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INDIA

FASTEST GROWING
FREE MARKET DEMOCRACY

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Apparel Retail : Labelling the Indian


Market

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India Brand Equity Foundation

P A G E 2

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APPAREL RETAIL : LABELLING THE INDIAN MARKET

Industry experts believe


that apparel sales in
retail stores posted a
growth of between 2530 per cent in 2003 and
according to an estimate
by McKinsey, the
branded apparel marketis now worth
nearly $ 1 billion.

Apparel manufacturer Cavin Cally Fashion runs a single retail outlet in


Chennai. Before the end of March next year, it plans to open 20 retail
outlets in the neighbouring state of Andhra Pradesh. The company
managements ambitions dont end there. Over the next two years, Cavin
Cally plans to open at least 250 retail outlets across the country.
Branded apparel merchandising is gathering critical momentum in India,
and thats a bit of a surprise in a country where preferences change every
25 km and loyalties change for a 10% difference in pricing.
Changing consumer behaviour
But suddenly, brands have started shaping buying behaviour. A large young
working population with a median age of 24 years; growing numbers of
nuclear families in urban areas; increasing working-women population and
emerging opportunities in the services sector have increased the average
consumer spend on branded clothing.
Industry experts believe that apparel sales in retail stores posted a growth
of between 25-30 per cent in 2003 and according to an estimate by
McKinsey, the branded apparel marketis now worth nearly $ 1 billion.
Until recently, quality retailing was limited to high streets and standalone
departmental stores. Now, across metros, apparel buying is the second
biggest consumption category at malls, after food products.
Without question, the consumer boom is being driven by a new openness
about using credit cards. According to ICICI Bank, credit card spends
increased by 37 per cent in 2003 compared to 2002. In the beginning of
2004, there were close to a million credit card users in the country, and
the number of users has been growing at 31 per cent annually. Clothing,
along with shopping for jewellery and eating out, contribute 45 per cent to
credit card spends, up from 21 per cent a year ago.
In fact, apparel retailing is no longer a metropolitan phenomenon;
companies are now quickly branching to smaller cities in an effort to cash
in on the consumer boom.
Beyond the metros
The ICICI Bank study shows that cities like Chandigarh, Hyderabad, Pune,
Indore and Ludhiana are growing as fast as metro cities like Delhi and
Mumbai. On an average, credit card spends in these cities increased by 66
per cent last year.
In fact, branded apparels have not started carrying an appeal even in rural

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APPAREL RETAIL : LABELLING THE INDIAN MARKET

Raymonds the flagship


brand of the Singhania
Group-- is revamping its
chain of 300 stores
known as Raymonds
Shopsand focusing on
readymades at a cost of
around US $ 35 million.

India. In 2004, ITCs Chaupal Sagar became the first hypermarket to hit
rural Madhya Pradesh. ITC has come up with a special low-cost apparel
range called Springfield has debuted at this mall.
In the past, one of the key challenges of the domestic apparel business
was distribution, says Darshan Mehta, President, Arvind Brands. It now
appears that the consumer boom has given various players an opportunity
to address this supply chain link.
From franchise to company owned
Larger textile manufacturers were the first off the block in the nineties,
with big players like Raymond, Arvind Mills, Madura Garments and Zodiac
Clothing building extensive retail networks. Because the market potential
was still relatively small in the nineties, most players used the franchise
route to expand.
Now, companies are using their own funds to increase the capacities of
their retail stores. Previously, the Arvind Mafatlal Group had a chain of
below-1,000 sq ft stores to sell its flagship brand apparel: Arrow. Over the
last two years, the company management has closed down a number of
these small stores and gone in for bigger stores. The new stores have a
minimum 1,500 square feet space, and nearly per cent of Arvinds apparel
business comes from these outlets.
Raymonds the flagship brand of the Singhania Group-- is revamping its
chain of 300 storesknown as Raymonds Shopsand focusing on
readymades at a cost of around US $ 35 million. The logic: the
contribution of readymade apparel to total sales has gone up 25-30 per
cent compared to the previous year.
Likewise, Madura Garments has opened up a mega store in the heart of
Bangalore that sells the companys flagship brand, Peter England. Spread
over a carpet area of 1350 square feet, the store is designed to function at
three levelsground, semi-ground and mezzanine. Last year, this single
store logged sales of nearly US $ 205,000. Encouraged by this success, the
company has opened a second mega store and is planning a third in the
near future.
Spurred by these successes, a slew of new retail entrepreneurs chains are
investing heavily to cash in on Indias US $ 15 billion clothing market (see
chart).

