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May, 01 2009

Apparel biz on upswing : From basic to an opportunity

Be they adults or five-year-olds, each has a desire to look and feel good and live up to the saying `clothe maketh a man`. This feel-good factor has been driving the growth of the apparel industry even in these tough times as consumers and well as retaile

With the global economy yet to recover from the ongoing slowdown, consumer`s buying habits are undergoing a change the worldover. Only basic necessities now form a major chunk of the wallet share. Of these, one basic necessity is apparel.

Though apparel sounds like a basic necessity which one buys for a basic purpose, however, that`s not how today`s consumers and retailers perceive it. There is an opportunity which can be found to solve the clothing requirements of the nation. Apparel now boasts of trends which are set every season by fashionistas and designers.

Apparel industry by and large remains to be the largest foreign exchange earner for India. Apparel industry touches the lives of millions of people by its products and by employment. Talking about apparel sector`s role in India`s exports, Chetan Bijesure, Team Leader, Manufacturing and, Deputy Director, WTO, FTA and Foreign Trade, FICCI, New Delhi says, “Apparel contributes around 8 to 9 per cent of India`s exports. The sector provides employment to over 6 million people in the country out of which 38 per cent are women. It is the second largest employer after agriculture in the country. The size of the domestic apparel market is estimated at around $1800 crore.”

With a multitude of layers this dynamic and ever changing industry is not everyone`s cup of tea where a brand takes years of research and planning to make its mark in the society. Though, these at the end of the day have to reach out to the masses to earn the bread and butter with the means of sales. This is where franchising makes its presence felt.

From the past 10 years when franchising started making its mark on the Indian terrain to the last five years the time from when modern retailing has started spreading its wings in India, apparel franchising has made giant strides benefiting both sections.

Retailing which was earlier regarded as just the selling of product to the consumer has taken a shape of giving an experience to the customer where he or she enjoys each and every aspect of it whether it is the display of clothes or the variety of clothes to the extra care a sales person puts in to make the buyer feel comfortable.

Franchising today has not been restricted to product only where the franchisor, franchisee transact the product but the Indian franchisor has transcended limits to include into fold training and orientation of franchisee and his team in maneuvering incredibly successful sales and imprinting brand name in the minds of customers, through franchise outlet, who surrogates the face of the brand. Though apparel industry largely remains to be product driven it actually conveys a message of the brand, its perspective and experience which it brings along.

Apparel categories

Though menswear has held a special place amongst apparel retailers from the start, women and kids wear are gaining momentum as the untapped market and an industry with a lot of potential. Most of the organised retailers picked up men`s clothing section, but a great deal of women`s and kids wear sections lay in hands of unorganized sector. However, now-a-days, many apparel makers are eyeing a share of this bigger pie with companies focusing entirely on women`s wear or kids wear, and menswear makers too launching special lines of women and kids wear. There is lot of specialization coming up in ethnic and western clothing, in both men`s wear and women`s wear sections

Not small anymore – kids wear

A major segment in the apparel industry is held by kidswear, which accounts for a market size of Rs 13,000 crore. Growing at a rate of 15-20 per cent per annum the segment is being ruled in India by leading names like Lilliput, Gini & Jony, Catmoss, Li`l Tomatoes and Ruff Kids.

Earlier in India, the trend was that most of the people preferred buying functional kids` apparel rather than branded ones. Children`s garments were usually purchased from small stores and from street shops, while branded garments were only bought by the elite section of the society. Over the years there has been a gradual surge in this trend; the branded Kidswear industry has grown and is now a more evolved market.

What is driving the growth in this market is the increasing number of dual income families where both parents are working and have high disposable income and are ready to splurge on branded fashionable clothes for their kids. Industry experts believe the market has a potential to grow to a further Rs 45,000 crore by 2013 out of which branded kids wear is expected to be of Rs 20,00 crore. So, there is a huge market share to be captured. But the market is not the domain of Indian kidswear makers only. International players have also started eyeing this growing market.

Considering the entry of many international players in the Indian domain, Indian companies are enjoying a fair share of the global market per se. Target markets for Indian kids wear makers are Gulf, Egypt and China.

