MUMBAI, India — Despite the numbers being bandied around about the Indian economy slowing down, the $450 billion retail industry is growing fast and fashion retail continues to ride the wave.
A new report from Reliance Brands, shared exclusively with WWD before it is released, takes a look at the fashion retail market, which it forecasts will continue to grow in the high double digits. This is the first study from the group, and with the shortage of market information and numbers in India, it highlights some of the sector’s strengths and weaknesses. It also focuses on who the consumer is and how premium and luxury brands are meeting market expectations.
“Certain segments of the economy and even retail may certainly be slowing down, but if you look at the numbers for premium and luxury retail the inflection point for customers spending their money is only coming closer,” said Darshan Mehta, president and chief executive officer of Reliance Brands.
The report noted that 38 percent of what it classifies as the world’s leading luxury brands are in India, or 19 out of 50. Premium brands are right around the same number, at 37 percent of what it believes are the leading premium brands — 28 out of 75. The premium market is geared to grow at least three times over the next decade, matching the growth of the affluent population.
The report focuses on the cities where there are more consumers. At the aggregate level, they are highly accessible, with more than 50 percent of customers concentrated in four cities — New Delhi, Mumbai, Bangalore and Chennai.
Premium brands have an advantage over luxury brands in that there is more real estate availability. They also have more potential for sales growth as the number of affluent consumers is greater than the superrich, the reported noted. The number of affluent households which make up the premium consumer segment is set to grow from 2.5 million to 7.5 million by 2020, or a 6 percent increase.
Despite the larger geographical distribution of consumers who would shop for premium brands, there is a limited awareness of Western fashion and a large variation in the propensity to spend.
These two factors mean that only a few cities have the adequate market potential for premium apparel. The report pointed out that the premium consumer in India is of two distinct types — those who live in the metropolitan areas and those who reside in smaller towns — and said there are “only 12 cities that are really ready for premium retail.” The report believes it is important to establish multiple points of presence in all suitable malls.
The report identified the key areas for premium brands as New Delhi, Mumbai, Bangalore and Pune, with emerging zones in Hyderabad, Ludhiana and Chandigarh, which have “high demand but somewhat restricted real estate availability in which space in new malls tends to get blocked at the blueprint stage and high street locations are recommended.”
Amritsar, Ahmedabad, Surat, Kolkata and Chennai are recommended as selective bets as it is a matter of getting the combination of the right location and the right store economics. Properties are available at rents that make it feasible to get in early and shape the market.
The report rates the best malls in different cities, awarding five stars to Highstreet Phoenix in Lower Parel, Mumbai, and three-and-a-half stars for Select Citywalk, Saket; DLF Promenade, Vasant Kunj and Ambience Mall, Vasant Kunj in New Delhi. In Bangalore, Phoenix Marketcity, Whitefield gets three-and-a-half stars, while Forum in Maleshwaram, Bangalore gets three stars. In Pune, Phoenix Marketcity, Nagar Road gets four-and-a-half stars.
For luxury, the road map is more restricted, with New Delhi and Mumbai being the prime zones, with the emerging areas identified as Hyderabad and Chandigarh and selective bets of Bangalore, Chennai, Kolkata, Chandigarh and Pune. The report recommended that cities to watch are Surat, Ahmedabad, Nagpur, Jaipur, Amritsar, Jalandar and Ludhiana.
Other than apparel and fashion and lifestyle, there are other categories in retail that are growing fast, including food and grocery, electronics and e-commerce.
According to the report, the number of superrich in India is likely to reach 600,000 to 800,000 in 10 years time, as compared to 81,000 today. The superrich are categorized as those with incomes of more than $180,000 a year. In China there are 500,000 superrich today. While several brands, particularly in the luxury segment, have changed franchise partners over the last few years and have been disillusioned by the numbers, the report pointed out that it was only a matter of time and an understanding of the market.
“Historically, brands have found it difficult to come to grips with the complexity of the Indian marketplace and consumer expectations. India’s retail productivity levels too do not help matters being as they are still quite low. China’s productivity for luxury brands is between two to nine times Indian productivity. Profitability too is still some distance away,” the report noted.