apparel industry - its growth

SCHOLARS WORLD-IRMJCR Online: ISSN 2320-3145, Print: ISSN 2319-5789

www.scholarsworld.net [email protected] Volume. II, Issue I, January 2014 [64]

GROWTH OF APPAREL INDUSTRY IN INDIA:

PRESENT AND FUTURE ASPECTS

NAMRATA ANAND,

Assistant Professor, MMIM, MM University,

Mullana, Ambala, Haryana- India

VANDANA KHETARPAL,

Associate Professor, MMIM, MM University,

Mullana, Ambala, Haryana- India

ABSTRACT

Growth in Apparel Industry in India (AII) is increasing manifold with the change in lifestyle, earnings and urbanization of the customers. The worldwide consumers are accepting the apparel fashion products produced in India. AII has realized the immense potential to yield business in this segment. The Indian consumers are adopting fashionable items quickly and conveniently with the rise in competition. The present study has been conducted to derive the information on the trends of AII through analyzing the present and future aspects. The study has been conducted by analyzing the data collected from secondary source. The growth in AII with respect to global scenario has been studied and highlighted in detail. The study also evaluates the potential of growth of AII and the factors nurturing it.

Keywords: Fashion apparel, Retailing, Growth of Apparel Industry in India

Research Type: Descriptive



1. INTRODUCTION:

In addition to having faster population growth, India in recent decades has made remarkable socioeconomic gains, which have resulted in changing societal perceptions of the Indian consumers. Therefore, Indians have become a viable ethnic target market, after blacks and Hispanics, for marketers and retailers. The fashion of anything keeps changing with time. Earlier in India, the ‘kurta’, ‘lungi’ and ‘saree’ were a trend among Indians. All of these items were made of cotton. In the 1970s international fashion arrived in India with the bold colors, flower prints and bell-bottoms. Synthetics turned trendy and the disco culture affected the fashion scenario. It was a point, when the Indian fashion scenario reached a certain steady level and from there, in the beginning of the 21st century, with the evolution of new designers, models and more sensible designing, the fashion hype accelerated. The Apparel Industry in India (AII) is one of the leading apparel industries in the world. Primarily it was quite unorganized but the scenario has been changing with time. It was mainly started after the economic liberalization of Indian economy in 1991. The opening up of economy gave the much-needed thrust to the Indian apparel industry, which has now successfully become one of the largest in the world. India is one of the largest producers of fibre in the world. The main fibres produced in India include cotton, silk, jute, wool, and man-made fibres. India is the third largest producer of cotton, the second largest producer of silk and the fifth largest producer of man-made fibres. India has a strong domestic as well as international demand which led to huge growth of the AII. From the past few years fashion retailing sector is aligning with global trends with retailing firms such as Shoppers Stop, and Crossroads entering into middle class segment. It is being predicted that the apparel sector in India will grow at a very fast rate in the next few years. With the change in lifestyle, increase in per capita income and urbanization of the Indian consumers, the attitude of spending money on fashion related articles such as apparel is increasing a lot. Simultaneously the AII, accounting for the current demand and forecasting for the future demand of Indian consumers, has also gone through significant changes in production as well as availability of latest fashion designs and brands. AII has made a major contribution to the economy of the country in terms of direct and indirect employment generation and net foreign exchange earnings. The sector contributes about 14% to industrial production, 4% to the gross domestic product (GDP) and 17% to the country's export earnings. It provides direct employment to over 35 million people. The textiles sector is the second largest provider of employment after agriculture. Thus, the growth and all round development of this industry has a direct bearing on the improvement of the economy of the nation.

2. OBJECTIVE OF THE STUDY:

The objective of the present study was to study the trends of latest developments in the Apparel Industry in India (AII) and to analyze the scope for future growth in the industry.

