India’s fashion retail landscape in transition

The IAF was invited to attend CMAI’s Fashion Retail

Summit. The seminar was perfectly organized by the CMAI with its knowledge partners Wazir.

Contentwise the seminar proved to be inspiring and provided a deep insight into the challenges, but I dare to say above all the opportunities for the Indian apparel industry. The theme of the Convention focused on retail, but the organisers did a very good job demonstrating the strong interconnection between fashion retailing, branding and manufacturing. As a side note; this connection is not always seen clearly by policy makers, be they in India, Europe or the US. Promoting the apparel industry as a government requires an integral vision on the entire industry that does include fashion retail.

It is clear that India’s fashion retail offers a landscape in transition. This is most clearly exemplified by the fact that prime retail space in the large Indian cities commands a rent that is as high as in countries with much higher spending on fashion per capita. The turnover per square meter in Indian fashion retail, however, is much lower. In India, more so than in other emerging economies, the challenge is to see the difference between the temporary difficulties that always accompany transition and growth, and the factors which are more structural and specific to India. The importance of Indian traditional wear and the importance of ultra small retailers to the fabric of society are good examples of factors specific to India influencing the development of fashion retail. So how fast the transition of Indian apparel retail will progress is a great unknown and subject to a lively debate.

Another contested topic is e-commerce. The market is not yet big, but it can potentially bypass some of the great infrastructural problems in India. A good example of this was the comment from one of the panelists that Indians can and do order online abroad, creating competition with foreign brands and retailers that have no physical presence on the Indian market. Another reason for taking e-commerce very seriously, also in the Indian context, is the rise of omnichannel retailing, whereby retailers can perform best if they communicate with their clients both online and offline. On the other hand, it is still very difficult to make money in e-commerce in India. The future will tell us whether e-commerce could partly perform the same role as mobile phones in some countries, bypassing the stage of landlines creating a quicker change of the retail scene than perhaps expected.

In any case, the Convention did name some numbers. The retail market is set to grow from 40 to 140 billion US dollars. Could the Indian manufacturing sector cope with this growing market it was asked? Turning this question around, the opportunities offered by the projected growth of the Indian apparel retail are enormous. To make best use of them, the panelists suggested that Indian manufacturers should brand themselves as ideal partners for the Indian fashion retailers. They can move in the direction of private label suppliers, offering more in addition to pure manufacturing services. Especially when speed to market comes into play, manufacturers closeby can do more to exploit their advantage.

Similarly, the threats and difficulties for Indian brands in the light of the growing retail market were discussed, where the central question was what prevailed, the threat or the opportunity. In the end, rightly so, the spirit of opportunity prevailed. The comment by the moderator that the entry of global brands on the Indian retail scene will help the local brands to develop was made in that spirit. Surely, it was argued, the high growth of Indian spending on clothing will attract plenty global brands with large marketing budgets. But an important part of the market will be available for Indian brands with a superior knowledge of and feeling for the local consumers (which of course differs per Indian region).

As a visitor from Europe, a slight feeling of envy came upon me. In Europe growth has become a rather rare commodity. In India there is real and prospected growth and Indian manufacturers and brands can grow with the fast developing fashion retail scene. Having said that, India is a challenging environment for retail, and growth will be a bumpy ride. It requires taking the right decisions and working from a sense of self confidence. CMAI’s seminar gave the strong impression that the Indian fashion industry has plenty of reason to be self confident.

Written by: Matthijs Crietee, Deputy Secretary General IAF