Domestic Apparel Market

India Shining : A Growth Opportunity

Historical Asia Perspective• According to ADB report• In 1820, 60% of world GDP was in Asia.• After industrial revolution, Asia lost to

Europe and reduced to 20% of world GDP in 1940.

• In 2006, it reached 40% of World GDP and expected to be original 60% of World GDP by 2025.

• Asia is booming and major contributors are Japan, China and India.

India : An Overview

Macro Factors – Population

• Population – 1000+ Million – 50 Million Rich and 300 Million Middle class

Macro Factors - Composition

• 65% of population below 35 years• 54% below age 25 years• Working population in India is growing unlike

most other developed countries• Emerging Large Consuming Class• China has issues of median age 30-34 years at

the early stage of development and psychology issues after implementation of “one child policy”

Macro Trends – Population

• From joint family system to Nuclear Family growing

• Housing Boom – due to nuclear family, low interest rates, tax benefits from government and lastly strong Indian values driven by savings and “owning home”

• Resulting into high growth of home textile category

Consumption of Lifestyle Products

• Customer Segments – • Super Haves(SEC A+), • Haves (Upper Middle Income Group- SEC

a1/a2), • Strivers and • Strugglers

Super Haves• 2.1% of urban youth and adults in 2000• lead global oriented westernized lifestyle• contribute to the bulk of purchase of

international and super premium brands• highly conscious of status and image,

they patronize brands which add to their self esteem

• high spender and less price conscious

Haves• 9% of urban youth and adults in 2000• financially secure upper middle income

group• upwardly mobile and seek more

recognition• brand conscious and key customer to

Indian lifestyle brands, however looks for VFM

• Seeks contemporary brands within their price bands

Haves Household will multiply

• The All Have segment will multiply 4 times to touch 23 million by 2012

• this is the fastest growing segment• a very attractive for premium lifestyle

brands

Macro Factors - Size

• Retail industry is expected to be USD 225 billion and growing at 5%.

• Economy - 4h largest economy in the world on PPP basis -One of the fastest growing economy with 6.5% average growth in GDP for last 10 years

Macro Factors - Size

• Textile/Apparel – USD 35 Billion out of which

• Exports - USD 13 Billion • Domestic Apparel Market - USD 18.5 • Home Textile - USD 1.4 Billion• Domestic Bed and Bath - USD .5 Billion

Change Drivers

• Exposure on electronic media – integration of global trends, yet distinct Indianism - by 2007, it is expected to have 67 Million household connected by cable and satellite.

• International Travel - 4 Million traveled abroad in 2003

• Increase in credit friendliness – 50k crore in 2000 to 160k crore in 2004 - 18 Mn credit cards and likely to touch 75 Mn by 2010

Where do these consumers buy? - Retail network

Retailers - Population

• Fragmented retailing with 5 million retailers and 96% less than 500 sq ft – nation of shop-keepers -brilliant trading and entrepreneur community

• Lowest per capita retail space 2 v/s 16 in USA

Key Retail Insights

• India is 1/7th size but 5 times the population of USA. A retail format that is successful in US or elsewhere might not work in India. India is more similar to China in terms of structure of market.

• The cost of space in India can go up due to population pressure. Signs of high rental and property prices visible.

Commercial Structure

• Low cost of entrepreneurship• Low gross margin for branded product

business as well as retail business e.g. Gucci, BHS v/s Indian brands or retailers, though real estate and operation cost are relatively higher

Political Structure

• Unity in diversity – Culture, convictions, values, customs, language, lifestyle, climate etc

• Sound democratic tradition with now aggressive judiciary and media

• Model of growth – brilliant entrepreneurship, superior corporate governance, globally competitive service industry, rising consumption and not just export-led

However,

• Low cost retail is very critical for long term profitability and survival. Indian retail square ft must deliver higher sales/price than many other countries.

Retail Revolution in India

Market Evolution Cycle

• 1994-2000 – Brand Boom• 2000-04 – Retail Boom• 2004- Mall boom• However, home textile industry largely

missed product upgrade cycle (unlike many other home product categories like furniture, ceramics etc) from 1994 to 2004 and now addressing all stages of evolution cycle together

In the year 2007

• For one set of customers time poverty setting in like many developed countries whereas for other classes, shopping remains the best week-end outing destination.

• Shopping Malls driving retail boom – by 2007, 356 shopping malls with 90 million square feet is expected to be operational

International Players• Despite FDI in retail not allowed, • Metro – already established “Cash and Carry

Operation”• ‘Shop-rite’ and ‘Marks and Spencer’ started

direct to customer through franchise route• Wal-Mart with Bharti and Carrefour with Land-

mark Group are set to enter franchising route• This is apart from single brand retail by large

number of companies across sectors.

Domestic Players

• Reliance – Mega-retail plans• Hyper-markets – Ambitious expansion

plans by Big Bazaar, Star India Bazaar, Spencer etc

• Same with Department stores category – Shoppers’ Stop, Pantaloons, Lifestyle, Pyramid and so on.

