The document discusses the Indian fashion brands and retail industry. It provides an introduction to the growing industry in India and discusses key drivers of demand like favorable demographics and changing consumer mindsets. Specific trends are also examined, like the evolution of mall culture and international brands that are contributing to changes in India's fashion ecology and retail environment. The industry is poised for continued high growth in the coming years.

1. INDIAN FASHION BRANDS AND
RETAIL INDUSTRY
Presented By:
Gaurav P Thakkar (Roll no. 17)
Glancy D’silva (Roll no. )
Jinesh Dedhia (Roll no. 1)
Viky Sangoi (Roll no. )

2. TOPICS TO BE DISCUSSED
 Introduction to industry
 Demand drivers and determinants.
 Overview of Arvind Limited
 Product Categories and its forecasting
 Brand Sale

3. INTRODUCTION
Fashion is serious business, everywhere. Admittedly, India
was a late comer in the scene, but the pace now is
scintillating. This is testified through the escalating figures
of the garment market as also by the growing tally of
fashion brands and retailers who have occupied
substantial share of the country’s retail space. Truly, the
clock cannot be turned back now. Over the past year, the
garment industry has been building up on its capacities at
various levels, expanding its product base, incorporating
innovative technology, and engineering newer avenues of
business. This sector, being one of the largest industrial
sectors of the country, is a major propellant of the
economy’s growth.

4. GROWTH OF INDIAN APPAREL INDUSTRY:
The industry has already given ample hint of ingenuity, as
is evident from the revival of consumer enthusiasm in the
seemingly stagnant menswear segment, besides
remarkable growth in categories like sportswear, casual
wear and party wear. The apparel market has grown
15.50% to INR 1,224 billion. There has been a rapid
increase in the market size of ready-to-wear clothing and
lifestyle apparel brands. With about 65% of these
consumers below 35 years of age, apparel retail can only
reign supreme in the marketplace.

5. RETAIL IN INDIA:
India has been ranked as the top retail destination globally
for retail investment attractiveness among 30 emerging
markets in the world. The Indian retail sector is the second
largest untapped market after China. Retail business
contributes around 11 percent of India‘s GDP. Retailing as
a sector is witnessing revolution in India. Retailing in India
is gradually becoming the next boom industry. Indian
Fashion Retail is poised for high growth with multiple short
and long term catalysts - revival in economic growth
leading to increase in disposable income, favorable
demographics, GST implementation and changing fashion
consumption trends. Wazir Advisors, a renowned sector
consultant expect fashion retail to grow at a Compound
Annual Growth Rate (CAGR) of 12.2% over next 10 years.

6. At present, it is amongst the fastest growing industry
segment and is also the second largest foreign exchange
earner for the country. The apparel industry accounts for
26% of all Indian exports. The Indian government has
targeted the apparel and textiles industry segments to
reach $50 billion by the year 2015. The growth of India's
retail sector is not only limited to urban areas but also
growing in rural areas. In the next five years, it is expected
that, India's retail industry will expand more than 80%.
Higher disposable income coupled with favorable
demographic changes (Increase in working women
population, rise in nuclear family, largest young population
and higher growth in urban and sub-urban population),
changes in consumer needs, attitudes and behavior, and
increased credit friendliness are some of the key growth
drivers for modern retail in India.

7. DEMAND OUTLOOK:
 According to Prof. Bober, “By demand we mean the
various quantities of a given commodity or service
which consumers would buy in one market in a
given period of time at various prices or at various
incomes or at various prices of related goods.”
 The demand for a commodity is its quantity which
consumers are able and willing to buy at various
prices during a given period of time. So, for a
commodity to have demand, the consumer must
possess willingness to buy it, the ability or means to
buy it, and it must be related to per unit of time i.e.
per day, per week, per month or per year.

8. DEMAND DETERMINANTS:
The demand of a product
is influenced by a
number of factors. An
organization should
properly understand the
relationship between the
demand and its each
determinant to analyze
and estimate the
individual and market
demand of a product.

9. FAVORABLE DEMOGRAPHICS:
 Indians amongst most fashion conscious people globally.
In a Neilson Global Luxury Brands survey conducted in
2008, India was the 3rd most brand conscious country
globally. We do believe the same holds true today across
all strata of society.
 Urban India’s demographics are quite favorable for
growth in fashion retail. Even without accounting for any
increase in urbanization, the current urban population in
age group 16–60, which consumes maximum fashion
products, will increase from 244mn to 285mn by 2020
and 293mn by 2025.
 Per capita spend of Urban India on fashion apparels is
much lower at USD 124 vs. China’s Urban consumption
of USD 206, let alone the comparison with US and
Europe.

