Indian Apparel Market: Current Status and Future Outlook

Harminder Sahni, Founder & Managing Director Wazir Advisors, India

Indian Textile Summit, Mumbai 27th September , 2012

Agenda
Domestic Apparel Market: Current and Projected Market Size

Global Apparel Market: Current and Projected Market Size

Indian Market vis--vis Other Major Markets

Key Market Influencers

Future Outlook

India : Fastest growing economy by 2020

2011 GDP (USD)
EU 27 United States China Japan Brazil Russia Canada India Australia Others 7,298 5,869 2,493 1,850 1,737 1,676 1,488 14,577 17,578 15,094 United States EU 27 China Japan Russia India Brazil Canada Australia Others 7,165 4,018 3,902 3,885 2,372 2,175 14,917

2020 GDP (USD)

22,661 20,714 16,798

CAGR from 2011 to 2020 4.6% 1.8% 9.7% 2.2% 9.0% 9.8% 5.1% 3.5% 4.3% 0.3%

Indian apparel market is large going to be enormous

Currently valued at USD 40 billion Projected to grow at a CAGR of 13% (fairly reasonable) Estimated to increase to USD 124 billion, by 2020 Indian Domestic Apparel Consumption
Values in USD Bn

124

+13%

25

27

31

35

40

2007

2008

2009

2010

2011

2020(P)

Source: Wazir Advisors

Womens apparel and brands across will dominate by 2020

2011, USD Bn Category % share in Total Apparel Market 2020(P), USD Bn % share in Total Apparel Market

Branded

Unbranded

Branded

Unbranded

Men Women Kids Total Apparel Market

40% 35% 25%

5 4 1

11 10 9

39%

18 20 5

30 31 20

42%
19%

100%

10

30

100%

43

81

Source: Wazir Advisors

Indian apparel market fastest growing at 13% CAGR

Relative Apparel Market Size of Major Economies
2%
411 350

Values in USD Bn X%
CAGR from 2011 to 2020

10%
366

4%
316

225

Global Apparel Market 2011 USD 1,075 Bn 2020(E) USD 1,670 Bn

2%
110 127

150

13%
124

10%
87

4% 6%
75 45 100

3%
25 34

5%
20 31

73

40

37

EU 27

China

United States

Japan

India

Russia

Brazil

Canada

Australia

Others

2020 2011

25% 33%

22% 14%

19% 21%

8% 10%

7% 4%

5% 3%

4% 4%

2% 2%

2% 2%

6% 7%

* Percentages represent the market share of each country in the total global apparel market
6

Indian spending on apparel is relatively still very low

2011 Country Name Per Capita Apparel Consumption (USD) 1,015 Market Size (USD) 64 310 50 95 88 40

UK US France Japan China India

988
762 746 65

33

Developed markets are dominated by large retailers

Retailer Origin No. of Stores No. of Countries Revenue 2011

Sweden

2,000+

35+

18.3bn

Spain

3,000+

80+

17.7bn

USA

3,000+

30+

14.5bn

Developed markets are dominated by large retailers

No. of Countries 42 80

Retailer

Origin

No. of Stores

Revenue 2011

USA Germany

380+ 1,600+

6.85bn 2.7bn

Italy

560+

23

2.3bn

Uniqlo
9

Japan

1,000

Mainly Japan & Asia

13bn

China already has few billion plus apparel retailers

Retailer No. of Stores Revenue 2011

10,000

1.3bn

1,500

770mn

8,000

1.3bn

3,700

1.0bn

10

Indian fashion houses growing rapidly but long way to go

Turnover (in USD Mn) Company Name 2011

Madura Fashion & Lifestyle

400+

Raymond Ltd.

200+

Arvind Ltd.

