India: the next favorite market for global fashion brands
The actual global slowdown is touching many industries. But as we know when we experience a decline in economic growth, the consumers cut discretionaries expenses first. Which represent a direct threat to the fashion and electronics industries.
The Indian economy is proficient and likely to stay the same with a constant 8% growth in GDP between 2018 and 2022. In addition, India will soon give birth to the world’s widest middle class. The annual average income is expected to triple between 2025 compared to the actual income. Thanks to the increasing Indian population and wages, the quantity of potential Indian customers will know an exponential growth.
Indeed, India’s middle class is to grow from 4% today to 41% of the population in 2025 (around 585 million Indians). Another interesting fact would be the young age of the Indian population who are the target customer segment for fashion brands.
The forecasted market valuation for apparel in India is around $59 billion in 2022 and will keep rising.
Furthermore, Indian firms understand the importance of innovation in customer experience. In fact, they already use their technological knowledge for customer services like Augmented Reality (AR), Virtual Reality (VR) or other advanced marketing tools.
Regarding e-commerce, the rise of a large middle class will result in a significant increase regarding the use of the internet and smartphones. In 2018, around 460 million people were using the internet ( only 50 million in 2008). This number is supposed to double (900 million) in 2021 with a constant increase during the next years.
Moreover, the procurement and operation divisions of fashion brands are considering to produce in India. The labor cost is cheap and will remain profitable, also India has a high quantity of raw materials such as cotton, wool, silk … If brands implement their sourcing in the next biggest fashion market in the world, they will be able to use and manage the entire value chain (from raw materials to consumers’ closets). This is the dream business model for fashion brands. This process should take effect in the next few years if the Indian government keeps allowing relaxed FDI (Foreign Direct Investment). In fact, the India government gave access to a 100% foreign-owned brand for retail operations, as well as other industries. This means that brands can create their own Indian subsidiaries.
Besides, the potential of the Indian market, global fashion brands will encounter new challenges. The biggest one will be to understand the Indian market: What are their tastes? How they consume?
Moreover, in India, traditional clothing is still very popular for women (70% in 2017 of apparel sales). The predictions show that even with the increase of Western-style apparel sales, by 2023 the traditional India wear will still represent around 65% market share for the fashion industry.
Another challenge is to trade within low-quality infrastructures, which make access to facilities challenging. The last biggest challenge is the insufficient number of malls and shopping centers in India nowadays. Eventually, the government will resolve those issues thanks to the foreign capital acquired on the Indian territory by using flexible regulations on FDI.