Fashion and apparel to drive highest consumer spending in India, says report

Fashion and apparel started becoming more popular for e-commerce 2.0 during the start of the pandemic with millions of first-time users taking to online shopping.

According to a report by BCG and Matrix Partners, this sector is expected to represent the largest portion of online consumer expenditure in India by 2025.

Fashion and clothing made over 20 per cent of India’s US $ 50–55 billion in total online retail sales in 2021. It is anticipated to account for the largest portion (25 per cent) of the US $ 140-160 billion in total online spending over the next two to three years.

This market has grown significantly as a result of the emergence of new, fashion-focused services like AJIO, Tata Cliq, Nykaa Fashion, etc. in addition to market leader Myntra, such as Meesho, which boosts sales of affordable fashion items in Tier-2+ cities.

Intriguingly, the BCG-Matrix analysis predicts that ‘fashion and apparel’ will overtake ‘mobile phones’ as the leading category, with the latter’s consumer wallet share falling from 32 per cent in 2021 to 23 per cent in 2025.

“Consumers are seeking quicker gratification with shorter delivery options, leading to the emergence of Q-commerce, which has rapidly increased to 25–30 per cent of the overall online grocery market,” the report stated.

India may have 350–400 million online buyers by 2025, making it one of the world’s largest e-commerce markets thanks to the pandemic’s acceleration of digital adoption. The democratisation of digital payments and a much wider-spread logistical infrastructure, which now covers over 95 per cent of India’s pin codes, have also been important accelerators in this growth story.

Siddharth Agarwal, Principal at Matrix Partners India, said: “In the next 5-10 years, India’s economy is projected to grow by US $ 3.5 trillion, which is equivalent to the amount added since its independence 75 years ago. This growth is expected to result in a remarkable surge in per-capita income, leading to an increase in discretionary spending that has not been witnessed in the past.”

“New online shoppers are not the same as existing ones – they are older, more women, lower income and from smaller towns. This is both an opportunity and a challenge as entrepreneurs and leaders innovate on business models to serve the new consumer,” added Parul Bajaj, MD and Partner, BCG.