Kidswear major Gini & Jony exports has presence in Saudi Arabia and UAE and is on a look out for international tie ups.

Catmoss is also planning to make an international foray in the coming season. It has a total of 150 EBOs with a judicious mix of 78 company-owned and 72 franchised outlets. The company crossed a turnover of Rs 70 crore in the last financial year.

Lilliput Kidswear Ltd, incorporated in 1991 has a large number of, say, 210 stores in India, besides its presence in China, Middle East, Kingdom of Saudi Arabia and Egypt clocking a turnover of Rs 300 crores. Lilliput has two collections to offer in a year namely, Spring-Summer and Autumn-Winter collections. It has a set up of six manufacturing units with 5500 machines producing 1 million units per month. Lilliput exports its range to the likes of Carter`s, GAP, Next, Macy`s etc.

D. S. Corporation, the flagship company of Dearson group of companies engaged in manufacturing of garments since last 28 years ventured in the field of casuals in 1995 under the Brand label of "Ruff". The company has created stores with concepts such as Water Melon (an in house hair styling saloon), Kids Flix (a mini theater) to keep the customers entertained. Apart from being available in 16 Brand stores, Ruff is also available at 250 plus Multi brand outlets, more than 70 large format store and Retail chains across India. Internationally, the company has presence in U.A.E, Kuwait, Qatar, Jordan and Tanzania.

Talking about the sea change the market has undergone Riaz Patca, CEO, Ruff Kids, says “Today, Indian kids wear is not just about grading the men`s wear clothing into smaller sizes and it`s also not about making “Baba-suits” only. Kids have a mind of their own and they decide the best for themselves.”

Talking about emerging brand Toon Kidz`s presence abroad, Venkat RV, MD, Toon Kidz says, “In the Gulf, we have our presence in 85 LFS formats and three EBOs are coming up soon. We will also have presence through six EBOs getting launched in Egypt.”

ToonKidz is promoted by AR Knit Process & NF Retail. It is an umbrella store of most popular global animation characters merchandise, for example Popeye, Ben10, Bob the Builder, Powerpuff Girls, Marvel Heroes from popular global TV channels like Cartoon Network, Pogo and Spacetoons.

Urban 10, a brand promoting kids wear for ages 1 to 14 years was established a year ago by a 200 crore consortium with diversified business interests in garment exports, BPO, real estate and food retailing. A wide range of almost 200 styles in different sizes is launched every two months to provide freshness to the stores. The brand has 120 points of sale – both in large formats (like Bharti Walmart and Chunmun) and MBOs, and is planning to come up with 80 outlets in the next five years which would be both, company owned and franchised.

Increasing focus on women-wear market

In India, men`s apparel market is larger than women`s wear market. And then, growing number of working women, information from electronic and other media channels, economic empowerment, changing fashion trends have all given a new dimension to women`s wear industry in India. Lack of organized players in women`s wear sector has given way to apparel brands eyeing a bigger share of this untapped market.

In year, 2007, this market reached at more than Rs 37,000 crore. A recent report by RNCOS estimates the market to increase at a CAGR of over 17 per cent, and is expected to cross Rs. 61,000 crore by 2010.

Chhabra 555 is the most leading name in women ethnic wear offering a wide range of women`s wear, comprising lehanga, sareers and suits starting from casual wear to wedding wear. Every season, a new collection is introduced which is four times in a year. Jagdeep Chhabra, Director, Chhabra 555 counts locations and manpower as the two important aspects for the success of an apparel store.

Femella Fashions, women wear garment brand from the house of Ritesh Properties and Industries Ltd. (RPIL) started operations in 2008 and operates seven stores at present. It plans to have 50 stores by the end of 2009 and keep on growing. The long-term plan is to have 500 stores in the coming five years which would be a mix of company owned and franchisee stores.

Another brand from Kolkata, Fashion &I is an emerging retailer of women`s wear. Today Fashion &I has 19 stores across 12 cities such as Mumbai, Delhi, Kolkata Hyderabad, Jaipur, Indore, Surat, Varanasi, Lucknow, Faridabad, Noida and Guwahati.

