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With plenty of players already on the ready to wear apparel scene and many others on their way, the options for the customer have multiplied tremendously. This has made the customer more wary and more demanding. In such a scenario, the type of merchandise on offer at the retail store and the price range become the chief differentiating factors among brands. The Indian apparel business is in fact quite peculiar. While there are several large brands in menswear, there are none in the women or children categories. Retailers have begun developing smaller vendors to target these segments to offer a complete range of merchandise and better price points. Although menswear will continue to dominate the apparel business with newer brands pushing prices down to pull customers, women’s wear and kids wear are expected to be the future action zones. Recently, retail stores have been diverting all their energies on private labels which have emerged hugely successful. Private labels offer a magical combination of higher margins to the retailers along with more attractive prices to the customer. The apparel market is thus poised for huge and troubled growth in the next few years. Huge because there is already a growing market and troubled because the competition in the marketplace is far in excess of the growth. Only players that are able to give the best value for money to the customers and still manage to be profitable will survive. Understanding the apparel market is not an easy task as the Indian apparel market is quite complicated. On the demand side, there are various segments, based on customer types and preferences. Other than menswear, branded goods haven't really made a significant impact. Fragmented supply is the other problem. There are very few large producers and only some have a national presence. A dependence on national brands has the danger of making a commodity out of retailing, which is something no retailer with national ambitions would want. So the emphasis will be on the kind of products on offer. Those who build a solid private label or are able to source and develop quality small labels will have an edge. Driving prices down can also be a winning strategy. Discounters have done well the world over and could work in the Indian market too.
Each of these functions differently. several new brands are just working on giving better prices to customers. 2 . though more than a decade old is witnessing some very interesting trends. Thus. have changed the rules of the game with risk regarded as a challenge and not something scary. Therefore. With more and more players. who are now well established.Evolution of the Apparel Industry The Indian apparel industry. The new players and international firms are already looking at professional and collaborative relationships with the retailer. Another trend clearly visible in the industry is the demarcation between the various players in the market and emerging relationships between the apparel manufacturers and retailers. Though menswear still accounts for a large portion of the RMG market. There are very few names that appear in the top of the mind recall for consumers . This is forcing the older brands to review their business models and modify their traditional methods to meet the demands of the retailers and the customer. One major reason for the shift in the market is the move towards price play. there is vast potential in several other categories like women's western wear and kid’s wear. maternity wear and school uniforms.especially in the menswear segment. Private labels and International labels. The apparel market is divided into four major segments – • • • • Old Established brands. New smaller labels. Players like Colour Plus and Provogue. The market is shifting from just ready-made shirts to other segments. women's undergarments. the options for the consumers have increased substantially. price has become a key differentiating factor for all the second rung brands. Other areas of growth are women's ethnic wear.
large customer base. Importantly. while offering almost 20% price advantage to the customers as compared to national brands.The apparel market . low margins Mid Range Brands Large no. of course. Private labels can give as much as 6% extra margin to the retailers.mainly menswear . In spite of the risk. this is also the highest growing segment in the marketplace as more and more people shift to RMG. higher margins This range is. be the consumer who will now get the best deals and value for money. the penetration of private label is only going to increase. Low End Brands Few Players. This is mainly because of the 3 . most of the private labels are equally if not more strong in women's and kids' segments.is thus increasingly shifting to the mid-price points. The ultimate winner will. The private label movement has really picked up in India and most of the large retailers have already achieved a critical mass in private label penetration. This is expected to be one more reason for consolidation in the RMG industry. normal margins High End Brands Few players. the private label in retail stores is emerging as a threat to brand manufacturers. small customer base. With most of the retailers now on an expansion spree. expected to witness maximum activity and there would be many entries and exits here. of players. thus. Significantly.
