India's apparel retail industry has witnessed a remarkable growth over the past decade, growing at a compounded annual growth rate (CAGR) of 10.2 per cent. This increase is primarily due to rising disposable incomes, rapid urbanization, and a consequent shift from unorganized to branded retail, reveals a recent study by financial advisory firm Centrum Research.

Apparel sector growth to continue

The study says, the apparel market is poised to continue growth, driven by favorable demographics, increasing incomes, and a growing demand for affordable fashion, particularly among Gen-Z consumers. The organized retail sector has experienced significant expansion, with major players increasing their store footprint by 15.7 per cent CAGR over the past five years.

One of the notable trends in the industry is the rising popularity of private-label apparel, which offers price and product differentiation. While customers in smaller cities prioritize quality and value-for-money, affordable fashion has emerged as the dominant force in the market, accounting for 56 per cent of the total apparel sales.

Mass market to see substantial growth
The mass market segment has witnessed substantial growth, growing at 28.4 per cent in FY23 with a projected CAGR of 13.7 per cent for FY23-FY27. Similarly, the economy segment recorded a 28.7 per cent increase in FY23 and is expected to grow at a CAGR of 14 per cent over the next five years. In fact, value fashion is projected to bounce back as inflation eases, while premium segments will benefit from a growing brand-conscious consumer base.

The mid-premium and premium segments have also demonstrated impressive growth, with FY23 figures showing increases of 37.9 per cent and 45.1 per cent, respectively. The projected CAGRs for these segments are 21.7 per cent and 25 per cent for FY23-FY27. And the premium+ category grew by 33.0 per cent in FY23 and is expected to grow at a CAGR of 35.9 per cent by FY27.

The organized market has witnessed segmentation, with categories like western wear, ethnic wear, and athleisure experiencing rapid growth. As inflation eases, value fashion is expected to rebound, while premium segments will benefit from a growing brand-conscious consumer base. Private brands are poised to capitalize on evolving consumer lifestyles and fashion trends, driving further growth in the market. Looking ahead, the apparel market is expected to continue growing, with rising incomes, favourable demographics, and increased demand for affordable fashion, particularly among Gen-Z consumers.

With the value fashion segment gaining momentum, the fashion retail sector in India is expected to witness a demand recovery with revenues rising by 15 per cent in FY2025, as per ICRA.

After nearly two years of slowdown, the value fashion segment in India is showing signs of recovery with average sales per sq ft surpassing pre-COVID levels for the first time in Q1 FY2025. This resurgence is marked by increased activity, as large corporations either enter the market or expand their presence aggressively.

In contrast, average sales per sq ft in the premium fashion segment declined by 3 per cent in FY2024 and Q1 FY2025, while the value segment thrived, surpassing pre-pandemic figures.

Revenues of Trent Retail, operator of the value fashion brand Zudio, rose by 56 per cent during Q1 FY25, along with a substantial profit rise of 126.3 per cent. Zudio also opened 203 new stores across 46 new cities, bringing its total to 545 locations.

Zudio is now a formidable competitor to Landmark Group’s Max. In response to market trends, Shoppers Stop has launched its new value format, InTune, in the mass premium segment, planning to open 60 new stores in FY25. Meanwhile, Reliance Retail’s value fashion brand Yousta is negotiating with British retailer Primark to potentially launch in India.

In the centre of India's ever growing e-commerce landscape, Amazon India has observed a silent transformative trend: the rise of premiumization in Indian fashion and apparel retail. An in-depth look at their own sales data reveals evolving consumer preferences and regional nuances. The study highlights the rise of premium brands and growing appetite for high-quality fashion across states. “The premiumization trend in India is undeniable. Consumers are increasingly seeking high-quality, branded products, and are willing to pay a premium for them," says Amit Agarwal, SVP and Country Head, Amazon India.

Growing demand for premium fashion

Amazon India's data reveals a growing appetite for premium fashion and apparel brands among Indian consumers. The platform's premium segment has witnessed a significant sales increase, indicating a shift in consumer preferences towards higher-priced, quality-focused brands. And the pattern of sale changes across states. While major metros like Delhi, Mumbai, and Bangalore remain big contributors to overall fashion and apparel sales accounting for over 60 per cent of fashion and apparel sales on Amazon India.

