Retail giants like Reliance Retail and Aditya Birla Fashion and Retail (ABFRL) are trying to catch a bus they have missed in the past – India’s Rs. 1.5 lakh crore ethnic wear market.
The success of brands such as W, Aurelia, Fab India and Biba in a market thought to be unorganised and impenetrable seems to have inspired Reliance Retail and Aditya Birla Fashion to venture into ethnic wear.
Reliance Retail last week said it would introduce an ethnic wear brand called Avantra and launch a chain of stores to sell its wares, the first of which will open in Bengaluru.
Aditya Birla Fashion, known for its Western wear brands like Louis Philippe, Van Heusen, Allen Solly and Peter England, is testing the market as well. In January, the company acquired a majority stake in designer label Sabyasachi and a month later bought a 33 percent stake in another designer label Tarun Tahiliani. Both the brands are eponymous with their designers.
“Ethnic wear is a clear focus area of the company. Ethnic is the largest segment in the fashion and apparel sector with a significant profit pool,” Kumar Mangalam Birla, chairman of Aditya Birla Fashion, told shareholders at the company’s annual general meeting in September.
“It is also a sector that has strong resilience to apparel cycle fluctuations and is least impacted by competition from global brands,” he added.
The Tata Group’s Titan Company, too, is betting on the segment with its ethnic wear brand Taneira. Although the company introduced Taneira stores in 2018, its plans to expand were interrupted by the pandemic. Now, Titan Company is giving a renewed push to this range.
Titan operates 14-16 Taneira stores and plans to add 10-15 more this year, the company’s Chief Financial Officer (CFO) Ashok Sonthalia told Moneycontrol in a recent conversation. The company, which initially introduced saris, has also launched lehengas and other ethnic wear products.
The three companies are positioning their brands in different price segments. Taneira, Tarun Tahiliani and Sabyasachi are placed in the premium to the luxury segment, and Reliance Retail will be targeting the economy category. Reliance Retail already offers an ethnic range under its lifestyle retail chain Trends; with Avantra, it is vying for a piece of the mid-premium ethnic wear category.
The ethnic wear or traditional Indian wear category consists of outfits such as sarees, salwar-suits, lehenga-choli, kurta-pajamas, dhotis etc.
The ethnic story
Although a large market in India, ethnic wear so far has been considered tough to crack by most companies, given its unorganised nature. The emergence of a few Rs 1,000 crore brands such as Biba, W and Fab India, made the retail biggies realise its potential.
“The ethnic wear was almost like a blind spot for these big companies for a long time,” said Ankur Bisen, Senior Vice President of the retail and consumer products division at management consulting firm Technopak.
“It was out in the open and they never pursued it till the time homegrown brands suddenly became big and proved the potential of the market. They proved it can be organised, it can be branded and there can be a good customer loyalty around it,’ he added.
The market
According to estimates, the market for ethnic, men’s and women’s, is valued at about Rs 1.5 lakh crore. Experts say the organised category is valued at Rs 17,000-18,000 crore. In the organised segment, about 40 percent of market belongs to brands in the value segment, 30 percent is commanded by premium brands and 30 percent by luxury brands.
To be sure, the Covid-19 outbreak interrupted its progress, albeit momentarily.
“The organised part of ethnic wear market was growing at 20-25 percent between 2015 and 2019. But in 2020 it was hit badly by COVID-19 and declined by 30-35 percent. However, we expect it to bounce back and grow by 20 percent in the next four-five years,” said Siddharth Jain, a partner at consulting firm Kearney’s India unit.
Growth is being fuelled by the increasing presence of designer wear in the luxury segment, which was growing 40 percent year-on-year in the pre-pandemic times, Jain said.
At the other end of the value segment, growth is being stoked by the migration of buyers from the unorganised to organised retail in the tier II to tier IV markets and also by the rapid proliferation of e-commerce-only labels, he added.
Although a promising segment, the ethnic wear market also confronts several challenges which the retailers need to address to succeed in their recent bets. For one thing, the supply chain for ethnic wear in India is highly fragmented and the large share unorganised entities command does not make the market an easy one to ace.
“Competition is unorganised play which has advantages on tax and cost structure,” said Jain, noting also the need for high working capital on account of inventory.
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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