Chapter 2 Overview of the Fashion and Apparel Industry in India

Dating back to several centuries, India's fashion and apparel sector is one of the oldest
industries in Indian economy. Today, fashion and apparel industry is one of the
largest contributors to India's exports with approximately 11 % of overall exports. The
fashion and apparel sector along with one of the largest employers is also labour
intensive/comprehensive. As per the Cotton Textiles Export Promotion Council
(Texprocil), the sector accomplished export earnings worth US$ 41.4 billion in 2014-
15, a growth of 5.4 %. There are two broad segments in the fashion and apparel
sector. First, the unorganized sector consists of handloom, handicrafts and sericulture,
which are operated at a minor ratio and through traditional tools and methods. The
second is the organized sector consisting of spinning, apparel and garments segment
which apply modern machinery and techniques such as economies of scale.

The fashion and apparel sector of India is extremely varied, with the hand-spun and
hand-woven textiles sectors at one edge of the spectrum, while the capital intensive
sophisticated mills sector at the other edge of the spectrum. The decentralized power
looms/ hosiery and knitting sector form the largest component of the textiles sector.
Parallel to the industries of other countries, the aspects that makes the Indian textiles
industry distinctive is the close relationship of the textile industry to agriculture (for
raw materials such as cotton) and the ancient culture and ethnicity of the country in
terms of textiles. Within India and across the world, the Indian textile sector has the
ability to produce a wide variety of products appropriate to different market segments.

Market Size

By 2021, The Indian textiles industry is projected to reach US$ 223 billion which is at
present at around US$ 108 billion. The Indian Textile Industry contributes around 5%
to India's Gross Domestic Product (GDP), and 14% total Index of Industrial
Production (IIP). According to a study by Wazir Advisors and PCI Xylenes &
Polyester, the Indian textile industry has the ability to reach US$ 500 billion in size.
The growth implies domestic sales to rise to US$ 315 billion from currently US$ 68
billion. At the same time, exports are implied to increase to US$ 185 billion from
approximately US$ 41 billion currently. The size of India’s textile market in 2014 was
US$ 99 billion; the market is expected to expand at a CAGR of 9.6 % over 2014–23.

A Study on Online Buying Behavior in Fashion and Apparel Industry Page 9

Further, Gujarat’s textile industry contributes in a big way to the industrialization of
the State. About 33 % of cotton production in the country is from Gujarat and the
State contributes to about 35 % of the woven fabrics from the organized sector in
India. The city of Surat alone contributes to 40 % of art silk fabric produced in India
and is the largest production base for man-made fabrics. Further, 23 % of the State
GDP comes from textiles. Gujarat contributes around 20 % of textile exports from
India and 6 % of garments export in India. In the early 1990s, Gujarat saw a dramatic
change in the textile industry scenario with the entry of denim manufacturing. Arvind
Mills, Soma Textiles, Modern Denim started manufacturing denim in Gujarat, and
soon the State was known as ‘India’s land of denim’.

The statistical facts along with the enablers, constraints and imperatives linked
to fashion and apparel of Gujarat.

Enablers

Large availability of raw material like cotton has significantly contributed to the
growth of textile sector in Gujarat. Proximity to ports and other mode of transport,
liberal labour policies, cheap raw material and well developed textile machinery
industry is attracting companies to set up units in Gujarat. In recent times there has
been a shift of the textile hub from Mumbai to Gujarat, largely due to lower cost of
real estate in Gujarat. The State is also supporting development of SEZs by giving tax
incentives.

Constraints

Even though the textile industry is among the largest sectors in the State, it is highly
unorganized and fragmented. The unorganized industry dominated by small traders
and merchants serve as hindrances in the growth of the retail sector and industry
exports. Although, Gujarat houses some of the leading organizations like Arvind
Mills and Soma Textiles the apparel segment is not well developed. The State
contributes to only 6% of garments export in India.