• Rural Malls – ITC, Hariyali Mall – Sriram Group, Godrej

Finally, Home Retailers• Home Stop by Shoppers’ Stop– Home Center by

Lifestyle – 2 – Ambitious expansion plans• @home (Nilkamal Group)– from 0 to 7 in last

one year and 30+ in next 3 years• Home Improvement Category - Housefull

(Renaissance Group)– 4 to 50 in 3 years, Home Town by Pantaloon – 6 within one year and Hind-ware (Somany Group)– likely to start with mega plans

• In addition, traditional specialty home textile retailers are growing very well.

Ambitious Retail plans are changing the retail land-scape in

favor of Organized retail.

Composition of Retail 1999 2002 2006

estimated

Total Retail in INR 000 Million

7000 8250 13500

Organized Retail in INR 000 Million

50 150 3200

% .7% 1.8% 3.2%

It translates into

• Organized retail growing at 30%+ p.a. compound growth. is expected to reach Rs. 270000/- crore ( USD 60 Billion )by 2011. The share of organized retail is expected to reach between 14 to 16% of total retail in 2011 from 3.2% in 2006.

Organized retail is changing rules of the game

• Traditional marketing methods do not apply anymore. Pressure to all consumer product marketing companies.

• Earlier business was driven by size (though size as business strategy may even work now), scale, street smartness, networking and contacts. Now, businesses are driven by strategic business vision and values.

New Growth vehicles

• New Product Capabilities and organized retail format have been developing market for many new product categories.

• Expected growth of retail formats - Hyper, Category Killer and Consolidators in wholesale segment

Consumers in India

Traits of India Customer

• Argumentative Indian – like to speak, argue, demand value – reflect in buying behavior

• Core Traditional values and changing modern values with distinct Indianism

Indian customer is traditional.• RTS (ready to stitch) to RTW (ready to wear) –

though tailor-made garments are still popular – 37% of total sales.

• In one of the most posh area in India, lady customers get cotton filling pillow made with cheap shell fabric in retail shop at very low cost.

• Indian customers is used to experience products. E.g. open and check bed-sheet set. Or while buying audio set, take a cd from home and play to listen to the real effect while buying the set.

Indian customers are changing

• Design and quality acquiring significance as market moves towards growth phase especially in Home textile.

• Consumer is willing to buy expensive products in right environment e.g. dust-bin for 10k, marriage gift bedding set for 50k, Rs. 3/- lac bed-room set at Home Center and lamp at Rs. 22 lac - niche products etc

Value for Money

• Indianized solution required – Anything will not work – Shanghai to Spain – Value not by European bench-mark or by an exporters’ bench-mark. Value is not just cheap. They are willing to pay the price if they see value. E.g. Soya quilt

• Pragmatic in consumption – Many premium category customers fill their ward-robe during twice a year end-season sales though they can afford to buy at full price.

Pricing

• For premium products, one set of customer willing to buy, second set of customer will buy after they get used to premium price and last set will never buy.

• Penetrative pricing to get entry into retail as well as to get customer look at brand. From McDonald to Pizza Hut have Indian menu and Indian entry prices. Case of Pillow marketer. Most brands have introduces volume drives though brand imagery is always premium.

HT products

• Product category in the order of emotional attachment in buying process - Apparel, Living Room and then bed/bath products.

• Living room brands complement each other and need not be same for bed and bath.

Overview Of The Attitude Towards HTLow involvement High involvement

TowelsCompletely personalNo show value attachedFrequency of purchase twice in a yearNothing special about it Matter of factVery need based

CurtainsFor interiorsReflection of class & prestigeConsidered to be very important part of the upholsteryFrequency of purchase once in two yearsHigh involvement

Bed sheetsFor others - others would seeReflection of certain class & prestigeImportant for the overall upkeep of the housePersonal involvement in choosing the right kind of bed sheetFrequency of purchase almost quarterly

Personal clothesFor self hence require ultimate attentionVery high involvement and indulgenceMostly planned. At times impulse purchase tooFrequency of purchase is high - almost once a month

Trends For bed linen category

• A lady considers bed-sheet sets is the most inexpensive tool to change look of the room. Willing to spend more. A see change in last 3 years when bed-linen was bought like commodity.

• Co-ordinated solution of complete bed-room is required.

• Growth in sales of air-conditioners (400% at Vivek’s in last summer) and change in lifestyle – Sales of quilt and blanket

Business Opportunity

• Top 5 retailers commanding 4% market share compared to 30%+ in USA, UK and Germany

• No brand commanding 5% share in any category in Home Textile market

• After saturation of apparel market, HT has grown world over. Indication of same trend visible in India

However

• A consumer wants all fashion, experience, convenience, services, good quality and good brand ALL AT A REASONABLE PRICE.

Thank You