The entry of national apparel retailers in the value fashion segment is likely to fuel a shift from unorganised to organised players.
Stating that value fashion is the fastest growing segment in the apparel sector, a report by Motilal Oswal Financial Services added that while the overall value apparel category is projected to report a 6 per cent CAGR over CY20-25, organised value apparel retail is expected to outperform the overall value category and post about 13 per cent CAGR during the same period.
This growth will be driven by factors such as increased disposable income, a favourable demographic profile with a large addressable market of millennial and Gen Z customers and urbanisation.
The value fashion segment targeted at budget-conscious consumers, which constitutes about 57 per cent of the overall apparel market is one of the fastest-growing segments. Post the success of Trent’s Zudio, the segment has seen entries of national retailers such as Yousta (Reliance Retail), Style-Up (ABFRL), and InTune (Shoppers Stop), it added.
“A huge opportunity beyond the metros and Tier 1 cites, driven by better demographics, higher incomes and better aspiration within the customers, has compelled several big players to enter a market that was previously dominated by regional and local operators,” the report noted.
It also added that regional retailers are facing intensive competition and a few of them are yet to recover to their pre-Covid levels due to the continuing weak consumption in the smaller tier cities.
The market size is substantial and customers’ preference for organised retail with a better shopping experience will drive growth. “However, with the ability of each deep-pocket player to expand their footprints in the next 3-5 years, the market may see a proliferation of store networks,” it added.
However, the report noted that national retailers will need to focus on operational efficiencies as store-level execution will be critical to ensure profitability in the value fashion category. “Design and inventory management remain key differentiators as evidenced by the recent performance of players such as Zudio and InTune, which focus on the youth category, whereas regional retailers emphasize value propositions and local preferences,” the report added.
“While the market presents tremendous opportunities, aggressive entry by national retailers could be a red flag. Conversely, we believe that if Reliance Yousta, Shoppers Stop’s InTune, V-Mart, and ABFRL can execute their plans properly, the growth potential is substantial from hereon,” the report pointed out.