. To stay
in the market, realigning and restructuring of the business models as per the evolving
needs of the dynamic market is essential. The industry encompasses a plethora of
opportunities but tapping these opportunities, and converting them to business value,
requires a holistic understanding of the industry, starting from fibre-to-fashion retail.
Fashion retailers have to go beyond the boundaries of sales, marketing, merchandising, and
category management, and have to explore upstream and allied industries with accuracy.
Many organizations in India are now gradually moving towards improving their profitability
and efficiency by implementing various supply chain techniques. The most commonly used
tools are information technology-based apparel retailers have started seeing information
technology as an important tool to improve efficiencies and are taking definitive steps
towards leveraging IT tools in reducing the gaps in the supply chain. Companies have begun
understanding the need for building a sufficiently flexible supply chain which enables
them to capitalize on new growth possibilities like developing a new product in the
shortest possible time. The future belongs to those companies wherein a robust and
flexible supply chain can become the base for any growth initiative.
Sources: IBEF, CMIE, CCI, Edel Invest Research, Wazir Advisors, Technopak
+91-9892691696