3. LITERATURE REVIEW:

The size of both domestic and exports houses of AII is projected to grow at a CAGR of 9.5% to reach $223 billion by 2021 from the $89 billion in 2011, according to a white paper by industry body FICCI and research firm Technopak. India's share of the world's apparel exports stands at 4.5%. It is estimated that due to the increasing shift of apparel and textile 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 $82 billion. This growth, from 4.5 to 8% of world trade, will open up huge potential for Indian players, the report said [1]. In 2007, the worldwide apparel market was worth 345 billion US $ and during the last decade the market grew at an average of 8% per annum. Moreover according to NSS Report on Household Consumption of Various Goods and Services in India, 2007 between 1993-94 and 2004-05, the proportion of households purchasing readymade garments has increased in both rural and urban areas by about 75%, while the proportion purchasing hosiery articles shows a three-fold increase. Apparel Export Promotion Council (AEPC) estimated that in value terms, the size of the Indian textile market was Rs. 1692 billion in 2007 recording a growth of 8.8% [2]. India has the potential to become a rapidly growing market for better-quality apparel, particularly brand-name fashion goods. The country’s sizable middle class of an estimated 200 million, which is expected to double in the next 10 years, includes an estimated 40 million people who prefer brand-name fashions. India has the potential to benefit significantly from ongoing global trade liberalization in apparel, particularly now that the GOI has deregulated the apparel sector. A recent study of the Indian apparel and textile industry concluded that



India has the potential to double its current world market share in apparel during the next 5 years, provided that the apparel sector invests about $16.6 billion in new production technology [3].

4. RESEARCH METHODOLOGY:

The present study has been conducted utilizing the secondary data collected from various sources such as published statistics, reports, journals, thesis, websites, etc. To understand the present developments and scope for growth in future in the Apparel Industry in India (AII), descriptive and case study approach has been used to reveal the facts.

5. APPAREL INDUSTRY IN INDIA: SCOPE AND CHALLENGES:

Apparel Industry in India (AII) poses an opportunity of tremendous economic growth. The emergence of branded apparel outlets, shopping malls are also increasing rapidly all over India. The change in the lifestyle of the Indian consumer, increasing working class, higher disposable incomes, dual career families, and many other social and economic changes offer a wide array of opportunities, and contribute in accelerating the pace of growth of AII. The major factors leading to a change in lifestyle are increasing per capita and household income, rapid urbanization, education and media & information. The apparel retailing in India consists of 95% of total sales in department stores; 70% in hypermarkets such as Big Bazaar, Spencer’s Retail etc. The apparel fashion retail brands have been elevating the business and economy in India rapidly. The men’s wear segment portrays the highest scope of growth. Presently, the growth rate is more for women’s wear; growing at 12%, and is expected to gain majority share in future. Other apparel segments such as kids wear are also increasing very rapidly [4]. The apparel industry is one of the extreme significant sectors of India in terms of revenue, investment, and trade and job creation. Apparel industry has tremendous product variety, short product life cycles, explosive and changeable demand, long and stiff distribution network. There is a transitional shift in the apparel industry with time [4]. Based on McKinsey report, the apparel is the most profitable segment of the Indian retail market. As shown in Table 1 [5], ‘food’ is the most organized segment, however it does not provide the desired profit. Apparel retailing is not as organized and large as food, but offers the highest margin. There is further scope of development of apparel retailing in India. Apparel consumers always prefer to have the latest style outfits, trying to replicate themselves as the elite section of the modern society. Majority of them patronize the trends of popular designer brands or those flaunted by Bollywood or sports celebrities. A country of over one billion population, an enormous consumer class, India is measured as the most favored destinations for trade and investments. Apparel and textiles are the largest segments in retailing industry. With mounting income levels and changing attitude "look good - feel good", fashion is providing gigantic potential to foray into the untapped Indian markets. Clothing is adopted by individuals to display their identity, and as an important means to express them in society. Apparel has been the most profitable sector in terms of development in India, not due to its volume but the way it has altered lifestyle of the consumers [4].

6. FACTORS NURTURING THE 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. It is having about 10% share in the overall retail segment in India and is the second largest retail segment after food and groceries. It is also reported that the size of Indian domestic apparel industry will double 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. Moreover, the growth in AII in the future has been estimated to be at very high which is due to various influential factors. Some of the factors are discussed below:

6.1. Per Capita and Average Household Income:The per capita monthly income in India is growing with time. It was Rs 5,130 in 2011-12 as compared to Rs 4,513 in 2010-11. The per capita private final consumption expenditure in 2011-12 was estimated at Rs 42,065 as against Rs 36,677 in the year 2010-11, showing an increase of 15%. In the previous year also this rate was similar.