11. UNIQUE CHARACTERISTICS:
Fashion products have very unique characteristics in amongst the consumer
products, which we believe will make the category the fastest growing. The
reasons for the same are;
 Fashion is very personal: Fashion Products, unlike most consumer products,
are very personal and hence, the consumer is less likely to downgrade its
consumption pattern. For eg. A man who wears Louis Philippe will never wear
Peter England.
 1st point of lifestyle up-gradation: Of all the B2C durable products, fashion
products are the most visible communicators of one’s status. Hence, whenever
there is an up-gradation in the consumer’s lifestyle, the 1st category they will
upgrade is fashion products either by way of variety or in terms of brand
premium or both.
 Lower end of discretionary spending: Fashion products are least costly in
B2C durable products category and hence, the marginal cost of any up-
gradation is the least compared to other discretionary B2C products viz.
electronics, automobiles, holidays, etc.
 Highest frequency of consumption after staples. In the B2C products
category, consumer would purchase electronic items and automobile once in 3
years, but would purchase a fashion product atleast once in 3-6 months period
of its last purchase.

13. TRENDS AND ECOLOGY:
The economic revival will add to the higher
disposable income. We expect higher share of this
disposable income to be spent on fashion products
due to
 Changes in consumption pattern across all strata of
society and
 Evolving ecology enticing consumer to a better
lifestyle. Apart from both these key factors, there
are many other soft factors which are adding to
towards consumption of fashion products.

15. CHANGING CONSUMER MINDSET:
India’s consumer base is widely distributed on the basis of socio-
economic standing and buying capacity. We categorize them as
Low Income Group (LIG), Mid Income Group (MIG) & High Income
Group (HIG). Each of these groups are constantly progressing up
the - ‘The Fashion Value Chain’.
 Readymade Garments: India’s first major transition into fashion
retail (in 1990s) was moving from stitched to readymade
apparels. This transition, which took over a generation,
strengthened the concept of branding in the fashion retail
industry. It also brought in the bulk manufacturing of garments
and aided huge investments in apparel manufacturing.
 Multiple Ownership: The next stage of the fashion retail
transition was evolved seen in 2000s, when with the high
economic growth came a phase of higher disposable income and
hence, higher spending. People not only spent on branded
products but also started owning multiple products in the same
product category. Footwear, watches and accessories are
categories are the biggest beneficiaries of this transition.

16.  Brand Up-gradation: Higher economic growth and
higher disposable income also led to upgrade in the
lifestyle, which led to up gradation to premium brands. In
this stage volumes remain more or less intact, but there
is a sharp increase in the price one pays for. This leads
to change to increase in the value spent on fashion
products, with volume remains more or less intact.
 Seasonal Fashion: India is still at a very promising stage
of this transition, wherein a change in the seasonal
fashion leads to higher churn in the consumers’
wardrobe. This stage affects both volume and value as
the churn of fashion consumption increases.

18. EVOLVING ECOLOGY:
The change in consumer mindset is changing the ecology
and vice versa. The key factors contributing to the change
in fashion retail ecology are:
 Mall Culture: The 1st positive change in the fashion retail
ecology was advent of malls and organized retail in India.
Malls changed the shopping experience of an Indian, which
led to a friends and family outing destination. Although mall
culture and organized retail do not really lead to consumption
growth, it enhances the shopping experience, making it more
organized and less tedious.
 Changing lifestyles: Media, social media and even cinema
has had a huge influence on ones lifestyle leading to change
in consumption pattern. Increase in travelling and outings has
led to increase in consumption of fashion products, which is
further augmented by higher fashion awareness and peer
pressure. For eg. Higher outings has led to higher ownership
of dresses, shoes, watches, etc.

19.  International Brands: International brands are entering
India, which is adding to the evolving ecology of fashion.
These new brands are bringing in global fashion products,
creating trends and awareness through media campaigns,
creating huge awareness and acceptance of fashion
products not only in super metros but also in tier-2 towns.
We believe the fashion awareness and industry will only
grow from here, as was seen in mid-2000s when these
brands had entered China.
 E-Commerce: Fashion brands and products are a
prominent part of the evolvement of E-commerce in India.
After electronics, fashion products have found highest
acceptance in the E-commerce medium. Again, as e-
commerce is evolving, it is contributing hugely to the
fashion industry in terms newer brands, newer products,
newer trends, newer experience and most important
newer reach and penetration. Through E-commerce,
brands can reach wider consumer base as there no
location constraints.

