Backed by many investors, start-ups are flourishing across India. As a recent funding report by YourStory for the period January-September 2019 reveals, start-ups in India raised $7.67 billion, with over 21 deals crossing the $100 million mark. Prominent amongst these are fashion start-ups that are thriving despite odds. These young firms are attracting the attention of investors, who seek to fund disruptive ideas, passionate founders and the limitless potential the big Indian market offers.
Despite this, many startups are struggling to find their niche as conditions have become tougher and government benefits are restricted to the crème de la crème. While many new names have entered, many others have been forced to shut shop either due to lack of funds or the uncooperative taxation system. Another impediment is the competition that these startups face from established retail brands.
Advantages for startups
Established brands are able to cut their production costs by producing larger quantities. However, start-ups have some distinct advantages as millennials are driven not more by a brand’s response time to a particular style or trend. Start-ups’ design to market timing is much shorter than that of established brands which enables them to adapt to changing trends quickly.
As Suprathik Reddy, Co-founder of Krate and Alpha points out, another benefit for these startups is they cater to a niche sensibility as opposed to a larger market base that brands have to design for. Hence, it is easier for them to source fabrics according to our stipulations and play around with them to suit our smaller audiences.
Also, as opposed to startups, brands have larger operating costs as they operate both online and offline stores. Their marketing costs also tend to be much higher. Start-ups, on the other hand, can use social media channels to market their products as most of their audiences are based out of metropolitans and Tier-1 towns.
Another advantage is the emergence of new business models such as rental, barter, subscription and B2B selling for apparel, apart from concepts that involve sustainability and divergent product categories like sustainable fitness clothing, wellness products or handlooms and handicrafts.
However, these benefits are often outweighed by cons. As Arijit Mazumdar, CEO and Co-founder of Northmist observes, the criteria listed for start-ups to get funding are quite impossible to meet. They ask for documents that cannot exist for start-ups. Reddy too agrees, another issue plaguing start-ups is the poor implementation of GST. The rules change every other month leading to mass confusion and hurdles for businesses.
As per Statica, Indian apparel industry has remained unaffected largely due to the penetration of internet to even the smallest of towns. With store closures becoming more common in the US, the market in India is slated to grow at 11.6 per cent CAGR from 2020-2023
However, established brands and start-ups will still have to struggle to remain viable in today’s economy. With the growth of new e-commerce channels and rising costs, start-ups will have to rebuild their brand image from scratch. They will also have to invest in educating their audience at every step about their product, concept and brand value.
Both established brands and starts ups have their own set of advantages and disadvantage, but over the last few years, start-ups have manifested themselves as tough contenders in the race to woo customers.