6.2. Increasing Trends of Special Occasions: The trend of special occasions in India is also growing with the increase in household income, urbanization of the people etc. The types of apparels and their



availability for different special occasions are making the consumer preferential. Consumer is ready to pay more to look trendy as per the theme of occasion. Not long ago, for example, men from India’s northern regions only required a dark suit or sherwani, the traditional long coat, to cover big occasions and important celebrations. From the past few years, men have started preferring Western stylist jackets, and collared shirts, “funky” fashion, stripes or checks for business meetings. Today, Indians are more inclined than consumers in other markets to buy apparel for a specific purpose [4].

6.3. Fashion Involvement: Increasingly, Indian consumers are embracing the idea of fashion. Traditional clothing remains central to the way consumers dress, and the quality and craftsmanship of classic Indian clothing have drawn rave reviews in recent years from some of the world’s leading designers, style magazines, and fashion blogs. In a recent McKinsey survey of Indian consumers, 62% said they thought it was important to “keep up with trends.” More than ever, Indian consumers are experimenting with combining styles. The active involvement of the consumer has made-up the chance of growing the industry in India.

6.4. Growth in the Women’s Segment: With increasing income and rising number of working women, the AII is witnessing rapid growth from past few years and this trend is expected to continue in future as well. The Indian women apparel market is anticipated to grow at a CAGR of around 11% during 2013-2015.

6.5. Rapid Urbanization: India had the second highest urban population in the world in 2012 and will be amongst the fastest growing urban populations globally between 2013 and 2020. About 29% of Indians live in cities n towns, among the least urbanization ratio of any country in the world. However that has been shifting fast in the forthcoming 20 years, anticipated number of Indians living in cities will grow by 300 million, where they will adopt new styles and fashions to cope with new lifestyles and social statute.

6.6. Globalization of Industry: The overall growth of the AII can be attributed to the globalization. About 35 million personnel are employed by the apparel and textile industry in India which accounts for 21% of the total employment generated in the economy. The globalization of the AII also leads to introduce the modern and efficient manufacturing machineries, and techniques. Moreover, the industry in developed countries like USA and UK have their manufacturing facilities in developing countries like India and China or they outsource the facilities of the latter countries due to the low manufacturing costs in developing countries. It increases the scope for more employment.

6.7. Diffusion of Fashion Innovators: Diffusion is the spread of a fashion object within and across social systems. It is highly dependent on the fashion innovators who help a lot in the fashion invention and introduction of new styles. A source of fashion objects, such as a fashion designer, entrepreneur, or consumer innovator creates an object that is noticeably different from its predecessors.

6.8. E-tailing of Apparel: With the boom in the organized retail industry and concept of online retailing (e-tailing) is catching pace, expansion strategies adopted by companies will give a new direction to the AII. The e-tailing of apparels in India is on radar for the majority of online consumers [6]. According to PriceGrabber.com’s Apparel Survey, 65% of the online consumers feel comfortable purchasing apparel through e-tailing [7].

6.9. Organized Retail: The chain of large and branded stores showing the products stocked systematically and displayed, will speed the transformation of consumer preferences. For now, organized retail accounts for less than 20% of all Indian apparel purchases. However, the scores of shopping malls have opened on the outskirts of India’s largest cities during last five years which has increased the trend of organized retail of apparels in India. The concept of getting many things right at once: figuring out what consumers want, developing a profitable retail concept, and building a solid team, is increasing which will surely grow the AII.

7. GROWTH OF APPAREL INDUSTRY IN INDIA: PRESENT AND FUTURE ASPECTS:

India, with a population of more than 1.2 billion people, has a huge domestic market. India’s middle class is half the country’s total population. Based on purchasing power parity, India is the fourth-largest economy in the



