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Apparel Retail : Labelling the Indian Market

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India Brand Equity Foundation

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APPAREL RETAIL : LABELLING THE INDIAN MARKET
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 management’s ambitions don’t 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 that’s 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 market—is 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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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 market—is now worth nearly $ 1 billion.

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APPAREL RETAIL : LABELLING THE INDIAN MARKET
India. In 2004, ITC’s 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 Arvind’s apparel business comes from these outlets. Raymond’s – the flagship brand of the Singhania Group-- is revamping its chain of 300 stores—known as Raymond’s Shops—and 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 company’s flagship brand, Peter England. Spread over a carpet area of 1350 square feet, the store is designed to function at three levels—ground, 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 India’s US $ 15 billion clothing market (see chart).
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Raymond’s – the flagship brand of the Singhania Group-- is revamping its chain of 300 stores— known as Raymond’s Shops—and focusing on readymades at a cost of around US $ 35 million.

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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 players—such as Levi Strauss, Benetton and Lacoste—have 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 company’s brands. Now, with the government’s proposal to let in branded retail players— brands like Benetton and Lacoste currently sell mostly through the franchise route—investments in India’s apparel sector are likely to go up substantially. Enter, the New Retail Entrepreneurs √ 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
√ 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 India’s 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 has huge potential as a market for foreign clothing, given its large population and growing household incomes.

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India Brand Equity Foundation

NOVEMBER

2004

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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.

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