Fashion Boom: Rising affluence fuels India's apparel appetite
India's rise as a consumer giant is set to reshape the fashion industry, with a growing affluent class boosting apparel spending. A recent report by UBS predicts India will become the world's third-largest consumer market by 2026, surpassing Germany and Japan. This growth is driven by a significant increase in affluent population – those earning over $10,000 annually. Their numbers are expected to double from 40 million in 2023 to 88 million by 2028.
Income and apparel consumption a direct correlation
The link between income growth and fashion spending is well-established. As disposable income rises, consumers allocate a larger share towards discretionary items like clothing and footwear. Data supports this trend. As per a report by McKinsey & Company, apparel and footwear consumption in India is expected to reach $350 billion by 2030, a significant jump from $175 billion in 2020. This growth is primarily driven by rising incomes, particularly in the middle and affluent segments. Other global studies also reinforce this connection, as Euromonitor, a market research provider study shows, a 10 per cent rise in per capita income in a developing nation leads to an average increase of 5.5 per cent in apparel expenditure. A.T. Kearney's 2023 Retail Apparel Index found apparel spending in India is expected to grow at a CAGR of 8.2 per cent between 2 023 and 2030, reaching a value of $733 billion.
The rise of western brands catering to evolving tastes
The influx of affluent consumers presents a lucrative opportunity for Western fashion brands. As Indian consumers become more brand conscious and develop a taste for international styles, these brands are well-positioned to capture a significant market share. We can expect to see a rise in flagship stores, online presence, and potentially, collaborations with Indian designers to cater to local preferences.
Indeed, this growth presents a good opportunity for both domestic and international fashion brands. Domestic players like Aditya Birla Fashion and Fabindia are poised to benefit immensely. Additionally, established Western brands like Zara and H&M are eyeing the Indian market with renewed vigor.
Catering to a market with nuances
It's important to acknowledge the ‘consumption dichotomy’ highlighted by UBS. While the affluent segment thrives, urban mass-market demand might remain subdued due to factors like wage stagnation. The report estimates the affluent population will double from 40 million in 2023 to 88 million by 2028. This segment will have a higher propensity to spend on fashion, particularly premium and designer brands. This necessitates a multi-pronged approach from fashion brands. High-end labels can cater to the premium segment, while others can focus on value propositions and affordability for the broader market.
While the affluent consumer boom is exciting, UBS highlights the need for quality job creation to sustain this growth. Increased job opportunities will lead to a broader rise in disposable income, not just for the affluent, but for the middle class as well. This will create a more balanced consumption pattern across the country.
Meanwhile the success of Western brands will depend on their ability to:
• Adapt to local sensibilities: Offering culturally appropriate designs and fits will be crucial.
• Embrace omnichannel strategies: Investing in a strong online presence alongside physical stores will cater to the growing e-commerce market in India.
• Offer competitive pricing: While there's a demand for luxury, price sensitivity remains a factor for many Indian consumers.
Indeed, India's apparel industry is poised for a golden age. To ensure long-term success, brands must prioritize sustainability and ethical practices, aligning with the growing eco-consciousness of Indian consumers. Also, catering to the diverse needs and preferences across various income brackets will be crucial for brands to win hearts and wardrobes in the world's soon-to-be third-largest consumer market.