Size of the Sector Apparel Retail in India is estimated to be at Rs. The apparel market is thus poised for huge and troubled growth in the next few years. new brands in these areas would also face competition on the shop floor from the established brands of the stores. The figure for the USA stands at 1. As a result. MBOs including the textile outlet constitute 98% of the total urban apparel retail outlets in Urban India. It is evident that today majority of the apparel retail sales are channeled through the MBOs.8% and that for China is 3%. Only players that are able to give the best value for money to the customers and still manage to be profitable will survive. Total Organized Retail Sector: Rs 55000 crore Clothing & Textile Sector: Rs 21400 crore Share of clothing & textile to the total organized retail sector is 39% • • • • • Food & Grocery – 11% Catering – 7% Entertainment – 3% Jewellery – 3% Consumer Electronics – 9% 4 .dearth of well-established brands here. Huge because there is already a growing market and troubled because the competition in the marketplace is far in excess of the growth.5% of the nominal GDP.113500 crore which is 2.
The shirts market is growing at 8% whereas branded market is growing at 15%.1200 crores.29 billion). The consumption in western countries is 60-80 times more than this. • Shirts The shirts hold the largest share (31%) in men’s wear with total of 295 million pieces (88 million pieces in readymade valued at over Rs 32 billion and 207 million pieces in tailor mades valued at about RS.500 onwards Premium Rs.650-900 Growth 20-25% 18-20% 12-15% 5 .1.Structure of the sector Total Size of the Sector: Rs 113500 crore Organized: Rs 21400 crore Unorganized: Rs 92100 crore In recent times the Indian menswear market has changed from a strictly made-to order market to a much more westernized ready-to-wear market. Segments in Branded shirts Super premium Rs. The market size of all kinds of shirts in the organized retail markets at all over India level can be estimated at Rs. Branded shirts command 33% of the total shirt’s market amounting to Rs 2400 crore and 63% of the readymades.900-1500 Upper Middle Rs.
accounting for over Rs 150-200 crores market for suits annually at retail value. 12-15% per annum compared to under 10% for suitable fabric. The organized and branded market for suits is estimated at 67 lakhs units annually. Branded. Almost all price segments have shown good growth in both volume and value.3700 crores. formalwear was resurging across the world. with a growth rate of 10%. blazers. According to Technopak Research. The branded segment in this category showed 17 per cent growth this year. merchandise account for less than 30 per cent of the overall domestic market for suits. after years of semiformal dress codes for men.Middle Economy upto Rs. we can find that the eveningwear is growing day by day. But. • Suits The market for suits is growing day by day. the branded sector though is growing at a higher rate of 18%. Since there are a lot of parties happening in this cities. 6 . causing a significant jump in the market size to 13 per cent.375 8-10% 12-15% • Trousers The readymade trousers market in India is estimated at Rs. The premium segment is growing at a much faster pace of 18-20% because of the insignificant presence earlier and very low absolute value. RTW suits/jackets/blazers account for 15% of the total suiting market in India but are growing at a higher rate. coats and sherwanis.
Zodiac.the differentiating feature is that while other brands have to develop platforms to display their merchandise. This assures the customer that anything offered by such stores would be worth considering. Private label. Manufacturers. These are mainly the domestic brands. 7 . Peter England.Four Major Segments 1. New brands: As far as new manufacturers are concerned. is the store label. Manufacturers. by definition. Park Avenue. Newport. Ruggers. which have established themselves very firmly in the market and have created substantial customer awareness. These are typically brands that have established themselves over the last decade and do not have the marketing and distribution power to push themselves. In a strict sense. Thus they depend primarily on the retailer to drive their products rather than relying on demand pull. developed a solid brand image in terms of the quality of merchandise they sell. Players in this group include Madura Garments (Louis Philippe. Ruf & Tuf). there already is an available platform for the private label. 2. developed and designed by the store. Arvind Mills (Arrow. Excalibur. rather than a brand push scenario. Byford). over the years. Lee. the retailers rule the roost. Established Brands: These are either old manufacturers or established brands or both. Private label: The private label is fast emerging as a serious player in the entire landscape of apparel retailing. Parx) and Colour Plus. Wrangler. 3. Internationally. the private label has been associated with stores that have. resulting in brand pull. Flying Machine. Allen Solly. Van Heusen. although the private label is like any other brand and functions like one in terms of timeframe . Raymond (Raymond.
