Aggressively growing Indian apparel retail

India is the world’s fifth largest retail destination country and the fashion retail sector in the country is experiencing robust expansion. With fashion emerging as the third largest expenditure category with a current size of US $ 88 billion (apparel specifically), this industry is expected to grow at a compound annual growth rate (CAGR) of 11-12 per cent. Owing to multiple reasons (explained further in the article), Indian retail has become one of the most dynamic and fast-moving industries. It is an ocean of opportunities, not only for India but even for global brands and retailers, apparel manufacturers and all stakeholders in the apparel supply chain.

Steady progress of apparel brands and retailers 

Reliance, Aditya Birla, Tata and Arvind are the conglomerates, each having an annual revenue (in the fashion segment) exceeding US $ 1 billion. Besides these giants, there are hundreds of brands and retailers targeting various segments (premium to value for money) that are aggressively moving ahead on the growth path:

With a revenue of Rs. 12,418 crore. ABFRL is built across a retail space of 10.8 million sq. ft. and has a network of 3,977 stores across approximately 33,500 multi-brand outlets with 6,723 points of sale in department stores across India. Recently it acquired 51 per cent stake in TCNS Clothing for Rs. 1,650 crore.

With currently more than 4,000 stores, Reliance has added 1,000+ Fashion and Lifestyle stores in FY 2021-22.

Tata Group-owned retailer Trent Limited nearly doubled standalone revenue from operations to Rs. 7,715 crore in FY ’23.

Amazon’s CEO, Andy Jassy, recently announced plans to invest US $ 26 billion in India by 2030.

The international retail chain, Max Fashion, has 465 stores in India (850 globally) and in the coming year, it will add 100 more stores in India.

Citykart, a value retail store chain having 93 stores and revenue of Rs. 560 crore in the fiscal year 2023, will add 150 + stores in 3 years.

Cantabil Retail, a value-for-money brand, has a total number of 461 EBOs across India, with plans for continued expansion as in the current financial year, it has a plan to open 80 new stores. It is also in the process to foray into the footwear and athleisure category.

With a presence across India with 1,773 touchpoints, including 379 EBOs, Mufti Jeans is coming up with an IPO.

Large number of D2C brands and budding start-ups are also continuously growing in terms of turnover, their presence and product categories. HRX, The Bear House, Fable Street, The Souled Store, WROGN, Bewakoof, 20Dresses, Chumbak, Jaipur Kurti, Bombay Trooper, Creatures of Habit, Anouk, FabAlley, Zivame, Clovia, Pretty Secrets, Bombay Shirt Company and Andaman are few of the D2C brands which have established themselves well.

Launched in 2013, infant and kidswear brand Miniklub has expanded its presence with 55 EBOs and 450 multi-brand outlets across India.

A report of ICRA, the leading credit rating agency, indicates that demand pressures and inflationary headwinds are expected to moderate the revenue growth of Indian fashion retail entities to 10 per cent in the fiscal year 2024.

Main reasons for growth

The above mentioned few examples show how various segments in Indian apparel retail are geared up for growth. India has 254 million youth (15-24 years) and India’s economy is currently ranked as the fifth-largest globally which is further projected to ascend to the third-largest economy by 2030.

Growing disposable income (per capita income is set to increase by over 100 per cent by 2031, which is currently US $ 2,278) is pushing for more consumption, aspiration for attractive clothing and branded garments (there is a shift from need-based buying to aspirational). Moreover, Government’s supporting policies, increasing urbanisation, retailers and brands’ growing thrust on Tier-2 and Tier-3 cities, their aggressive marketing and focus on improved consumer experience in their stores, dedication to product development including raw material to design development, comfort and utility, technology enabling smooth operations across the entire operations, thrust on sustainability, celebrities’ thrust on their brands, collaboration with brands available in the market, the impact of social media and influencer culture are some of the major factors responsible for the growth.

Nearly all the product categories and segments (luxury to value) have ample growth opportunities like the concern of health motivating more use of sportswear and yoga clothing. Women are seeking exclusive, customised ethnicwear like designerwear which is more accessible now and organised players are also focusing more on the same. D2C brands offer the latest designs influenced by data-driven insights through granular data analysis, thereby minimising the time required from design to product launch.

 Better future ahead

A few of the below-mentioned factors have become instrumental in industry’s growth and also ensure a better future ahead.

 Policy level decisions

The implementation of the Goods and Services Tax (GST) system has unified India under a single taxation system, fostering cohesion and simplicity. Efficient logistics systems have been established to facilitate quick, last-mile delivery.

The logistical costs currently account for 13 per cent to 14 per cent of India’s GDP, almost double of what the costs are in developed countries. With logistics policy, India is aiming at bringing this cost to a single digit. Initiatives like Startup India, Mudra Loan are already being supported by the industry while now PLI, PM MITRA parks, several initiatives to attract FDI in retail will help the apparel retail business directly or indirectly.

Digital transformation 

Digital transformation is the flag bearer of Indian apparel retail industry’s growth and it has a bright future. The fashion e-commerce market in India, currently worth US $ 8 billion to US $ 10 billion, can grow at a rate of 35 per cent and reach about US $ 30 billion in the next five years.

Thanks to the availability of the cheapest internet data plans and the affordability of smartphones, the subsequent introduction of the UPI payment transfer platform on mobile phones, e-commerce portals like Myntra, Amazon, Meesho, Flipkart, Snapdeal, thousands of Startups, D2C brands, Instagram sellers are flourishing in the market. And moving forward, the Open Network for Digital Commerce (ONDC) is poised to revolutionise digital purchasing, ensuring accessibility for everyone at the most affordable prices.

The digital growth will continue for sure as India is expected to have more than 1.3 billion smartphone users and internet users and 500 million online shoppers by 2030, while e-commerce penetration in India is projected to be 15 per cent by FY ’27.

Continuous entry of overseas brands 

Zara, Levi’s, H&M, M&S, Armani, Uniqlo, Forever 21, GAP, Mango, Jockey, Tommy Hilfiger, Calvin Klein, Louis Vuitton, Gucci, Chanel, Prada are just a few global names that are enjoying growth in India. The list is long as there are more than 100 international apparel brands that have a presence in India. Many of them have their stores and operate individually while few have collaborations with Indian retail giants.

Sustainable clothing attracts everyone 

As everyone, especially the youth, are concerned more about the environment and a socially responsible future, a tilt towards sustainable clothing is also a trigger for the fashion market. Though India’s market for sustainable clothing is still developing, over the past few years, it has demonstrated consistent growth. Industry reports claim that the sustainable fashion market in India is estimated to reach US $ 9 billion by 2025. As per reports, 60 per cent of consumers in India are willing to pay a premium for sustainable products while 52 per cent of consumers in urban India expect to increase spending on sustainable brands in the next three years.

Mid-range brands and retailers shaping retail growth

Brands and retailers in the mid-level are shaping retail growth such as Go Colors, Mufti, Spykar, Octave, Cantabil, Barcelona etc. And majority of these are also on growth path. Having 115 stores, Barcelona raised Rs. 5 crore debt capital from GetVantage and it is in process for massive store expansion. Apart from adding new stores on continuous basis, Cantabil has invested Rs 5 crore to enter the footwear and accessories categories. Spykar is in process to execute lot of affiliate marketing besides social media. The interesting point is that brands like Cantabil and Barcelona have strong presence across the country, especially in Tier-2 and Tier-3 cities.

Performance of leading retailers/brands

Source: Company’s reports and market sources (all figures in crore)

(*Raymond’s approx. 55 % share is from retail segment)