Women’s apparel segment set to overtake menswear even as design-related costs rise
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Mumbai: The branded women’s apparel market is growing at 20% compounded annual growth rate (CAGR) while women’s apparel in general is growing at 11%. India is among the few large economies whose apparel market is dominated by menswear as of now.
A report by financial services firm Avendus Capital, titled “Women’s Apparel: Landscape in India”, said that women’s apparel is set to be the fastest growing segment of India’s apparel market, growing from Rs99,300 crore in 2015 to Rs2.77 trillion in 2025, making nearly 40% of the market. Branded clothing, which was only 26% of the total women’s apparel market in 2015, will comprise nearly 40% by 2025, the report said.
This growth in branded apparel for women is coming from increasing artificial obsolescence, among other factors including more number of working women, women with increased discretionary spending who buy on aspiration rather than need, Avendus said in its report.
This has rapidly changed how women identify brands and maintain loyalty with them, the report said. “Brand association is more with design language today (and) style and design are the top considerations,” the report said, citing data from RedSeer Market research and consulting firm AT Kearney, which showed that most consumers counted style and design as their top or second consideration while shopping for clothes.
This has led brands to focus on “higher design proliferation” by offering more colours and designs in their portfolio than before, and sharply positioning their brand. For instance, Fabindia Overseas Pvt. Ltd, India’s largest single brand apparel retailer, offers over 600 designs and more than 30 colours, while global fast fashion giant Zara offers 322 designs and 15 colours, the report found.
“If you want to create a brand, you need to have a clear positioning,” said Abha Agarwal, director at Avendus Capital. “There are brands that have a design team but who are there to buy (designs) rather than to design. But if you want to grow beyond Rs40-50 crore in size, you will need to focus on your design,” said Agarwal.
Avendus’s report estimates that as brands focus on more complex designs to cater to a demand for rapidly changing trends, 70-80% of garment costs will come from the design choices a brand makes. This will also mean more inventory piled up as trends change—nearly 20% unsold every season—and more discount sales to get rid of it.
“Brands will have to carefully calibrate their throughput and their inventories to control costs,” Agarwal said. “Manufacturing (apparel) is all about good execution and that can be outsourced with the right kind of supervision,” she said. This can help new growing brands control costs and focus more on their designs and brand positioning.
However, distribution will become another major cost for such brands as it becomes imperative for them to reach out to all major channels, Agarwal said. “Online (e-commerce) has become easier channel for smaller brands to grow, but anyone who wants to grow beyond a Rs40-50 crore size will have to focus on EBO (exclusive brand outlet),” she said. EBOs are a network of physical stores that exclusively sell one brand. These are relatively more expensive than multi-brand outlets where more than one brand is sold and concepts such as shop-in-shops (space dedicated to one brand) can help reduce rental cost.
Despite mounting costs, Agarwal said it is better for brands to focus on strong design and setting up EBOs if they are looking for long-term growth. All major private equity deals in the apparel space in India in 2015 and 2016 involved companies with high design complexity in their products, the report said. These include L Capital’s stake sale in Fabindia to Premji Invest for $110 million in November last year and TA Associates’ acquisition of stake in TCNS Clothing Co. Ltd (that owns women’s brands W and Aurelia) for $140 million in August last year.
“A major portion of deals involving private investments or exits have been associated with companies having high fashion content as compared to core or regular clothing,” the report said.