Tier-II, III cities are showing rapid growth almost contributing nearly 40 per cent to overall fashion sales, driven by increased internet penetration and rising disposable incomes. Ethnic wear remains a popular choice across India, accounting for over 40 per cent of overall fashion and apparel sales on Amazon India. Manish Tiwary, Vice President, Amazon India points out, "We are witnessing a remarkable shift in the fashion landscape in India, with a growing preference for premium brands and a surge in demand from diverse states across the country. Amazon India is committed to providing a platform for both established and emerging brands to reach a wide customer base."

States like Maharashtra, Karnataka, and Tamil Nadu have emerged as fashion-forward states, displaying a higher inclination towards premium brands and trendy styles. These states also exhibit a preference for ethnic wear, reflecting the strong cultural influences in these regions. What’s more, over 70 per cent of fashion purchases on Amazon India are made through mobile devices, reflecting the country's digital-savvy consumer base.

Growth potential in smaller cities
There study points out, there has been a rise in homegrown luxury. Indian luxury brands like Sabyasachi and Anita Dongre have witnessed exponential growth on Amazon India, catering to the increasing demand for premium ethnic wear. At the same time, luxury brands like Louis Vuitton, Gucci, and Prada have witnessed significant success on Amazon India, with a growing number of Indian consumers opting for these high-end brands.

Cities like Jaipur and Lucknow are witnessing a surge in fashion consciousness, with consumers actively seeking out the latest trends and premium brands. And fashion influencers are playing a pivotal role in driving sales, particularly among younger consumers, who look to them for style inspiration and recommendations.

Amazon India's findings highlight the evolving fashion and apparel landscape in India. The growing appetite for premium brands and the rapid growth of Tier-II, III cities present significant opportunities for both domestic and international brands. As India's e-commerce market continues to grow, fashion and apparel brands need to adapt their strategies to cater to the changing consumer preferences and regional dynamics.

In a complaint this week to the Department for Promotion of Industry and Internal Trade (DPIIT), Madras High Court lawyer K Narasimhan has accused Flipkart of influencing prices for select sellers and funding discounts, creating an uneven playing field in the e-commerce marketplace.

Narasimhan claims Flipkart has been offering selective waivers at the product level, directly impacting the pricing of certain sellers. This, he argues, creates a "skewed and non-competitive environment" that stifles competition and hurts the broader seller ecosystem.

Allegations among festive sale

The allegations have surfaced amidst the ongoing annual festive season sale events organized by major e-commerce companies like Flipkart, Amazon, and Myntra. The Confederation of All India Traders (CAIT) has also called for the suspension of these sales, claiming that they further harm domestic traders through the continued use of anti-competitive practices.
Rules and Regulations Allegedly Being Violated

The primary rule that Flipkart is accused of violating is the prohibition on e-commerce companies interfering with or influencing the price of products listed on their platforms. This is enshrined in the Consumer Protection (E-Commerce) Rules, 2020, which were enacted to ensure fair trade practices and protect the interests of consumers and sellers.

The alleged rule violations
Consumer Protection (E-commerce) Rules, 2020: The rules prohibit e-commerce entities from directly or indirectly influencing the sale price of goods or services offered on their platforms.

Competition Act, 2002: The Act prohibits anti-competitive agreements and abuse of dominant market position, which could include predatory pricing or discriminatory practices.
Foreign Direct Investment (FDI) Policy: The policy for e-commerce marketplace entities restricts them from influencing the selling price of goods and services and mandates a level playing field for all sellers.

E-commerce companies' defence

Flipkart has not yet responded to the allegations. However, e-commerce companies typically argue that discounts and promotional offers are essential for attracting customers and driving sales, especially during the festive season. They also claim that these practices benefit sellers by increasing their visibility and reach.

If found guilty of violating the Consumer Protection (E-Commerce) Rules, 2020, Flipkart could face penalties under the Consumer Protection Act; penalties may include fines and imprisonment for the individuals responsible.  
This is not the first time that Indian e-commerce majors have faced scrutiny for their business practices. In the past, both Flipkart and Amazon have been investigated by the Competition Commission of India (CCI) for alleged anti-competitive behavior.

The allegations against Flipkart have once again brought to the fore the concerns about the dominance of large e-commerce companies in the Indian market and their impact on small and medium-sized businesses. The government and regulatory authorities are likely to face increasing pressure to take action to ensure a level playing field for all players in the e-commerce ecosystem.