BackZudio’s success spurs competition in value-fashion market
Zudio’s success promises to give stiff competition to regional retailers such as V-Mart, Style Bazaar, City Kart, and V2 Retail
PremiumNew Delhi: Large retailers in India are intensifying their expansion in the value-fashion segment, as increasing disposable incomes and growing consumer aspirations in the nation's smaller cities fuel demand for budget-friendly branded apparel and footwear. The triump of Trent Ltd.'s Zudio, a value retailer, present in prime urban locations has also prompted peers to emulate this model in hopes of similar success.
The value apparel segment is projected to witness a compound annual growth rate (CAGR) of 6% from 2020 to 2025, but the organized sub-sector is expected to surpass this, achieving a 13% CAGR, analysts at Motilal Oswal Financial Services Ltd. said in a report on Monday.
This growth has been attributed to rising disposable incomes, demographic trends favouring a youthful consumer base, and ongoing urbanization.
“The value fashion segment, at ₹2.5 trillion as of CY20 (57% of the total apparel market), is one of the largest and fastest-growing segments within the apparels market. The segment is now witnessing a change in dynamics," according to the report.
“A huge opportunity beyond the metros and tier 1 cites, driven by better demographics, higher incomes and better aspiration within the customers, has compelled several big players to enter a market that was previously dominated by regional and local operators. Following the success of Trent’s Zudio, the segment has seen entries of national retailers such as Yousta (Reliance Retail), Style-Up (ABFRL), and InTune (Shoppers Stop)."
Zudio has seen remarkable expansion since its FY17 inception, now boasting over 350 standalone stores and revenue of ₹3,540 crore. It operates on a franchise-owned, company-operated model, appealing to franchisees with its capital expenditure approach, while Trent manages inventory costs.
Zudio’s success promises to give stiff competition to regional retailers such as V-Mart, Style Bazaar, City Kart, and V2 Retail, the report said.
“The driving force behind Zudio was a differentiated proposition with a high fashion quotient but at a low price point aimed at the youth segment. This is in contrast to the regional retailers such as V-Mart, Style Bazaar, City Kart, and V2 Retail, which target the lower middle-class families with a wider range of products and local preferences but with low differentiation. Hence, they face intensive competition and a few of them are yet to recover to their pre-covid levels due to the continuing weak consumption in the smaller tier cities," the report said.
Historically, India’s value-fashion segment has been ruled by unorganized retailers and represents over half (57%) of the overall apparel market, primarily serving the middle and lower income brackets in tier 2 and beyond markets. Only a handful of regional retailers have managed to carve out a presence in this cost-conscious segment, which has proven challenging for larger retail entities to penetrate.
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