D2C fashion and lifestyle market to touch $10 billion by FY28

Gen Z shoppers are becoming an important cohort for all e-commerce companies

The direct-to-consumer (D2C) fashion and lifestyle market is projected to become a $10 billion industry by FY28, up from $2.4 billion currently, according to a report jointly published by Bain & Company and TMRW, a house of brands within the Aditya Birla Group.

As an industry D2C fashion and lifestyle, or digital disruptor brands, is growing at an annual pace of 35 percent and is increasingly taking up market share at the cost of unbranded products.

The online fashion and lifestyle market, the size of which has grown from $4 billion in FY19 to $11 billion in FY23, can be broadly slotted into four categories: unbranded, national brands, private labels, and digital disruptors or D2C companies.

The unbranded category had a 54 percent market share in FY19, but has now reduced to 45 percent. As the share of unbranded fashion products reduced and the market became more organised, it helped in the growth of national brands (from 19 percent in FY19 to 22 percent in FY23) (example: Louis Phillipe), private labels (from 9 percent in FY19 to 12 percent in FY23) (example: Avaasa from Ajio) and D2C companies (from 18 percent in FY19 to 21 percent in FY23) (example: BlueStone), Radhika Sridharan, partner at Bain & Company told Moneycontrol.

Growth in the D2C category was primarily being driven by the Gen Z population who have a higher disposable income and are more willing to try new products from digital-first brands.

Gen Z shoppers are becoming an important cohort for all e-commerce companies, irrespective of size. While Flipkart launched Spoyl dedicated towards Gen Z, Myntra unveiled FWD that specifically targets users born between 1997 and 2012.

Bain’s Sridharan said that the Gen Z population was responsible for about 70 percent of the total sales in the D2C fashion and lifestyle category, and in about five years, that will increase to about 75 percent.

Currently, in the D2C fashion and lifestyle space, there are about 650 brands in the sub Rs 50 crore revenue range and that base is expected to jump to 1,500 by FY28, as the space matures. The Rs 50-100 crore revenue range is expected to house 140 brands by FY28, up from 40 currently.

Further, the report projected that there will be about 70 companies in the Rs 100-200 crore revenue mark by FY28, an increase from 15 brands at present. More importantly, while there are roughly 10 companies in the Rs 200 crore and above revenue bracket, Sridharan said the number would jump 5X to have 50 brands by FY28.

Even as companies grow, Prashanth Aluru, CEO and co-founder of TMRW told Moneycontrol that the space will continue to consolidate. About 95 percent of the D2C companies that get sold to larger players are distressed sales as they’re unable to scale operations, Moneycontrol had reported earlier.

“Several brands, particularly those generating revenue between Rs 100 crore and Rs 400 crore, face stagnation or high losses in their business…poor execution, inefficient marketing and lack of product discipline, has hampered profitability,” TMRW’s Aluru said.