Making shopping not just limited to procurement but a complete experience; FI - Fashion & I constantly unlocks innovative and fresh boulevards for the woman shopper across the country. The company sources its raw materials and fabrics from all over the world to produce 20000 pcs per month.

Besides ethnic wear, many players are eyeing western wear segment. Demand for western apparel brands is increasing because of the growth in disposable income of Indian populace. Of late, we have witnessed a marked change in demographic trend and higher income levels coupled with the increasing number of dual-income nucleus families, that has fuelled the rage. A lot of menswear apparel retailers are eyeing the women wear industry owing to the higher returns it offers.

Jain Amar Clothing forayed into women`s western wear in late 80s and by 1993 it started manufacturing women`s western wear under the brand name `Madame`. Currently Madame enjoys a market share of 5 per cent. Madame started franchising its stores right after the success of its flagship store in Mumbai in 2002. Presently, it has 51 stores all over the country which are a mix of company owned and franchisee owned. The company plans to hit 200 exclusive stores by the year 2012, which again will be a mix of company owned and franchisee owned in the ratio of 53:47.

Menswear – The apple of the eye

Menswear segment remains to be the favourite amongst apparel makers. Starting from Raymond`s and Madura Garments to S Kumars and Arvind, and likes of Provogue, who hold the crown in men`s apparel, all are vying to outdo others. In menswear segment, there are sections like readymade apparel and fabric manufacturers. In readymade, one sees a vast variety of formals, semi-formals and casuals. Apart from these, a horde of companies are producing ethnic wears for men.

Targeting Indian middle class where they shop as a family, Koutons Retail India offers a wide range of apparel designs suited for all segments including corporate, formal and casual dressings for men, women and children. Koutons garments are available in both large and small city malls and high streets.

Koutons the flagship brand has under its wings, Charlie Outlaw for men, Les Femme for the modern and vibrant women, Koutons Junior for the young and energetic children, K2One for shoes, leather jackets and accessories, Patent Club and Feel Me. The total turnover of Koutons till 30 December, 08 was Rs 669 crore.

DPS Kohli, Chairman, Koutons Retail India informs, “The changing retail industry landscape, coupled with rising purchasing power and increasing influence of western culture, is giving a new meaning to the domestic apparel market of India. The emergence of middle class, growing young population and rapid globalization of culture is fuelling the demand for branded apparel in the country. This is attracting the foreign and domestic players to tap the rising demand of branded segment products.”

Koutons has a manufacturing capacity of 80 lakh pieces approximately per annum (cost around Rs 4 crore), and finishing capacity of 80 lakh pieces approximately per annum(cost around Rs 4 crore) with 18 in-house manufacturing / finishing units and 14 warehouses spread across Gurgaon. Koutons has more than 1400 stores in India out of which 1341 are franchised outlets. To expand further, it targets all the state capitals and districts of the states.

S Kumars Nationwide, premium brands, Reid & Taylor and Belmonte operate on a franchise mode. Talking about the factors fuelling the demand for apparel Tarun Joshi, CEO, Brandhouse Retail, (a subsidiary of S Kumars Nationwide) informs, “The emergence of youth (70 per cent of our population is under 35 years) who is exposed to international fashion, thanks to TV, along with the emergence of organized retailing has been critical in fuelling this demand.” S Kumars` expansion plans are very bullish as it plans to grow using both, company managed as well as franchisee stores.

The another important player in the fray is Donear, who has been in men`s apparels since one and a half year. Donear operates 142 stores, of which 95 per cent are run by franchisees. Donear is targeting high streets instead of malls, and is looking for franchisees who have their own retail space.

Then, there is Royal Classic Group (RCG). They began in 1991 as an exporter and gradually grew into a Rs 425 crore textile giant with two brands under wings. In February 2001, the company launched its maiden T-shirt brand Classic Polo, making its foray into the domestic market. RCG acquired Smash, another T-shirt brand, in 2004 and launched its exclusive premium men`s intimate wear under the brand name Smash in 2005. Although, Classic Polo is primarily a T-shirt brand, it also offers a complete lifestyle wardrobe like exclusive T-shirts, shirts, trousers, etc. Presently Classic Polo is retailed through 3500 MBOs, 63 exclusive branded outlets in India and one store in Singapore. The company`s store count in south would reach 100 by December 2009.

