The apparel market in India is rapidly evolving with a shift in consumer tastes towards branded apparel providing strong investment opportunities. We expect the brands market to double in size by 2021 (to US$30bn).
Apparel industry undergoes J-curve expansion at US$2,000 GDP per capita
Global precedent suggests that local apparel industries undergo J-curve expansion when a country’s GDP per-capita increases to over US$2,000. In China, the apparel industry tripled in size within a decade (2002-12) and this led to the emergence of several US$1bn+ brands. In contrast, the top-three Indian brands have combined sales of less than US$1bn providing a long-term opportunity as the economy progresses towards this inflection point (with a current GDP per-capita of about US$1,700).
Branded apparel likely to outpace industry growth rates by 1.5 times
The branded apparel segment is gaining considerable traction in an otherwise fragmented market. This is reflected in the top-15 brands registering a 24% Cagr over 2011-15 (versus 6.5% Cagr for the industry); and the organised value-retail segment (as opposed to unorganised retail or independent stores) gaining considerable traction. In our view, the branded apparel sector is likely to outpace industry growth rates by 1.5x through to FY21.
E-commerce, entry of foreign players and potential GST will facilitate shift to branded apparel
We believe the growth in e-commerce, entry of foreign players and the potential implementation of a GST will further facilitate the shift to branded apparel. We see e-commerce as a growth catalyst for brands (improving distribution) but as a headwind for department stores. The entry of foreign brands is also accelerating mall foot traffic and providing attractive partnership opportunities for Indian companies. A sizeable local textile industry also provides a supportive ecosystem for branded apparel.