In India, both domestic and international brands have their own set of unique challenges and advantages. The diverse markets and its current structure requires these brands to learn from peers. The market is fast changing requiring players to pro-actively augment their strategy from time to time to overcome the challenges.
The Indian apparel market has a healthy confluence of homegrown and international brands. However, the number of international apparel brands present in India seems to be lower than other large economies. The Indian market had been largely ignored by global brands till about a decade; even those that were interested in the market chose not to invest much in market understanding or development. They chose partnerships, franchisee and in some cases license arrangements to enter the market. The last decade has however seen a change and the pace accelerated after the government of India liberalised FDI policies in this sector. This was driven by high GDP growth rates of approximately 8 per cent between 2006 and 2011 and the emergence of India as a market of future potential.
Now, with further liberalisation of Foreign Direct Investment (FDI) policy in retailing in 2012, allowing 100 per cent foreign investment in single brand retailing, more international brands are expected to enter the Indian market. The fact that several western markets have stagnated only add impetus to this growth.
Market potential and structure
In 2011, the Indian apparel market was estimated at US$45 billion and is growing at CAGR of 12-14 per cent p.a. Going forward, the market is expected to sustain this double digit growth rate to reach a size of US$80 billion by 2016. The organised or branded segment constitutes about 20 per cent of the Indian apparel market and is expected to grow at higher rate of 16-18 per cent p.a. till 2016.
While, the Indian apparel market is dominated by unorganised players, there is a continuous shift in consumption towards organised segment. This has been led by a combination of demand factors such as rising consumerism, increased consumer knowledge et cetera, and supply led factors such as entry and penetration of leading international and domestic brands.
Evolution of the Indian apparel retail market
Till the 1990s, the Indian branded apparel market was dominated by legacy brands such as ‘Raymond’, and the micro-markets were dominated by local unorganised retailers.
With the dawn of the millennium, the Indian market experienced a growth and shift in consumption for branded apparel, which propelled the entry and growth of organised retailers (specialty and department stores) and exclusive retail stores of international and domestic brands.
In 2006, the government of India’s decision to allow 51 per cent FDI in single-brand retail coupled with robust market growth, triggered the entry of several foreign brands in the Indian market. Post 2006, the market experienced a deluge of international brands, with three-fourth of brands present in the market having entered the Indian market between 2006 and 2012. This trend was largely led by brands from the U.S., Italy and the U.K..
The entry and expansion of Indian and international apparel brands is driving a shift in consumer spending on organised retail. Indian and international brands are leveraging their respective strengths such as brand equity, sourcing, designing and market knowledge to drive this shift.
Both domestic and international brands have their own set of unique challenges and advantages listed above. The diverse markets and its current structure requires apparel brands to learn from peers and investment time to learn doing business the Indian way. The market is fast changing requiring players to proactively augment their strategy from time to time to overcome the challenges.