Imperatives
Technology is the key to success in the textile industry. Thus, the Government must
aim to develop processing capacity and encourage technology up-gradation funds.
This will give more opportunities to the existing players and encourage new players to
start their venture in the State. The retail boom is catching on fast across the country.
The State should, thus focus on building retail opportunities in textiles & garments to
meet the growing demand in the country. Gujarat has large availability of both natural
and man-made fiber as basic raw materials and non-woven fabric manufacturing base,
which is the key for developing technical textiles. Thus, the State must leverage on
available resources and should focus on expanding the portfolio of technical textiles.

2.1 Fashion and Apparel Industry in India: Present and Future

Aspects

India has a huge domestic market, with a populace of more than 1.2 billion people.
The half of the country's total population is India's middle class. Based on purchasing
power parity, India is the second-largest economy among developing countries, third-
largest GDP in the continent of Asia and the fourth-largest economy around the globe.
Today, India is also one of the fastest expanding economies of the world.

As the Indian economy develops, more consumers will have greater discretionary
income for clothing and other purchases after meeting their basic needs even though
the disposable income of majority of Indian populace is low. Change in consumers'
behaviour towards shopping & lifestyle, increasing household income and
urbanization of the customers are supporting the growth of Apparel Industry in
India(AII). The developing apparel industry is impacting the GDP of India.

According to a study by Technopak, the development in modern retail drives the

growth of the apparel segment. In India, a growing number of foreign brands among
various structures shall foray to leverage the potential. Intense competition is
compelling international brands to adopt ‘made for India’ models leading to higher
acceptance and thus increased share from around 18% in 2011 to 25% over the next
five years (2016). In India, with growing domestic affluence, the cost effective
production of synthetic materials and increasing health awareness to use more
disposable clothes has led to the increase in demand of nonwoven textiles. The
liberalization of the Indian economy made it possible to enter into joint venture
 arrangements with foreign firms by creating opportunities to import machinery and
technology at preferential tariffs.Whereas the strong demand for automotive fabrics is
responsible for the development of the technical textiles market in India.

In 2011, India's total apparel and textile industry size (Domestic and Exports) was
estimated to be Rs. 4, 18,000 Crore (USD 89 billion) and by 2021, it is expected to
grow at a CAGR of 9.5% to reach Rs. 10, 50,000 Crore (USD 223 billion).

386

CAGR 9.5 %
235
Domestic
Exports
145 664
435
273

2011 (E) 2016 (P) 2021 (P)

Figure 2: Trends and Projections of Sales of Apparels in India, Both Domestic

and Exports, in Rs. Crore

By 2021, the domestic apparel market is projected to grow at 9% annually to reach

Rs. 6, 63,800 Crore (USD 141 billion) which is currently Rs. 2, 73,350 Crore (USD
58 billion). With a compound annual growth rate (CAGR) of 9%, the domestic AII is
also expected to develop. The growth of apparel market will be led by factors like
higher per capita consumption, favorable consumer demographic and increase in
prices. In the course of last five years, an escalation in investment has been seen in the
apparel and textiles sector. A number of export promotion policies for this sector have
also been promoted by the Indian government. In the Indian textile sector, a FDI
(foreign direct investment) of 100% is also allowed through automatic route.
According to a study by Technopak, with time, the purchasing attitude of the Indian
consumer is changing. Table 8, the purchasing attitude of the consumer 10 years is
quite different to the current one and the latter is quite different to the project buying
behavior after 10 years. Furthermore, In India, the preference of heterogeneity of the
mid-sized companies is also increasing leading to the forward integration into the
retail sector. In order to escalate brand salience, Indian apparel brands are venturing
into foreign markets after building successful brands within the domestic territory.
The main areas of apparels for the development and growth are children wear, denim,
contemporary ethnic wear for women, lingerie, lifestyle accessories and active
&comfort wear.

