India is in the midst of a digital transformation and fashion is at the forefront of this change. Of the $70 billion Indian fashion market today, about $7-9 billion is already digitally influenced. This influence is expected to multiply nearly 4 times to reach ~$30 billion by 2020, a staggering number which will constitute 60-70% of the total branded apparel market, according to a report launched by management consulting firm Boston Consulting Group (BCG) and social networking company Facebook titled ‘Fashion Forward 2020.’ The report focuses on the rising influence of digital in the fashion industry. According to the report, digital footprint, which refers to fashion buyers with Internet access, has more than doubled in the last three years. It will continue to grow rapidly as Internet penetration is expected to grow 2.5 times by 2020. Mobile is the primary device for Internet access for 73% of urban users and 87% of rural users—this trend is likely to continue as smartphone penetration continues to drive Internet penetration in India.
Here are the main takeaways:
Mobile first for Internet access and shopping
Mobile is the primary device for Internet access for 73% of urban users and 87% of rural users—this trend is likely to continue as smartphone usage continues to drive Internet penetration. Mobile has also become the predominant device for fashion e-commerce --85% of online shoppers prefer to shop on their smartphone. Within mobile, mobile apps are the most preferred way of purchasing with 80% of consumers preferring to use them over mobile websites. Mobile websites are seeing higher usage in small towns where consumers are typically operating with low capacity handsets. This, however, implies a potential barrier for new players. On an average, a consumer keeps 3-4 online shopping apps on his/her phone. New players must offer a unique proposition for consumers to create space for them on their phones.
Fashion is the first category that most people buy online
Among new online shoppers, 30% start with apparel & footwear. Among mature shoppers who buy multiple categories online, 70%-75% buy apparel, footwear & accessories online. Deals and discounts and promotional material such as e-mails are key purchase triggers for new shoppers.
However, low familiarity with website/app and return policies are big concerns for first time shoppers, who thus prefer spending low amounts online.
Hence, ensuring flexible payment options and smooth handling of returns/complaints is necessary to gain the trust of a new shopper.
New shoppers to drive ~40% of growth; higher share from existing shoppers will drive~25%
The growth in fashion e-commerce will be led by 3 primary demand-side factors. Firstly, the Internet user base in India is expected to grow 2-2.5x over the next 4 years. Growing smartphone penetration and declining costs of connectivity are fueling higher usage. More than 70% of urban India will be connected by 2020.
Secondly, e-commerce adoption is expected to grow from 30% to 40% of the user base (among urban Internet users). Investments in logistics infrastructure and convenient payment channels will drive adoption. Fashion e-tail will see 75 million new users resulting in a $5-$6 billion growth spurt. Thirdly, as the existing shoppers mature, their share of wallet will increase: 53% of users intend to increase their spend on fashion purchases online. This will drive an additional $3-$4 billion of market growth.
Fundamental shift in profile of online fashion shoppers
By 2020, the number of consumers purchasing fashion online will more than double. They will no longer be the typical young, metro residing, male users of today. A larger number of women and older age groups will start buying online—creating a much more balanced and representative shopper profile. There will be 2.5x women shoppers and 3x older shoppers compared to today. Online shopping will also take off in India’s lower tier cities as the consumers there mature and the network and delivery infrastructure improve. Tier 2/Tier 3/Tier 4 cities will comprise more than 50% of the online fashion shopper base by 2020.
Finally, the report call out the need for shift in media spending towards digital where further scope exists for brands and retailers as currently only ~10-15% of ad spends are on digital media, despite the magnitude of digital influence on fashion spends. The report concludes by drawing out implications for fashion players to win in this digital world which include ‘here & now’ strategies like leveraging digital to connect with consumer across the various touch-points to more futuristic strategies like optimizing assortment at ‘individual’ level and digital-enabled personalization.