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APPAREL RETAIL : LABELLING THE INDIAN MARKET


The influence of fashion

As lifestyles change,
fashion in India is becoming more stratified,
as in the West.

Clearly, fashion has also played an important role in shaping apparel


consumerism. As lifestyles change, fashion in India is becoming more
stratified, as in the West. Technology, ideas and lifestyles are moving
concurrently, and quickly. Companies and brands that offered
monotonous, mundane products for years have now tripled their product
ranges and new appealing shapes and forms are being launched each
season.
Top-notch fashion professionals came together four years ago to form
the Fashion Design Council of India. Under the aegis of the Union textile
ministry and in tandem with National Institute of Fashion Technology,
FDCI now provides professional inputs for designing labels and is now
working towards developing the fashion supply chain through backward
linkages with suppliers and mills, and forward linkages with the retail and
distribution network.
The lure of foreign labels
The boom in domestic apparel, nevertheless, tells only part of the story.
India has huge potential as a market for foreign clothing, given its large
population and growing household incomes. A few significant foreign
playerssuch as Levi Strauss, Benetton and Lacostehave been selling
their branded apparel in India for a number of years. But now, just like
their Indian counterparts, global apparel brands are setting up their own
apparel outlets, instead of just selling through departmental stores.
Ralph Lauren, for example, has a limited range exhibited in generic
department stores located in metro cities. Yet it has now set up its own
stand-alone stores, which showcase all the companys brands.
Now, with the governments proposal to let in branded retail players
brands like Benetton and Lacoste currently sell mostly through the
franchise routeinvestments in Indias apparel sector are likely to go up
substantially.
Enter, the New Retail Entrepreneurs

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Delhi-based Ebony has commenced a massive expansion in


northern India with eight new stores and a combined retail space
of 150,000 square feet. Besides sprucing up exiting stores in Delhi
and Punjab, the company is expanding to other north Indian
states.

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APPAREL RETAIL : LABELLING THE INDIAN MARKET

India has huge potential


as a market for foreign
clothing, given its large
population and growing
household incomes.

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Lifestyle, a part of the Dubai-based Landmark Group retail chain,


now owns seven stores located across various metro cities. The
company wants to double its presence to 14 stores by 2006,
occupying a combined retail space of one million square feet.

Mumbai-based lifestyle chain Pantaloon has spent around US $


660000 this year to revitalize its brands and promote new brands.

Bangalore-based Shoppers Stop which currently has 15 stores


spread over 9 of Indias largest cities, plans to open 35 more
outlets in the next three years.

TCNS Clothing has 17 stores across the country and is planning


to increase the number to 37, covering all major cities

Spykar has set up 22 stores across the country, and plans to add
30 more by mid 2006.

India Brand Equity Foundation

NOVEMBER

2004

P A G E 6

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The India Brand Equity Foundation is a public - private partnership


between the Ministry of Commerce, Government of India and
the Confederation of Indian Industry. The Foundation's primary objective
is to build positive economic perceptions of India globally.

India Brand Equity Foundation


c/o Confederation of Indian Industry
249-F Sector 18
Udyog Vihar Phase IV
Gurgaon 122015 Haryana
INDIA
Tel +91 124 501 4087 Fax +91 124 501 3873
E-mail india-now@ibef.org
Web www.ibef.org

www.ibef.org

India Brand Equity Foundation