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Apparel retailing: What is the potential? - Views on News from Equitymaster
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  • Jun 25, 2007

    Apparel retailing: What is the potential?

    The apparel market in India is estimated at around US$ 13 bn and is also one of India's largest foreign exchange earners, accounting for nearly 20% of the country's total exports. Though, the apparel market is mainly dominated by the unorganised sector, it is nonetheless also the key revenue driver for organised retailing in India. The share of the apparel sector in organised retailing in India was 8% in 2004. The major players in this segment are Trent, Shoppers Stop and Pantaloon etc. The segment is witnessing growth on account of increasing income levels, increase in proportion of working women amongst others.

    The Indian apparel market has been growing at 4% to 5% in volume terms and 13% in value terms per annum, driven by the factors such as population expansion and increasing purchasing power. Today on account of change in lifestyle, entry of leading international brands, increased awareness and access to media, the Indian consumer has shown a preference for different and new merchandise with convenience in shopping. In this article, we shall take a look at the segmentation of the apparel market and the potential going forward.

    Market segmentation...

    The core segment of the apparel market comprises of men's wear, women's wear and children's wear.

    Market segmentation
    Category % of total apparel market
    Men's wear 42
    Women's wear 34
    Children's wear 16
    Others 8
    Source: KSA Technopack

    The women's apparel market in India was estimated to be worth Rs 264 bn in 2004, which is 34% of the total apparel market. The branded women's wear segment constitutes 22% of the total women apparel market with an estimated market size of Rs 58 bn in 2004. The women's wear market has been growing at faster pace at about 9%, due to increase in the population of working women and rise in disposable incomes in general. As against this, the men's wear market, which is estimated to be around 42% of the total apparel market in India, is growing at the rate of 12% annually. However, the branded men's apparel market is growing at the rate of almost 22%. This underlines the fact that the branded wear segment was not targeted earlier and there is huge potential in this segment of business going forward. The children wear market in India accounts for around 16% of the total apparel market in India. The branded apparel market in this segment is estimated to be around 10% of the total branded apparel market and is growing at 20% per annum (Source: KSA Technopak).

    Branded apparel accounts for only 20% of the total apparel market. Out of the total branded apparel market, men's wear accounted for 33% as compared to 10% of children's wear and 22% of women's wear in 2004. The structure of apparel retail has changed dramatically in the recent past with the growth of large multi-brand apparel outlets and manufacturer brand-led chains.

    To sum up...
    Apparel retailing is the country's second largest opportunity for the organised retailers after food and groceries. Like in the west, specialty stores have begun to grab market share in India. Raymond, Arvind Brands, Madura Garments (Indian Rayon) and Zodiac Clothing were the first ones among apparel manufacturers to foray into organised retailing. Pure retailers like Trent, Pantaloons have also lined up huge expansion plans to explore the huge untapped potential in this line of business. Further, the high-value, high-margin nature of apparel retail has attracted several large business houses to invest in apparel retailing.

    Going forward, players who will be able to produce designs as per the customer's changing tastes and preferences and have developed an efficient supply chain system to cater to the needs of the consumers, while being cost effective, will have the competitive advantage.



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