Branded clothes market to double in India in five years

The streets of Bandra and Colaba markets in Mumbai and Janpath and Sarojini Nagar in New Delhi still draw huge crowds for roadside shopping, but industry experts say there has been a marked shift in consumer taste towards branded apparel in India.

According to a report from CLSA dated May 10, branded apparel market in India is set to double by 2021, that is, in five years. 

In the last five years, top apparel brands in India have recorded an impressive 24% CAGR, setting a strong precedent to what lies ahead, the report says. This is against a CAGR of 6.5% for the industry. The report also says that the organised value-retail segment (compared to unorganised retail or independent stores) is gaining considerable traction. The report says, "the branded apparel sector is likely to outpace the industry growth rates by 1.5x through FY21."

Currently, the branded apparel market in India is estimated to be around $15 billion, with the total aparrel market valued at around $52 billion. By 2021, it may grow to $30 billion with the total apparel market worth $88 billion, the report said.

There are several specific reasons why the demand for branded apparel is gaining momentum in the country. 

The report says that branded apparel market has been growing since 2011-12. In September 2012, the government allowed 100% FDI in single-brand retail and up to 51% in multi-brand retail, subject to certain conditions. Since then, "the entry of foreign brands with diverse distribution formats (franchisee, joint ventures, licensees)," is one of the reasons.

An expanding Indian middle class, new e-commerce companies, favorable demographics, and value retail format are the other reasons for the shift. 

E-commerce opening up foreign brands for consumers

A lot of consumers in the country have taken to online shopping. Most e-commerce companies operating on marketplace models have succeeded in bringing branded apparel -- both Indian brands and foreign ones -- to the consumers. This has helped in increasing the branded apparel market share in the country.

"We see e-commerce as a growth catalyst for brands (improving distribution) but as a headwind for department stores."

Foreign brands aide shift to branded apparel in India

Due to the easing of FDI norms in the country, many foreign brands have entered the market since 2012, both in single- and multi-retail format. 

These foreign brands have entered the country in various formats. Zara, Gap and Calvin Klein have joint ventures with Indian partners, while Arvind has partnered with Arrow, GAP, Children's Place, and many more, to offer the branded portfolio here.

In apparel, brands owned by Aditya Birla Fashion & Retail, Page Industries (tie ups with Jockey), Arvind, Inditex and Benetton have been the fastest growing brands in the past few years, the report says. Leading foreign brands in India include Zara, Benetton, Reebok and Levi's.

"We see more foreign brands entering India as the market is still at a nascent stage. This woudl further accelerate the shift towards more premium and branded products, in our view," it says.