China and India Provide Most Consumer Potential

The next wave of global apparel demand is likely to come not from rich nations, but from rapidly growing consumer markets.

India's retail market is expected to grow to $637 billion by 2015.

GENEVA — The next wave of global apparel demand is likely to come not from rich nations, but from rapidly growing consumer markets — particularly expanding middle classes — in major emerging economies such as China and India, according to a new study.

This story first appeared in the January 5, 2009 issue of WWD.  Subscribe Today.

The size of the dynamic emerging markets is expected to provide new sales opportunities for local producers and exporters from rich and developing nations, but also to create an environment marked by fierce competition, with price, quality and speed of delivery playing a decisive role.

China has the potential to become “the world’s largest consumer market” for apparel, concluded the study, “Clothing Demand From Emerging Markets,” from the Geneva-based International Trade Center, which noted that the country’s middle class is expected to sharply increase in size.

According to data by China’s national bureau of statistics, cited in the report, the middle class, which consists of people with an annual household income of $7,230 to $60,240, has higher expectations than other consumer groups.

China’s middle class will rise, the report outlined, from the current estimated 5 percent of total households to 45 percent and “become one of the most active consumers of apparel in the next 10 to 20 years.”

Meanwhile, the size of India’s retail market, it said, is expected to reach $637 billion by 2015, or more than double from around $300 billion in 2005-06.

In India’s case, the boom in the construction of hundreds of malls in the last few years is putting in place the “infrastructure required to support and fuel the rapid rise of retail.”

With its huge population of 1.3 billion and increasing apparel consumption, China “offers a lucrative business opportunity to the rest of the world,” said the study. Given the country’s robust growth and increasing purchasing power by consumers, per-capita fiber consumption in China’s apparel market increased to 14 kilograms in 2005 from 4.1 kilograms in 2000, and is forecast to reach 20 kilograms in 2010, the report said.

The ITC study said that, with per-capita gains in gross domestic product and a likely appreciation of the Chinese currency, the yuan, consumer purchasing power “will grow even stronger” and spur further consumption of apparel. The study said, “The Chinese consumer’s lifestyle is undergoing tremendous change, and the domestic clothing market is becoming more versatile, fashionable and segmented.”

With demand for comfort dressing increasing, it noted, more consumers today prefer quality apparel made of pure cotton and other natural fibers. There is also a growing interest by some segments in brands and in country of origin. “At the higher end of the market, consumers also care about brands, the countries where these brands originated and the countries where the articles bearing the brand names have been manufactured,” the study said.

But at the lower end, it added, consumers are more price sensitive. Overall, the higher end of the apparel market in China is dominated by brands of European origin, such as Giorgio Armani, Cerruti 1881, Hugo Boss, Dunhill, Chanel, Dior and Ermenegildo Zegna, and the study expects them to increase their expansion in the market.

The vast majority of domestic and overseas brands are manufactured in China, the study noted, but some top brands, such as Armani and Zegna, continue to be imported. At present, imported apparel only accounts for about 1.5 to 1.8 percent of total apparel expenditures.

Looking at new opportunities for women’s wear, the ITC report pointed out that, with an increasing number of women working among the country’s more than 600 million female population, demand for careerwear is forecast to “increase enormously.…The market for women’s officewear and business casualwear will be the fastest-growing segments.”

With regard to India, the ITC study said: “Indian manufacturers are strong on basics and weak on fashion. Retailers and brands are therefore looking outside the country for sources of supply in fashion products.”

The current Indian market for apparel is estimated at $20 billion, of which men’s wear accounts for 37 percent; women’s wear, 32 percent, and children’s wear, 15 percent, with unisex jeans and sportswear making up the balance. The future potential of the Indian market is that it has a growing and value-conscious middle class, and its population of 1.1 billion has a median age of 24 years.

Looking at market developments, the study said that, while traditional attire is the dominant dress code, there has been in recent years “a shift to Western wear.” But it also maintained that ready-to-wear now accounts for the bulk of the apparel markets for men (63 percent) and women (79 percent), which only a decade ago were dominated by tailor-made products.

Despite this shift, the report noted that “brands have yet to find the same acceptance, largely because there are still relatively few brands. This is particularly true in women’s wear.” Market research in India has identified unisex apparel — jeans, denim, woolen sweaters, cardigans and active sportswear — as a separate and growing segment.

Levi’s, which was launched in India in 1995 and has a retail network of more than 400 outlets in 70 cities, the report said, “sells through exclusive brand outlets and shop-in-shops in department stores and multibrand outlets.”