The global fashion industry, valued at US$3 trillion, constitutes two per cent of the world’s GDP. Today, the market largely owes its ebb and flow to the COVID-19 pandemic. The disruption to global fashion first began when people were forced to work from home. Resultantly, demand for formal wear fell drastically as people opted for comfortable casuals. The formal wear market was further threatened by transportation restrictions and the shutdown of manufacturing units that affected procurement of fabrics and hampered production, respectively. With an adversely affected global supply chain and a slender scope of revival, the light at the end of the tunnel for the formal wear market was burning dim.
Once the worse of the lockdowns were lifted and people gradually began stepping into offices, formal wear, as we knew it, had metamorphosed into a more relaxed, functional form that still kept people looking sharp and professional. ‘Smart casuals’, as it was called, thus emerged as both a fashionable and marketable segment.
In India, the newly emerged formal wear market for men and women is driven by both similar and dissimilar factors. While demand, as a whole, is fuelled by an increase in the propensity to spend among both genders and their keen desire to dress well, in the menswear segment, formal wear is dominated by Western attire while women’s wear is influenced by Indian ethnic fashion. “Formal clothing was first established in the early modern era and has seen numerous changes all the way until now – the post-COVID era. With the rise of women’s empowerment and the transformation of working cultures, the definition of women’s formal wear is expanding rapidly. The growth of social media such as Facebook, Instagram, Twitter and other fashion blogs is driving awareness of the latest apparel trends,” says Dipali Patwa, Group Head of Brand, Community, Digital, Fabindia Ltd.
According to a recent report by Technopak Analysis, the menswear market is expected to grow at a CAGR of 8.7%, from US$24.4 billion in FY 2020 to US$37 billion in FY 2025. Shirts and trousers are the largest categories within the menswear segment, contributing 27% and 20%, respectively. Indian wear, while accounting for 6% of the total market, is gaining share.
The women’s wear market, on the other hand, is expected to grow faster than menswear at a CAGR of 9.2%, says Technopak. While Indian wear, including sarees and salwar kameez, has always been the largest category in women’s wear in India, new segments are being adopted at a rapid pace. Fusion clothing, including kurtis, is another segment that is growing across all geographies and consumer segments.
“The women’s wear market has expanded rapidly in the pre-pandemic years because of increased disposable income and an increased percentage of working women. One of the significant drivers of the women’s wear market in this country is India’s religious and cultural diversity, where various opportunities are celebrated with equal joy and glee. Every woman prefers to look good and beautiful without being concerned about the amount she needs to shell out, especially the financially independent working women. Economic growth, ease of payment and other seamless experiences are driving factors for the demand for quality formal wear,” says Pooja Choudhary, Founder & CEO, Lavanya The Label.
That said, there is no denying that formal wear, as a market, is fast losing ground. “The formal wear market is merging with the smart casuals’ category. Classic formal wear is now limited to specific industries like finance, banking, etc. With the work-from-home culture getting accepted across various companies and genres, the market for typical formal wear further seems to be diminishing,” shares Divam Jain, Co-founder & Partner, Fabnest.
But, could there have been a positive impact of the pandemic on formal wear? While demand for this category dipped tremendously due to the unsparing pandemic, could it have, one way or another, opened newer markets and segments for fashion brands that traditionally dealt in formal wear? “I would say that the pandemic layered on an expansion of the definition of formal wear with a more intimate, casual and comfort touch. Also, sustainability being on top of everyone’s mind, its craft and impact-led supply chain management, which is on the forefront of a lot of dialogues, has finally been a refreshing change to witness. At Fabindia, this has been built into the DNA of the brand for 62 years and counting, and so I am happy to see the progress the industry is finally making to address this,” shares Patwa.
Jain does agree that the only positive impact has been for adopters of change and innovation, with some of them focusing on the direct-to-consumer (D2C) model instead and improvising to introduce more categories. Sharing his sentiment, Choudhary adds, “The pandemic pushed brands to digitise their consumer experience to sustain the market shift by going D2C through their e-commerce platforms and websites. The only positive impact I can see is the digitalisation of the formal wear market.” Nonetheless, in her opinion, the pandemic did have a negative impact on the formal wear category. “While offices went online, a massive contraction in the category was observed wherein the increase in demand for casual and loungewear options surged. As a result, the revenue for lifestyle brands declined by 81% in the first quarter of FY21. Even formal wear brands launched their new casual clothing line to explore the space,” she explains.
Drivers of Measured Growth
Economic growth can undoubtedly be credited to drive growth of the formal wear market in India irrespective of how slow-moving it may be. ‘Seamlessness’ is also one of the operatives fuelling this measured growth, coupled with increased disposable incomes and the desire to look smart among the Indian working populace. Sharing his perspective, Jain says, “Classic formal wear seems to be taking a backseat and continues to be limited to specific industries; growth of the banking sector and Fintechs seem to be providing new avenues to this category. I think COVID has made a permanent dent to some extent.” A lot of companies will probably never return to the 5 or 6-day work week; business travel and business meetings will also be restricted, further impeding the growth of this sector in attaining pre-COVID numbers of sales and revenue.
Numbers Lost & Found
With the formal wear category affected the way it has been, could it be possible for it to recover to pre-COVID numbers of sales and revenue? One school of thought believes that there’s still some way to go before that happens, but it will be interesting to see if its the brands that expanded their product line to smart casuals are the ones to attain that target. The other school of thought is that some retailers have already achieved the numbers they were operating at before COVID-19 was declared a pandemic and the world went into lockdown.