world, has the third-largest GDP in the continent of Asia, and is the second-largest economy among emerging nations. India is also one of the fastest growing economies of the world. Although the disposable income of the majority of the Indian population is low, as the Indian economy grows, more consumers will have greater discretionary income for clothing and other purchases after meeting their basic needs [3]. Change in consumers’ behavior towards shopping & lifestyle, increasing household income and urbanization of the customers are supporting the growth of AII. The growing apparel industry is contributing to the GDP of India. The export of the apparels in India is shown in Figure 1 which indicates that the export of apparels increased continuously over the years [2]. According to the study carried out by Technopak, the growth in the apparel segment is primarily driven by the growth in modern retail. An increasing number of international brands across formats shall foray into India to leverage the potential. Keen competition is driving 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 [8]. Demand for nonwoven textiles has been growing with increasing domestic affluence, growing health consciousness to use more disposable clothes, and the cost effective production of synthetic fibres in India. The liberalization of the Indian economy has created opportunities to import machinery and technology at preferential tariffs and enter into joint venture arrangements with foreign firms. The technical textiles market in India has grown due to strong demand for automotive fabrics [3]. India’s total apparel and textile industry size (Domestic and Exports) was estimated to be Rs. 4,18,000 Crore (USD 89 billion) in 2011 and is projected to grow at a CAGR of 9.5% to reach Rs. 10,50,000 Crore (USD 223 billion) by 2021 (Figure 3). The current domestic apparel market is worth Rs. 2,73,350 Crore (USD 58 billion) and is expected to grow at 9% annually to reach Rs. 6,63,800 Crore (USD 141 billion) by 2021. The domestic AII is also expected to grow at a CAGR of 9%. Higher per capita consumption, favorable consumer demographic and increase in prices will drive apparel market growth in India [8]. The apparel and textiles sector has witnessed a spurt in investment during the last five years. The industry (including dyed and printed) attracted foreign direct investments (FDI) worth Rs 5,674.45 Crore (US$ 1.04 billion) during April 2000 to February 2013. The Government of India (GOI) has also promoted a number of export promotion policies for this sector. It has also allowed 100% foreign direct investment (FDI) in the Indian textile sector through automatic route [9]. According to the Technopak study, the buying behavior of the Indian consumer is changing with time (Table 2). The buying behavior of the consumer 10 years is quite different to the present one and the latter is quite different to the project buying behavior after 10 years. The choice of diversification of the mid-sized companies in India is also increasing leading to the forward integration into the retail sector. After building successful brands within the domestic territory, Indian apparel brands are venturing into international markets in order to enhance brand salience. According to the study, the main areas of apparels for the development and growth are kidswear, denim, contemporary ethnic wear for women, lingerie, lifestyle accessories and active & comfort wear [8]. The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand. For the apparel and textile industry, the proposed hike in FDI limit in multi-brand retail will bring in more players, thereby providing more options to consumers. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with several international players like Marks & Spencer and Guess. The organised apparel segment is expected to grow at a compound annual growth rate (CAGR) of more than 13% over a 10-year period [9]. According to the research carried out by Corporate Catalyst India, along with the increasing export figures in the Indian Apparel sector in the country, Bangladesh is planning to set up two Special Economic Zones (SEZ) for attracting Indian companies, and duty free trade between the two countries. The two SEZs are intended to come up on 100-acre plots of land in Kishoreganj and Chattak, in Bangladesh. Secondly, Italian luxury major Canali has entered into a 51:49 Joint Venture with Genesis Luxury Fashion, which currently has distribution rights of Canali-branded products in India. The company will now sell Canali branded products in India exclusively [10].These facts highlight the fast pace of growth expected in the Indian apparel sector and offers tremendous growth opportunities for both domestic and global apparel players.

8. CONCLUSION:

The study describes in detail the facts about apparel fashion industry and its growth potential. In spite of the apparel consumer’s increasing demand and their active role in the diffusion of innovation, the study highlights the importance of research in the domain of apparel industry to tap this increasing potential. Apparel retailers and



suppliers also have a decisive role to play in order to understand the consumer behavior for buying the fashion apparel so that they may cater to this segment more profitably. They must take responsibility for the elements under their domain that also affect the technical factors in addition to the condition of machinery, efficiencies in the production line, and good management practices for growth of the apparel industry in India (AII). The growth of the AII is also highlighted by the increase in the number of large fashion events. Industry growth in India is mainly driven by the growing exposure of domestic designers at international forums, but growth is also supported by other factors such as the launch of focused business education courses for emerging designers and the establishment of an industry association. The role of e-tailing is also studied in this study. It is also an emerging area where the retailers or brand owners need to penetrate in more depth and with focused marketing strategies. This study also indicated the possible factors responsible for the growth of AII. Lacking in anyone of them will negatively affect the growth of AII. It is very much important to consider all factors accountable for the growth of AII and the factors which are more sensitive may be given more preference.