Established Brands: These players have been in the industry for several years and have established a large distribution structure. This web-like structure has also increased the overall cost of the garment. Some of them also have local agents in each of these countries to ensure that the licensees do not miss out on the core brand values. 8 . Nike. Most of these names have a worldwide presence so having a perfectly working set-up is a must for these companies. Mango. However. They work through agents and distributors and sometimes (particularly the newer companies) may deal directly with the stores. International labels: Although FDI in retail is not allowed. What works in favour of these brands is a highly evolved manufacturing and design structure. which gives them an edge over domestic labels. then there are licensees and franchisee networks in other regions. Usually. • Manufacturers.4. Lacoste. Methods of Retail: Channel of Distribution: • Manufacturers. Benetton. a large number of players from the international markets are already operating in India through the licensing route . Most of them have their own stores in some countries.Lee. the old companies like Madura Garments and Arvind Mills already have a complex distributor-agent model in place and rarely interact with the retailers directly. • International Players: The international players work through complex distribution structures. Reebok. But a whole lot of them also work directly with larger retailers to give them the benefit of lower costs. New brands: The new players have come up in the last one decade and thus they do not have a simpler distribution structure. International players have recognized the market potential in India and have used licensing to establish their brands here. Levi's. Lee Cooper and Pepe among others. Many of them work through distributors and/or agents. Adidas. the distribution structure of these companies is structured more to suit the requirements of their customers than their own convenience and this is quite different from the way the larger players function.
the private label margins are 30 to 50 per cent more than the margins provided by the national brands. the simpler and flexible distribution structure ensures that the retailer gets higher margins. The average mark-up provided by national brands varies between 28 to 65 per cent. the others give 30-45 days credit. successful private labels have tremendously boosted retailer margins. with penalties for delayed payments. Thus the total trade margins sometimes exceed 40-45 per cent for some of these players if they are following a complex and a multi-layered distribution set-up. Due to this many of them try to keep costs low and deal directly with the retailers. • Manufacturers. • Private label: On an average.Mark-ups & Margins: • Manufacturers. which results in margins of 35 to 37.5 per cent. Across the world. which means margins of 43 to 50 per cent. without affecting the overall margins of the company. which translates into margins of 22 to 39 per cent. Thus these companies exercise substantial power over the retailer. 9 . Also. On the other hand. Established Brands: These players work on lower mark-ups and margins for retailers and also have lower credit periods. While Arvind works on a principle of cash against delivery. the distributor and agent margins are also carved out from the retailer margins thus shrinking them further. New brands: These players typically give much higher mark-ups of 55-60 per cent to the retailers. these margins are structured as pure margins without deriving the distributor and agent shares. This gives a lot of flexibility to the retailers to undertake promotions and even mark-downs. In several cases. Often. retailer private label mark-ups are as high as 75 to 100 per cent.
Finally. therefore. Of course. have imported fixtures in their shops and use expensive displays . All this results in 27-41 per cent overhead cost versus just 5-7 per cent for private labels (see table below). often out of reach for many thus limiting the customer base of these brands.all of which pushes up costs. the systems. 10 . First. these players have huge administrative costs . is the royalty to be paid to the parent company. The average margins vary between 28-40 per cent. its distribution set-up and the consumer perception of the product. there are various reasons for this. Players like Levi's ship in some of their accessories. but also source through programmed lots in the domestic market. But what really affects and limits the penetration of these brands in the domestic market is the high MRPs of these labels. This varies between 7-12 per cent of the MRP. Next. A large part of the margin level is determined by how well the player was established in the market. sourcing costs are higher as these players not only use mainly imported goods.• International Players: The international players have been known to give reasonable retailer margins.international benchmarks in terms of quality of office. salary structures and so on are followed. The final price tags are. which further increase fixed costs.
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