Table no:1 Trends of Buying Behavior of Consumer for Fashion Apparels

with respect to time

10 Year Ago Current After 10 Years

Need-based Clothing Occasion Specific Dressing Detail Oriented
 Shirts  Sports/Gym wear  Design-based
 Trousers  Occasion specific ethnic assortment for
 Jackets wear occasion wear
 Sarees  Casual wear  Fast fashion
 SalwarKameez  Office wear  Eco-friendly apparel
 Night wear  Technical Garments

 Party wear like temperature

 Work wear controlled/IT-

embedded garments
etc.

Key Purchase Parameters

 Basic function  Look  Fashion
 Comfort  Trend  Exclusively
 Price  Technical
Function(Smart)
Source: Namrata Anand, Vandana Khetarpal (2014), Growth of Apparel Industry in India: Present
and
future aspects.

Sustained by both strong domestic utilization as well as export demand, the Indian
textile industry is set for powerful growth. The proposed hike in FDI limit in multi-
brand retail will bring in more players for apparel and textile Industry, thereby
providing more options to consumer. In the past 10 years, the retail sector has seen a
rapid growth among various international players like Marks & Spencer and Guess
due to commercialism and disposable income on the rise. The organized apparel
segment is projected to increase at a compound annual growth rate (CAGR) of more
than 13% over a 10-year period.

According to a study by Corporate Catalyst India, Bangladesh is planning to set up

two Special Economic Zones (SEZ) for attracting Indian companies, and duty free
trade between the two countries, along with the increasing export figures in the Indian
Apparel sector in the country. In Bangladesh, both the SEZs are proposed to come up
on 100-acre plots of land in Kishoreganj and Chattak. Secondly, Italian luxury major
Canali has entered into a 51:49 Joint Venture with Genesis Luxury Fashion that
presently has distribution rights of Canali-branded products in India. The Canali
branded products will be sold exclusively in India by the company. These facts
highlight the fast pace of growth expected in the Indian apparel sector and offers
tremendous growth opportunities for two apparel players i.e. both domestic and global
apparel players.

In the upcoming years-2016, Indian apparel industry is expecting positive

development mostly due to the removal of tariff on branded clothes and made ups
along with expected revival of total economy. In a report by Care Research, domestic
garment sector is anticipated to develop at around 8% year-on-year from US$ 37.35
billion in fiscal year 2012-13 to US$ 50.62 billion in fiscal year 2015-16. The report
states that the rise in the Indian economy coupled with the rising per capita disposable
income mainly drives the growth in Indian clothing sector.

According to a report by Care research, the development in the apparel industry of

India is led by aspects like the dynamic fashion trends, growing consumer class, rising
urbanization, growing retail penetration and the growing share of the designer wear.
Consenting with the care research report, the president of Clothes Manufacturing
Association of India (CMAI), Mr Rahul Mehta said to fiber2fashion that by 2020,
there is a likelihood of increase up to US$ 100-120 billion even though we feel that
the development in the domestic garment industry is going to be difficult and not
automatic. Further he added that the growth in Indian apparel Industry could be
mainly because the markets are improving, the excise duty on branded garments and
made-up has removed, so the prices of apparel are likely to come down and overall
economic sentiments have also gone up.

The report by Care Research also points out an expected revival in the overall
economy and a faster clearance of investment proposal of foreign retail brands due to
the development in the domestic garment industry and revival of zero tariffs on
readymade clothing and made-ups.