9. REFERENCES:

1. http://articles.economictimes.indiatimes.com/2012-10-10/news/34363404_1_apparel-exports-textile-and-apparel-cent-of-world-trade Accessed on 1th November 2013.

2. https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd= 1&cad=rja&ved=0CCgQFjAA&url=http%3A%2F%2Fwww.ihdindia.org%2FFormal-and-Informal-Employment%2FPaper-5-Garment-Industry-in-India-Some-Reflections-on-Size-Distribution-of-Firms.pdf&ei=Da-cUtmeMIyErAen5oDoAw&usg=AFQjCNGtvbQhHRrTl zeRaRdfLtyrtfmmZA&bvm=bv.57155469,d.bmk Accessed on 1th November 2013.

3. Simpson. V. (2001), “India’s Textile and Apparel Industry: Growth Potential and Trade and Investment Opportunities”, Publication 3401, United States International Trade Commission Washington, DC 20436.

4. Pani. A., Sharma. M. (2012), “Emerging Trends in Fashion Marketing: A Case Study of Apparel Retailing in India”, International Journal of Business and Management Tomorrow, Vol. 2(10), pp. 1-8.

5. http://csi.mckinsey.com/Knowledge_by_region/Asia/India/~/media/Extranets/Consumer%20Shopper%20Insights/Exhibit/exhibit_indiaapparel_2.ashx Accessed on 1th November 2013.

6. McCormick. H., Livett. C. (2012), “Analyzing the influence of the presentation of fashion garments on young consumers' online behaviour", Journal of Fashion Marketing and Management, Vol. 16(1), pp. 21-41.

7. www.priceGrabber.com Accessed on 1th November 2013. 8. Amit. G., Pakhie. S., Peush. N., Prakash. B., Ruby. J., Brahma.K.P. (2012). “Textile & Apparel

Compendium 2012”, www.technopak.com. 9. http://www.ibef.org/industry/textiles.aspx Accessed on 1th November 2013. 10. A brief report on textile industry in India. March, 2013, Corporate Catalyst Ltd.

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TABLE 1: MOST PROFITABLE SEGMENTS OF THE INDIAN RETAIL MARKET

Category Typical retailer

margin Description

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%20Shopper%20Insigh

ts/Exhibit/exhibit_indiaapparel_2.ashx



TABLE 2: TRENDS OF BUYING BEHAVIOR OF CONSUMER

FOR FASHION APPARELS WITH RESPECT TO TIME

10 Years Ago Current After 10 Years

Need-based Clothing

• Shirts

• Trousers

• Jackets

• Sarees

• Salwar Kameez

Occasion Specific Dressing

• Sports/ Gym wear

• Occasion specific ethnic wear

• Casual wear

• Office wear

• Night wear

• Party wear

• Work wear

Detail Oriented

• Design-based assortment for occasion wear

• Fast fashion

• Eco-friendly apparel

• Technical garments like temperature controlled/ IT-embedded garments etc.

Key Purchase Parameters

• Basic function

• Comfort

• Price

• Look

• Trend

• Fashion

• Exclusively

• Technical function (smart)

FIGURE1. EXPORTS OF APPARELS IN INDIA IN MILLION US $

(SOURCE: COMPUTED FROM RBI HANDBOOK)

FIGURE2. PRESENCE OF INTERNATIONAL BRANDS IN THE MODERN APPAREL RETAIL [8]

FIGURE3. TRENDS AND PROJECTIONS OF SALES OF APPARELS IN INDIA, BOTH DOMESTIC AND EXPORTS, IN RS CRORE [8]

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-

2,000

4,000

6,000

8,000

10,000

12,000

18

87

-88

19

88

-89

19

89

-90

19

90

-91

19

91

-92

19

92

-93

19

93

-94

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

82%

18%

2011Domestic Brands

International Brands

75%

25%

2016

273

435

664

145

235

386

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

Exports

Domestic

apparel industry - its growth

Economy & Finance