20. GDP SSG ROCES (RETURN ON
CAPITAL EMPLOYED)
 High co-relation between GDP and SSG trend: Same Store-Sales-Growth
(SSG) is a better indicator of consumption driven growth as it shows growth
on like-to-like basis and does not consider growth through network expansion.
As a result SSG in fashion retail has strong linkage and trend co-relation with
India’s GDP growth, clearly depicting the impact of economic revival on
consumption. As seen in the exhibit below, the SSG of Shoppers Stop,
Westside and FLFL, rose to double digit as India’s GDP grew above 6%.
Even in FY14, when GDP growth saw marginal revival, the SSG saw an
uptick.
 Higher SSG leads to much higher RoCE: Higher SSG mainly means that
the investments already incurred churn higher revenue and growth. Retail
business is highly fixed cost driven leading to high operating leverage. Hence,
any growth in topline leads to much higher growth in EBITDA. Also, since
working capital cost is constant in nature, higher profitability translates into
higher operating cash inflows as well. Finally, with capital employed remaining
constant on like to like basis, higher EBITDA leads to higher RoCEs.

22. ARVIND LIMITED
 Incorporated in 1931, Arvind Ltd. (ARVND) is part of one of the oldest
business houses, Lalbhai Group, in India with leading presence in
textiles. The company is led by Mr. Sanjay Lalbhai, 3rd generation of
family, along with his sons Punit and Kulin. Promoters held 43.5%
stake in the company as on June 2014.
 The company broadly has three large business segments – textiles,
fashion brands and fashion retail. Textiles is the largest segment,
contributing 68% to the topline in FY14, while brands and retail
contributed 28%. The balance came from company’s other initiatives
comprising of real estate.
 Company aspires to be a brand power house in India clogging
revenue of Rs 180bn by FY19, with share of brands and retail
increasing substantially.
 The brand and retail business are managed as different business
units altogether, head-quartered at different locations. Mr. J Suresh
heads the Arvind Lifestyle Brands Ltd. He is an MBA from IIM
Bangalore with over 30 years of experience in the FMCG, Lifestyle
Brands & Retail industries. Prior to joining ARVIND in 2005, he has
worked in HUL for 18 years.

24.  Expansion across textile value chain: Arvind Ltd.
(ARVND) is an integrated textile manufacturer with
presence across the value chain from fabrics, woven's
and garmenting. It is the largest manufacturer of denim
fabric in India. It has also diversified into woven, where it
manufactures shirting fabrics mainly for domestic market
and into garmenting wherein it manufactures readymade
garments for top global brands. The overall textile
vertical is doing well leading to expansion in capacities,
which will see commencement of operations from
H2FY15E onwards.
 Brand portfolio to start paying: ARVIND has a strong
fashion brand portfolio of 30 brands, of which 17 are
licensed mainly from US, which caters to premium-to-
luxury segments across the gender and age groups.
The segment currently is at high investment stage
leading to lower profitability and RoCE. Going forward,
we believe this segment will be the core contributor to
company’s growth and profitability.

25.  Transformation of Mega-Mart: ARVIND had
entered into multi-brand retail format, Mega Mart, in
1995 positioned as a 365-day discount store for its
brands. In 2012, company transformed and
repositioned the format into a value store, wherein
its value brands (mainly owned) are sold. The
company restructures its non-performing stores by
either downsizing it or right sizing it, which will be
completed by FY15.
 Other initiatives to aid growth: ARVIND has
ventured into newer areas with minimalist
investments viz. joint development of legacy land
bank, specialty retail chains and e-commerce.
Company recently launched customized clothing
concept on online platform under brand ‘Creyate’.

26. PRODUCT CATEGORIES

28. ARVIND entered the multi-brand retail format in 1995 under Mega Mart brand
mainly to monetise its unsold inventory by providing discounts.
 Arvind has presence into two retail formats – exclusive brand outlets
(EBOs) for its brand portfolio and multi-brand departmental store under
Mega Mart brand, which it entered in 1995.
 While the former is part of the brand business, latter is where the true
fashion retail focus lies. Mega Mart was initially launched as a discount
store with the mindset of monetising the unsold inventory of the brands.
 Mega Mart has seen huge growth deterioration with SSGs in FY14.
Company has implemented three-pronged strategy to revive the same;
1) trim down the loss making stores through closures or downsizing the
area 2) re-position Mega Mart from a discount store to a value store
wherein value brands are sold and 3) right-size and re-furbish some
key stores
 Company has shut down nearly 75 Mega Mart stores over the last 2-3
years and plans to further consolidate. Going forward, the plan is to
relaunch 25 stores for which it intends to spend Rs 300 mn. The whole
restructuring is expected to be competed by FY15E
 Mega Mart has 12 value brands sold through the store, of which some
of the key brands are Excalibur, Ruggers, New Port, Cherokee,
Geoffrey Beene, etc.