And then Turtle, started producing a meager quantity of 20 shirts a day. Today, it offers tailored super premium formals. Turtle has EBOs called `Turtle World` spread across the country. In franchising since 2000, it has at present 32 EBOs, and plans to have 24 stores by the end of the year. The company is presently exporting to the Middle East market. Its products are currently available in Dubai, Muscat, Kuwait, Bahrain, Saudi Arabia and Fiji Islands.

In mass segment another prominent name is Cantabil, the fashion-and-lifestyle label from the house of Cantabil International. The brand was launched in the year 2000, with a collection of only formal and semi formal shirts and trousers for men. Subsequently, the brand expanded its portfolio to casuals and smart casuals not only for men, but also for the diverse segments of women and children.

Founded and run by Wharton MBA graduates, Cornerstone runs 20 stores at present, offering menswear range. The company follows a unique zero stock model, which means no stock inventory in the stores which are the single most expensive unit items driving up the cost in conventional retail. Being the first brand in India to offer 11 sizes in shirts and 14 sizes in trousers including in-between sizes, Cornerstone aims to provide the perfect fit to its customers.

Denim label Numero Uno, was incorporated in 1987 by Hi Fashion Clothing Company. Numero Uno started by primarily manufacturing jeans for men, slowly moved into jeans for women, is eventually designing and manufacturing complete wardrobes for men and women. Numero Uno is aiming to open 200 stores within the next two years. Currently the company has 116 exclusive stores across India. Apart from its existing domestic operations, the brand is seriously looking at licensing arrangements in international markets.

Franchising carries an edge

Operating through exclusive stores gives brand identity to any company which is crucial to its success. Moreover, each exclusive store gives brand visibility. This task is easily achieved via franchise as this provides easy access to prime real estate. The store entrepreneur takes care of key issues like manpower, day-to-day running and store functioning.

While comparing the traditional mode of expansion with franchising model, Nawalgaria says, “Complete support in terms of product, marketing activities, training is received which was never a part of traditional modules. You can take active part with the brand to establish the brand image and expand the brand`s visual impact on consumers.”

Fashion & I, assists its franchisees both, with pre-opening and post-opening launch support by giving comprehensive turn-key assistance - from site selection to setup and start operations, layout and design; architectural support, pre-opening purchasing assistance and organising launch promo. A comprehensive training is provided to all the franchisees on store operations, accounting, inventory control etc., which is followed by field support in operations and advertising. Out of its 19 stores operational six are franchised. It plans to have 20 more stores this year.

Ramesh Keni, spokesperson, Royal Classic Group, on following the franchise model says, “In apparel industry franchising is the rule of the game, majority of customers are expecting a special ambience and treatment when they come to the store and are willing to take that extra efforts, and it is going to be the future.” Further, he informs, currently, the ratio between franchise vs company owned stores in Royal Classic Group is 40:60, which they gradually plan to increase by 20 to 30% (franchise outlets), by this year end. Moving forward, the company plans to encourage only franchise formats which is more challenging and mutually advantageous. RCG has plans to reach 100 store mark by march 2010.

Finding franchising, a lucrative option, Narula believes, “Franchising helps a company to get good locations, regional insights and financial partners taking care of operational expenses and other overheads through a franchise deal. Also, if one appoints franchisees who own the property of the store location, the company is relieved from the burden of rentals.” Lilliput`s first franchise store was opened in the year 2004. The company is eyeing Tier II & III cities apart from metros and other major cities.

Apparel rage catches in tier-2 towns

Apparel wear has seen a significant growth not only in the metros but in smaller towns as well where the majority of distribution is through franchise arrangement. Accelerating demand levels from tier-2 towns has led the entry of apparel makers towards these towns. In order to serve the consumers better by localizing their offerings companies have been driving the growth in these towns through franchise operations.

Many of the apparel companies leverage their brand names by exploring franchising as a quicker and low cost way to increase market presence. Though in franchising what makes a major difference for a franchisee while selecting a franchise are the product offerings.

Apparel is basically a product distribution format of franchising where the manufacturer retails his products through company-owned and franchised outlets. In spreading the footprint of organized retailing in tier-2 towns franchising is playing a major role.

