Fast fashion's march in India: not so fast anymore?
The euphoria around global brand names is on the wane as price still rules the shopper’s list of priorities. A new onslaught is looming too: the rise of private labels.
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Shabori Das
7 Jun 2018
VICTOR JIANG/SHUTTERSTOCK
If you sell fast fashion in India, nothing spells the kiss of danger quite like your target customer recoiling from you because you are "expensive".
When global faves Zara, Forever 21, and H&M came to India — the first two in 2010 and the last in 2015 — the Indian fashion buyer was jubilant. Fast fashion, it seemed, was tailor-made for India. Trendy designs from the ramp to the masses at affordable prices, all in super-quick time — what’s not to love?
This: For a long time after their launch, a visit to any of these brand's stores would have told you that much of their range isn’t exactly what the average Indian consumer considers affordable. Some are now making amends, at a hefty cost to their balance sheet.
Also this: The very phenomenon that ought to have strengthened their hand — apparel becoming a round-the-year purchase from an occasional one — might actually be working against them, as we shall see.
To be sure, in absolute terms the companies are still growing. However, a closer look reveals a very different story. (Zara and Forever 21 declined to comment.)
Forever 21 grew at a measly 2% during FY17 over the previous year. In February, the Times of India reported that Aditya Birla Fashion & Retail, its parent in India, would close or downsize several stores due to falling sales.
Zara, the leader of the pack, hit over INR1,000 crore in revenue in FY17. However, that barely masks the steady fall in its revenue growth since 2013, with only a marginal increase in FY17. Its profits too dipped a precipitous 40%.
Going relatively strong is H&M India, which saw a 95% growth in revenue in FY17 and a 21% quarter-on-quarter growth in Q1 FY18, according to numbers shared by the company. It’s interesting to note here that H&M achieved this feat with 24 outlets, which is comparable to Zara’s presence in the country (20 stores).
However, there’s a giant caveat to H&M’s growth numbers: Its range in India begins at INR250 — the cheapest among the international fast-fashion brands in the country.
What’s on the Indian shopper’s mind? (Hint: It’s what it has always been.)
Sowmya Adiraju is a 24-year-old research analyst in Bengaluru. Her evolution as a shopper will vibe with entire generations of Indian shoppers.
"As kids we used to shop for clothes mostly during festivals; the frequency of shopping was less," she says. "But now I shop much more frequently. As my purchases are more frequent and quality matters as well, department stores like Shoppers Stop and Lifestyle fit the bill perfectly. They have their private labels which are of good quality and fit my budget. For everyday wear, Zara and Forever 21 are definitely expensive."This is the perennial conundrum that comes with growth in India: While a changing demographic might signal growing appetite for brand names, a large segment of the consumer base still waits for sales to buy clothes from top global brands, or looks for more affordable options elsewhere.
Even the mightiest aren’t immune to the Indian bargain hunter.
Zara India, reported the Financial Express earlier this year, had to shrink its entry-level prices by more than 50% to INR390 from INR799 a year ago. It was initially meant to be a special sale price, but the company persisted with it even after the sale ended.
"There are a lot of brands, and the competition is intense," says Sunil Munshi, senior general manager, operations, at Orion Mall in Bengaluru, which houses several fast-fashion brands. "When a brand enters country, they generally follow the global prices. However, eventually they have to comply with local needs … [in order to] increase their customer base. As a mall developer, we also constantly keep checking the [prices], again with the primary focus on increasing footfalls."
Are private labels cannibalising fast-fashion brands?
Customers like Adiraju, with wardrobes that go through shorter replacement cycles, have found just the thing in private labels — of both online and brick-and-mortar brands — which may not have flaunt value but hit the sweet spot with their pricing and design.
Retailers push private labels for the simple reason: better profit margins.
Aditya Birla Fashion & Retail shut down the website of its e-commerce venture in December 2016, only to relaunch it in six months' time — but only with its private label ABOF.
"At a gross-margin profitability level, private brands lend more margins …," Govind Shrikhande, managing director of Shoppers Stop, told the Economic Times in an interview last year. "Private brands and exclusive brands alone clock margins of 45%-50%.” On a company level, the chain clocks gross margins of 33%, ET reported. Shoppers Stop's private labels including Stop, Life, Haute Curry, Vettorio Fratini, Elliza Donatein, and Kashish account for 11.5% of the company’s sales.
The growth and promise of private labels can be gleaned from the fact that the biggest retailing names in the world are investing big bucks in them. Walmart launched its private labels for apparel in February, starting from USD5. As of April, Amazon had 70 private-label brands, a majority in the apparel and fashion category.
In a market like India, where brand ownership matters little, fast-fashion brands with their exclusive brand names face a tough growth phase. With retail behemoths like Amazon and Walmart throwing their might behind their own labels, fast-fashion companies might be in for a long, hard pricing squeeze.
(An earlier version of the story stated that H&M India had declined comment. The company had, in fact, shared its financials for the story, though it declined our request for a detailed interview.)