“It will take a couple of years for brands to reach pre-COVID numbers, that too only if they move to other product categories. Formal wear in itself may never touch those numbers again,” says Jain, but Choudhary believes otherwise. “Since January, apparel retailers and e-commerce marketplaces have witnessed a surge in demand for formal wear. In addition, the need for the category is increasing with the decrease in COVID cases. Brands witnessed strong e-commerce performance with double-digit growth, from 7% in FY20 to 15% in FY21. The industry had reached pre-COVID sales in January and February 2022. In FY19-20, the formal wear market was pegged at Rs1,400 crore and from the following year onwards, the sector was expected to grow between 8-10% over the next four years. Pre-Diwali was at about 65-70%; during the festive period, the market recovered about 85%. However, in February, leading retailers claim to be back at pre-pandemic levels,” she shares.
Where to Invest
The demand for occasion-led traditional clothing in the formal wear category is still very high. However, there is a growing number of the working class that prefers Western designs with an Indian twist and have started contributing largely to the consumption of formal clothing. “Today’s consumers also try to create their own ensembles, so the opportunity is to understand this consumer and create collections that work for them,” advocates Patwa. Made-to-measure is also gaining popularity well beyond the conventional suit or outfits, she adds.
The pandemic has also opened many a door for the D2C market and both e-commerce as well as physical retail in Tier-II and III cities of India. Jain believes that the immense progress being made in this sector will continue to grow. “Supply chain and production techniques with new innovations are increasingly being used to enter new market segments. Smart fabrics, which require minimal care, are being introduced. Shirts with reversible prints, where one print is suitable for a formal meeting whereas the other goes with a casual look, are also becoming popular,” shares Jain. Fabnest is adding menswear to its portfolio this year with styles in the formal wear category as well.
The Indian retail sector is booming at a steady rate. “With the enormous number of retail outlets, India is witnessing exponential growth within retail development not only in metropolitan and major cities but even Tier-II and III cities and towns. Local retail stores are also creating a mark and emerging strong in domestic and international markets as they have a lot to offer in terms of their regional fashion, fabric and culture. Natural fibres are also turning heads everywhere,” adds Choudhary.
E-commerce vs Brick & Mortar
After a dramatic, turbulent 24 months, the fashion retail industry has recovered and displayed growth of 6% since its pre-pandemic years, shares Choudhary. “Moreover, the fashion sector is experiencing significant growth with a steady decline in the rate of COVID-19 cases. After the 40% decline caused by COVID-19, the revenue of brick-and-mortar apparel retailers will grow 20-25% this fiscal year. In addition, fashion businesses will be working in a hybrid model, registering their presence in the online and offline markets simultaneously as this is the need of the hour,” believes Choudhary. Lavanya The Label is also planning to expand its services across other e-commerce websites.
Studies do reveal that an omnichannel approach to business is the best bet for brands today. Giving the customer the joy of seamless transactions, purchase & return, and communication has a bigger return on investment than one can ever enumerate. To build a brand it is important to build loyalty but first, it is important to gain the trust of the consumer. And in gaining that trust a seamless interaction with the brand every step of the way is pivotal. Be it an online transaction or an in-store experience, the journey of the consumer with the brand must be free of bumps.
Jain believes that of the two (e-commerce and brick & mortar retail), however, it is e-commerce that is more engaging and thus a more beneficial investment for a fashion brand. “E-commerce will continue to lead the growth wave. COVID-led lockdowns and restrictions have made a large percentage of the population accustomed to ordering online. New features are being added to online portals to make them convenient and stress-free for potential customers. Hassle-free return & exchange policies are also making the process more convenient,” he elaborates.
Fabindia follows an omnichannel approach, with its stores and e-commerce working together to meet the needs of its consumer. “The advantage of having pan-India stores is that for any kind of apparel category, our customer can look, touch, feel and try the clothes at any of our stores and either buy them there or post determining their sizing, can make the purchase at our website. We also offer alteration studios and services at all our large-format Experience Centres. So, for a category like formal wear, this is an added service-led perk for our consumers,” says Patwa.
Formal Wear has Come of Age
Understanding consumer fashion in a country the size and variety of India is always a challenge. “India has different climates, ranging from the seasonal North and East to the mostly hot South and West, prompting demand for a broad range of apparel; not to forget the different regional and cultural tastes, festivals and occasions, all of which are part of our heritage. So while styling will evolve, cultural gatherings will change, the sentiment of celebration is here to stay,” says Patwa.
Jain believes that formal wear is never going back to the way it was earlier. He says, “Companies, big or small, have realised how it is absolutely possible to survive by not having a 5 or 6-day physical presence in office. They have tasted blood by saving money with respect to not having massive fixed costs due to rentals, maintenance and travel-linked expenses. This has changed for good; some percentage of this change is permanent. Smart casuals will rule.”
According to Choudhary, there has been a significant change in preferences, needs and demands for formal wear in the Indian market. “Consumers look for formals that are comfortable and boost their self-esteem at the same time,” she concludes.
The formal wear segment in India has thus not faded completely; it has merely metamorphosed into its more contemporary form – smart casuals. The shift, however, has increased the tensity among formal wear-dominant brands and forced them to innovate not only on product but also on distribution and marketing.
Good to Know
- In order for the category to find new avenues, formal wear needs to be marketed as articles of fashion statement. Not only globally but also in India, formal sets seem to be the popular choice among celebrities and influencers as statement pieces.
- The present generation prefers comfortable fashion even when it comes to formal wear. Social media platforms and various factors driving the market’s growth are participating in transforming traditional clothing into modern designs and blending ethnic and Western clothing to connect with people.
- Women prefer good-quality clothes; the presence of natural fibres is an essential identifier for high-quality garments. A significant part of the female populace prefers traditional wear in their traditional fabric.