200+

11

Consumer Trends Influencing Indian market

Increasing Consumerism - Increasing income level - Increasing discretionary spend - Increasing urbanization Preference for Readymade - Convenience - Exquisite designs and wide variety - Mismatch between desired and actual product Preference for Branded Products - Growth in organized retail - Increasing online retail - Increasing presence of international brands

12

Major Influencers of Indian Apparel Market

Increasing Consuming Population Increasing presence of International Brands Increasing Discretionary Spend

Apparel Market Increasing Online Retail Increasing Disposable Income

Growing Organized Retail

13

Growing consuming population in age group of 15 44 years

Population Segmentation
1600 1400 1200 1000 800

~1,347 ~1,200
96 170 160 190 220 350 2011 129 213 194 210 238 363 2020 (P)

~48% of population is between 15-44 years

in Mn

600 400 200 0

0-14

15-24

25-34

35-44

45-59

60+

Median Age in India increasing from 23 years (2000) to ~27 years in (2020) India has youngest population base with more than 60% of the population between 15-59 years and 49% of population less than 25 years

14

Consumption shifting from necessities to discretionary spending

2011
5% 2% 8% 7% 38% 18% 20% 9% 12% 4% 4% 4%

2020
11% 29%

11% 10% 3%

5%

Food, beverage, tobacco Household Products Communication

Apparel Personal Products & Services Education & Recreation

Housing & Utilities Transportation Healthcare

The share of disposable income spend on apparel is expected to increase from 4% in 2011 to 5% in 2020 owing to Greater number of households entering higher income bracket Increasing income levels fuelling greater consumption
15

Organized retail estimated to grow 5 times to 150bn by 2020

2011
USD 1 Bn, 0.2% USD 30 Bn, 6%

2020(E)
USD 6Bn, 1% USD 150Bn, 17%

USD 469 Bn, 94%

USD 744Bn, 83%

Organised Retail Unorganised Retail Online Retail

Indian Retail Market Size

2011 2020 ~USD 500 Bn ~USD 900 Bn

16

Source: International Monetary Fund, Wazir Analysis

Apparel dominates organized retail, with ~35% share

Share of Various Segments in the Retail Industry (%)
Total Retail
1.7 1.1 2.4 0.1 0.3 4.7 0.3 3.2 2.8

Organised Retail
0.9

3.1

3.5 2.4 4.3 2.9 9.2

12.5

0.9 0.4

4.1

5.9
7.3 67.6

34.9 7.7 0.5 2.5 2.9

9.3 0.7

Food & Grocery Footwear Eyewear Leisure Consumer Electronics

17

Apparel & Clothing Jewellery Catering and Food Services Mobile/Telecom Personal care & Fitness

Accessories Timewear Home & Interiors Pharmacy Entertainment & Gaming

Apparel and Clothing

Online Retail: Growing fast and tapping the true potential

Computer software Consumer Electronics
14% 12% 17% 17% 17% 12% 22% 10% 9% 7% 4% 6% 4% 4% 4% 4% 18% 4%

Value, Online retail market in India, in USD million 6180

6000 4000 2000 0 2011 2020(E) CAGR: 37%

Computer hardware Comparison Shopping Books Flowers/ Gifts/ Greetings Retail - Movies Luxury Goods/ Accessories Apparel

360

Worldwide share of Online apparel retail is 18% compared to only 4% in India With online retail market expected to grow at 37% CAGR there is huge potential for Apparel online retail to grow substantially

Worldwide

India

18

Online Fashion Retailers

Indian
Year of Establishment 2004 2007 2010 2011 2012 Reach (in Mn) 1.2 3 3.6 0.5 1.5 Penetration (cities) 1,100 1,200 1,200 500 500 Range (brands) 150 350 500 500 Revenues (in USD Mn) 20 100 11 30 150

International
2007 2000
19

10 8

54 190

1,000

300 500

India Apparel Market 2020 will be..

USD 120 billion plus In Top 5 markets in the world (7% market share) Womens wear (42%) would deservingly be bigger than mens wear (39%) Branded market (43bn) will be bigger than total market today (40bn) All major global brands will report India as a major contributor to sales Will have few many billion dollar brands and retailers Few fashion houses will have more than 20 brands portfolio Couple of retailers will have 5,000 plus stores An online retailer would have crossed billion plus mark An online retailer may be the largest retailer

20

Question is
There will be market

There will be consumers

There will be retailers

There will be brands

What role can your company play in this?

21

Thank You for your time and attention!

Harminder Sahni, Founder & Managing Director Wazir Advisors, India