The readymade garment market in rural areas is growing at a rate of 16.4 per cent annually. Given that shift Cornerstone wishes to expose its brand to these sectors.

India becoming hub for international apparel players

In the rapidly increasing retail sector, apparel is the second largest category in India accounting for around 10 per cent of US$ 3700 crore Indian retail market. Experts estimate it to increase further by 12-15 per cent. Acknowledging the interest of apparel retailers which forms a huge chunk of international apparel brands AT Kearney`s `Retail Apparel Index` ranks India as the third most attractive market for apparel retailers.

World`s leading apparel brands Hugo Boss, Diesel, etc have already stepped in India giving the required impetus to Indian apparel industry.

This growth is further fuelled by a growing number of young Indians, higher disposable income and growth in organized retail. Even consumer spending on apparel in India has grown over the last five years, touching the global benchmark of 5 per cent of the total income, according to consultancy firm McKinsey.

Indian companies forming partnership with apparel giants of the world is another major phenomenon for the entry of international apparel retailers. Last year, we have seen almost every major luxury and fashion brand entering India with the opening of luxury malls like Emporio Mall and UB City at New Delhi and Bangalore respectively.

In last one decade, there has been a very high awareness amongst Indians in terms of fashion and clothing in general due to facts, such as high disposable incomes, business and leisure trips abroad and therefore change in attitude in terms of spending.

Indian Boss Hugo Boss started its first franchising store by Bin Hendi Fashions in the year 2003, in New Delhi. At present it retails from its exclusive stores run by Bin Hendi Fashions located in three metros across India, viz., Bangalore, Mumbai and Delhi. Talking about the buying behaviour and customer offerings, spokesperson, Hugo Boss informs, “We know our customers very well and hence our buying is done in such a way that it follows international standards and brand guidelines, at the same time that suit varied tastes of our customers.”

S Kumar`s Brandhouse Retail also brought international labels from the house of Dunhill, Escada and Stephen Brothers. Ranging between an area of 1,000-3,000 sq. ft. all these super premium and luxury stores are company managed.

Another premium apparel brand from Germany is Lerros. Lerros comes out with 12 collections in a year for both men and women, so our window will change every month exhibiting the new range. Talking about the present stores of the brand run on a franchise model, S. Ramprasad, CEO, Lerros India says, “Presently, we have six exclusive outlets, all run by franchisees. The focus of Lerros is on delivering an international experience. We have collaborated with partners who share our understanding about the Indian consumer and will help us deliver high quality experience to the customer in all possible ways.”

Lerros plans to have 100 outlets in the next five years and will continue to adopt the franchise model for its operations.

Apparel market facing heat of minimum guarantee fad

Due to the peculiarities of the Indian real estate market minimum guarantee has come to the fray. Many of the brands prefer minimum guarantee whether it is an upcoming brand trying to attract franchisees or a well known trying to cash in on premium real estate. The industry still has to reach a level where both parties undertake their fair share of risks to make it turn into a business format franchising.

Commenting on granting minimum guarantee to the franchisee, Vijay Bansal, MD, Cantabil International says, “We provide minimum guarantee as it ensures returns to franchisees. The risk is covered due to MG.”

Koutons` minimum guaranteed payments to franchisees cover lease rentals, employee costs, and other establishment costs apart from incentives on sales.

Toon Kidz`s franchise project comes with minimum guaranteed returns at 18 per cent on the setup investments along with the complete monthly overheads.

The core strength of the brand and the parent company are most important factors before opting for a franchise. Secondly, the USP of the brand and its market share and what the minimum guaranteed business is assured by the brand against the investments made is equally vital facto, as the association is purely a business tie-up; therefore ROI is crucial.

Next to these essential commercial factors (investments and earnings), the support facilities from the company, like supply chain management, merchandise in tune with the season and competition, stock refreshment as per industry standards, quality uncompromised, price worth the product, past performance of the company and of course, the goodwill of the company constitute the key ingredients before opting for any apparel franchisee. In total, the brand, company, sale, corporate culture, service, mission and vision and the goodwill are the deciding factors.

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