The euphoria around global brand names is on the wane as price still rules the shopper’s list of priorities. A new onslaught is looming too: the rise of private labels.
Share Gift this article
Shabori Das
7 Jun 2018
VICTOR JIANG/SHUTTERSTOCK
If you sell fast fashion in India, nothing spells the kiss of danger quite like your target customer recoiling from you because you are "expensive".
When global faves Zara, Forever 21, and H&M came to India — the first two in 2010 and the last in 2015 — the Indian fashion buyer was jubilant. Fast fashion, it seemed, was tailor-made for India. Trendy designs from the ramp to the masses at affordable prices, all in super-quick time — what’s not to love?
This: For a long time after their launch, a visit to any of these brand's stores would have told you that much of their range isn’t exactly what the average Indian consumer considers affordable. Some are now making amends, at a hefty cost to their balance sheet.
Also this: The very phenomenon that ought to have strengthened their hand — apparel becoming a round-the-year purchase from an occasional one — might actually be working against them, as we shall see.
To be sure, in absolute terms the companies are still growing. However, a closer look reveals a very different story. (Zara and Forever 21 declined to comment.)
Forever 21 grew at a measly 2% during FY17 over the previous year. In February, the Times of India reported that Aditya Birla Fashion & Retail, its parent in India, would close or downsize several stores due to falling sales.
Zara, the leader of the pack, hit over INR1,000 crore in revenue in FY17. However, that barely masks the steady fall in its revenue growth since 2013, with only a marginal increase in FY17. Its profits too dipped a precipitous 40%.
Going relatively strong is H&M India, which saw a 95% growth in revenue in FY17 and a 21% quarter-on-quarter growth in Q1 FY18, according to numbers shared by the company. It’s interesting to note here that H&M achieved this feat with 24 outlets, which is comparable to Zara’s presence in the country (20 stores).
However, there’s a giant caveat to H&M’s growth numbers: Its range in India begins at INR250 — the cheapest among the international fast-fashion brands in the country.
What’s on the Indian shopper’s mind? (Hint: It’s what it has always been.)
Sowmya Adiraju is a 24-year-old research analyst in Bengaluru. Her evolution as a shopper will vibe with entire generations of Indian shoppers.
"As kids we used to shop for clothes mostly during festivals; the frequency of shopping was less," she says. "But now I shop much more frequently. As my purchases are more frequent and quality matters as well, department stores like Shoppers Stop and Lifestyle fit the bill perfectly. They have their private labels which are of good quality and fit my budget. For everyday wear, Zara and Forever 21 are definitely expensive."This is the perennial conundrum that comes with growth in India: While a changing demographic might signal growing appetite for brand names, a large segment of the consumer base still waits for sales to buy clothes from top global brands, or looks for more affordable options elsewhere.
Even the mightiest aren’t immune to the Indian bargain hunter.
Zara India, reported the Financial Express earlier this year, had to shrink its entry-level prices by more than 50% to INR390 from INR799 a year ago. It was initially meant to be a special sale price, but the company persisted with it even after the sale ended.
"There are a lot of brands, and the competition is intense," says Sunil Munshi, senior general manager, operations, at Orion Mall in Bengaluru, which houses several fast-fashion brands. "When a brand enters country, they generally follow the global prices. However, eventually they have to comply with local needs … [in order to] increase their customer base. As a mall developer, we also constantly keep checking the [prices], again with the primary focus on increasing footfalls."
Are private labels cannibalising fast-fashion brands?
Customers like Adiraju, with wardrobes that go through shorter replacement cycles, have found just the thing in private labels — of both online and brick-and-mortar brands — which may not have flaunt value but hit the sweet spot with their pricing and design.
Retailers push private labels for the simple reason: better profit margins.
Aditya Birla Fashion & Retail shut down the website of its e-commerce venture in December 2016, only to relaunch it in six months' time — but only with its private label ABOF.
"At a gross-margin profitability level, private brands lend more margins …," Govind Shrikhande, managing director of Shoppers Stop, told the Economic Times in an interview last year. "Private brands and exclusive brands alone clock margins of 45%-50%.” On a company level, the chain clocks gross margins of 33%, ET reported. Shoppers Stop's private labels including Stop, Life, Haute Curry, Vettorio Fratini, Elliza Donatein, and Kashish account for 11.5% of the company’s sales.
The growth and promise of private labels can be gleaned from the fact that the biggest retailing names in the world are investing big bucks in them. Walmart launched its private labels for apparel in February, starting from USD5. As of April, Amazon had 70 private-label brands, a majority in the apparel and fashion category.
In a market like India, where brand ownership matters little, fast-fashion brands with their exclusive brand names face a tough growth phase. With retail behemoths like Amazon and Walmart throwing their might behind their own labels, fast-fashion companies might be in for a long, hard pricing squeeze.
(An earlier version of the story stated that H&M India had declined comment. The company had, in fact, shared its financials for the story, though it declined our request for a detailed interview.)
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