According to a report by Technopak and a white paper by industry body FICCI, by

2021 India's total textile and apparel industry size both domestic and exports is
expected to grow at a CAGR of 9.5% to reach USD 223 billion from the USD 89
billion(2011). The white paper on 'Challenges in Textile and Apparel Industry'
said "The domestic textile and apparel market in India is worth USD 58 billion and
has the potential to grow at a CAGR of 9 %, to reach USD 141 billion by 2021,".
Apparel exports contribute the most to the overall exports in terms of value, followed
by contributions from fiber, yarn and fabrics. However, fiber exports have the highest
CAGR with substantial growth in recent years. India's share of the world's textile and
apparel exports stands at 4.5 %. It is estimated that due to the increasing shift of
textile and apparel production to Asian nations and the deteriorating export-
competitiveness of China, this figure will grow to 8 % by 2020, with a total exports
value of USD 82 billion. This growth, from 4.5 % to 8 % of world trade, will open up
huge potential for Indian players. "The recession in textile industry seems to be over.
Investment in weaving and processing segments is required to strengthen value chain
and bankers commitment level to serve the client," Ministry of Textiles, deputy
director S P Verma said at a FICCI organized annual conference on textile and
apparels(2012) that the important thing is to meet challenges that have proposed on
infrastructure development, recycling and textile economic processing.
PeushNarang, principal consultant, at Technopak Advisors said EU and USA has
still not recovered from 2008 crisis and trend is likely to continue. In apparel industry
China and India is an emerging hub. India has to go far beyond China. Further
interpreting challenges he said, "Rising cost, raw material cost and increase in
volatility in raw material prices. Labour unrest, poor work environment and supply
chain problem are few challenges which can be solved by sincere efforts.”

2.2 Fashion and Apparel Industry in India: Scope and Challenges

An opportunity of tremendous economic development is poses by the Apparel

Industry in India (AII). In India, there is a rapid increase in the emergence of branded
apparel outlets and shopping malls. The factor that accelerate the growth of AII and
offers a wide range of opportunities are dynamic lifestyle of Indian consumer,
increasing working class, higher disposable incomes, dual career families, and many
other social and economic changes. The chief aspects that lead to a dynamic lifestyle
are rapid urbanization, education and media & information and growing per capita
and household income.

The Indian Business and economy has been rapidly elevating by the apparel fashion
retail brands. The highest scope of growth is depicted by the men's wear segment. In
2012, the textile growth rate was more for women's wear; growing at 12% and is
projected to achieve most of the share in future. Rapid increases in other apparel
segments such as children wear were also seen. In terms of revenue, investment, and
trade and job creation, the apparel industry is one of the extremely significant sectors
of India. Apparel industry has incredible product categories, long and rigid
distribution system, and short product life cycles, explosive and variable demand.
With time, there has been an unstable shift in the apparel industry.

According to a report by McKinsey, the apparel is the most successful fragment of the
Indian retail market. Apparel, offers the highest margin being not as organized and
large as food. There is further scope of development of apparel industry in India. An
apparel consumer consistently favours vogue style costumes, trying to imitate
themselves as the upper-class section of the modern society. Majority of them
patronize the trends of popular designer brands or those flaunted by Bollywood or
sports celebrities. India is measured as the most preferred harbors for trade and
financing, a country of over one billion populace, a gigantic consumer class. The
largest segments in retailing industry are Apparel and textiles. Clothing is adopted by
individuals to display their identity, and as a significant means to express them in
society. By the way Apparel has transformed the standard of living of the consumers;
it is the most successful industry in terms of development in India and not just
because of its volume.

Table No: 2Most Profitable Segments of the Indian Retail Market

Typical
Category Retailer Description
margin
Food 15-20% - More than 80% organized retail in India is food,
however, margin are not as high
Apparel 35-50% - Highest retailer margins through apparel
- The more organized segments like men’s formals
provide the highest returns
Electronics 5-10% - Household appliances may provide as much as 8-10%
however, categories like cell phones may be as low as
5-6%
Source:http://csi.mckinsey.com/knowledge_by_region/Asia/India/~media/Extranets/Consumer
%20Sho
pper%20Insights/Exhibit/exhibit_indiapparel_2.ashx

2.3 Factors Nurturing the Fashion and Apparel Industry in India

The AII is a rapidly growing segment; it is growing at a rate of 10% which is higher
than that of retail segments. Is the second largest retail segment after food and
groceries and it has about 10% share in the overall retail segment in India. It is also
reported that within five years due to several factors, such as economic prosperity,
simplified government policy, growth in fashion orientation and brand awareness as
well as consumer expectations, the size of Indian domestic apparel industry will
double. Moreover, the growth in AII in the upcoming years has been expected to be at
very high which is due to various influential factors. Some of the factors are discussed
below:

 Per Capita and Average Household Income

 Increasing Trends of Special Occasions
 Fashion Involvement
 Growth in the Women’s Segment
 Rapid Urbanization
 Globalization of Industry
 Diffusion of Fashion Innovators
 E-tailing of Apparel
 Organized Retail
2.4 Recent Trends in Fashion and Apparel Retailing In India

Before studying the trends Researcher has defined Apparel Retail Industry as an
industry which consists of the sale of all menswear, women’s wear and children’s
wear. The menswear market includes men’s active wear, casual wear, essentials,
formalwear, formalwear-occasion and outerwear. The women’s wear market includes
women's active wear, casual wear, essentials, formalwear, formalwear-occasion and
outerwear. The children’s wear market includes baby clothing, boys’ active wear,
boys’ casual wear, boys’ essentials, boys’ formalwear, boys’ formalwear-occasion,
boys’ outerwear, girls’ active wear, girls’ casual wear, girls’ essentials, girls’
formalwear-occasion, girls’ outerwear and toddler clothing.

India is a country of varied customs and cultures; so diverse that Indians differ in their
dressing too. The dressing is vivid and varied right from the salwaar-kameez to the
sari and from lungi to dhoti. The market of branded garments is growing up. With
favourable events like end of multi fiber agreement, entry of foreign retailers and
textile companies into the country and the growth and acknowledgement of the Indian
fashion industry throughout the world, apparel retailing has become one of the
interesting and tough jobs in the arena of marketing. Piyush Kumar Sinha and
Dwarika Prasad Uniyal, 2007 stated that face of retail and the distribution of apparel
have changed dramatically. For any company sourcing textiles and apparel, India
ranks among the top target countries. No other country can match the size, spread,
depth and competitiveness of the Indian textile and apparel industry, apart from
China.

2.5 Fashion & Apparel Retail Sector in India

The fashion and apparel retail industry consists of the sale of all menswear,
women’swear and children’swear. The menswear market includes men's active wear,
casual wear, essentials, formalwear, formalwear-occasion and outerwear. The
women’swear market includes women's active wear, casual wear, essentials,
formalwear, formalwear-occasion and outerwear. The children ‘swear market includes
baby clothing, boys active wear, boys casual wear, boys essentials, boys formalwear,
boys formalwear-occasion, boys outerwear, girls active wear, girls casual wear, girls
essentials, girls formalwear-occasion, girls outerwear and toddler clothing (Chandra,
P., 1998). The industry value is calculated at retail selling price (RSP), and includes
all taxes and levies. All currency conversions used in this report have been calculated
at constant 2009 annual average exchange rates.

2.6 Recent Trends in Fashion and Apparel Retailing in India

India is a country with diversified customs and cultures; so diverse that Indians differ
in their dressing too. Right from the salwaar-kameez to the sari and from lungi to
dhoti, our own Indian wear has been vivid and varied. The market of branded
garments is growing up. With favorable events like end of multifiber agreement, entry
of foreign retailers and textile companies into the country and the growth and
acknowledgement of the Indian fashion industry throughout the world, apparel
retailing has become one of the interesting and tough jobs in the arena of marketing.
The study emphasizes as to how over the last several decades the face of retail and the
distribution of apparel have changed dramatically (Piyush Kumar Sinha and Dwarika
Prasad Uniyal, 2007)

India ranks among the top target countries for any company sourcing textiles and
apparel. Indeed, apart from China, no other country can match the size, spread, depth
and competitiveness of the Indian textile and apparel industry. Moreover, with the
global elimination of quotas at the end of 2004, entry of foreign retailers and textile
companies into the country and the growth and acknowledgement of the Indian
fashion industry throughout the world, a thorough study of apparel retailing has
become necessary (Swapna Pradhan, 2007).