ECONOMICS ASSIGNMENT

ON
“MARKET STUDY OF INDIAN RETAIL
APPAREAL INDUSTRY”
(SECTION-A)

Amolika Chaurasia 19BSP0317

Muskan Bagadia 19BSP1633
Dharam Lapsia 19BSP0820
Saloni Agrawal 19BSP2410
Mahek Katariya 19BSP1451
Subham Agrawal 19BSP2902
Kanchan Rathod 19BSP1233
India’s Fashion & Retail Sector: An
Overview
The Indian Fashion Retail Market is poised for great growth. According to Technopak
Research, the Indian Retail Market was estimated to be worth Rs 53,06,400 crore
(US$ 792 billion) in 2018 and is expected to reach Rs 1,50,68,300 crore (US$ 2,249
billion) by 2028, growing at a Compound Annual Growth Rate (CAGR) of 11 percent.
It is envisaged that the current fashion retail market worth Rs 3,61,160 crore (US$ 54
billion) will grow at a promising CAGR of 8.1 percent for next ten years to reach Rs
7,88,532 crore (US$ 118 billion) by 2028.
The Indian fashion retail market, which is the second largest contributor in the retail
industry after food and grocery, has been witness to major disruptions in the past
one decade. The entry of international brands, a large and young consuming
population in the country, deeper penetration of the Internet, mass media and the
social media, changes in this population’s preferences from non-branded to branded
apparel, and a fast-growing economy leading to increased disposable income has
converted India into a highly lucrative market.
1.Market structure of retail apparel
industry
The retail apparel industry is comprised of thousands of different brands and
companies. However, each is defined by its quality of make and materials used.
Abercrombie & Fitch, Timberland, and Guess are all well-known and respected brand
names. However, if prices were to exceed what people are willing to pay, then the
consumers would alter their preferences and buy from another brand. Therefore, we
are dealing with a monopolistic competition. Monopolistic competition is often defined
as: a common form of industry structure characterized by a large number of firms,
none of which can influence market price by virtue of size alone. Lately the retail
industry has been using celebrity endorsement as an effective way to increase sales.

2.Firms in the retail apparel industry

3.Dominant players
Brands like Benetton, Zodiac, Z3, Zara, Vero Moda, Calvin Klein, Diesel and
Tommy Hilfiger have experienced good sales growth in the country, while
names like Zara, Armani, Forever21 or Uniqlo appeal to the Indian audiences,
attracting higher per square foot sales compared to the departmental or
hypermarket stores.

On the other hand, Indian companies like the Arvind group, Madura Fashion
and Lifestyle, Raymond Apparel, Trent Retail, Reliance Retail and Future
Group has launched their own fashion labels.

Market Annual Company

value revenue type
Company name:

Aditya Birla Fashion 3 billion 400 million

Public
and Retail dollars dollars

1.7 billion 1.1 billion

Vardhman Group Public
dollars dollars

1.6 billion 850 million

Arvind Limited Public
dollar dollars

1 billion 800 million

Raymond Limited Public
dollar dollars
4.Role of advertisement in the retail
apparel industry
Advertisements play a crucial role in promoting a brand and creating its awareness
amongst the masses in the retail apparel industry. Promoting a brand is more
important than opening a store. It is essential to create brand awareness for the
customers to know about the brand’s existence. The retailer must strive hard to
communicate the USPs (Unique selling Proposition) of the brand to influence the
buying behaviour of the customers. In simpler words, advertisements help the end-
users to know to which brand a particular product belongs.
Key role of advertising in retail apparel are:

 The retailer through various ways of advertising strives hard to promote his
brand amongst the masses for them to visit the store more often.
 Advertisements attract the customers into the store. They act as a catalyst in
bringing the customers to the stores.
5.Entry/exit in retail apparel industry
Entry
In the retail fashion industry, competition is getting more and more intensive due to
reducing quotas of tariff and increasing reliance on imports. International apparel
retailers are regarded to be one of the key drivers of globalization via global
sourcing. On the other hands, Inditex, the parent company of Zara, is one of most
successful fashion retailers in the clothing industry.
Threat of entry: Threat of entry to the apparel industry is low. But the economies of
scale in production has significant impact on the entrant. It forces the entrants either
to accept cost disadvantage or produce in a large scale. On the other hand, brand
identification and production differentiation plays the significant role, because brand
identification creates a barrier to entry.

Exit
There is a one-time exit cost of these brands because whenever they exit a business
in retail, they have retail stores, inventory and other things which need to be written
off.

6.Market share of retail apparel

industry
Case study- ZARA

Introduction
Zara is one of the largest international fashion companies. It belongs to Inditex, one of
the world’s largest distribution groups. It has overtaken Gap as the largest apparel
retailer in the world. The main competitive advantage of Zara is its quick response to
the customer fashion trends and producing clothes often with short life spans and
Zara’s mission mainly focuses on domestic manufacturing. Zara is an international
fashion retailer which has gained considerable acclaim, being one of the leaders of
the high-street fashion industry, and regularly producing new products for the market,
at a rate that is quicker than its competitors can achieve, due to the strong supply
chain in place.
ZARA’s market entry strategy
"The most important thing for Zara to enter a new market is the existence of potential
customers: People sensible to fashion phenomenon”.
ZARA’s entrance on international market has been undertaken through three entry
modes: Own subsidiaries, Franchising and Joint ventures.
•Own subsidiaries: This direct investment strategy is the most expensive mode of
entry and involves high levels of control and risk in case the firm exits the market. Zara
has adopted this strategy for most European and South American countries that were
perceived to have high growth potential and low business risk (Flavian and Polo,
2000).
•Joint ventures: This is a co-operative strategy in which the manufacturing facilities
and know-how of the local company are combined with the expertise of the foreign
firm in the market, especially in large, competitive markets where it is difficult to acquire
property to set up retail outlets or where there are other kinds of obstacles that require
co-operation with a local company.
• Franchising: This strategy is chosen for high-risk countries which are culturally
distant or have small markets with low sales forecast like Saudi Arabia, Kuwait,
Andorra or Malaysia (Flavian and Polo, 2000). Zara’s franchisees follow the same
business model as their own subsidiaries regarding the product, store location, interior
design, logistic and human resources. However, they are responsible for investing in
fixed assets and recruiting the staff. Zara gives franchisees the chance of returning
merchandise and exclusivity in their geographic area, although Zara has the right to
open its own stores in the same location (Castellano, 2002).

Marketing strategy of ZARA

ZARA in India
To enter the market in India, Inditex (the company behind Zara) used the strategy of
pursuing a joint venture with Trent Limited, a Tata Group company, a highly
recognized clothing line distributor. Zara took up joint ventures as its mode of entry in
India because this is a co-operative strategy in which the manufacturing facilities
and know-how of the local company are combined with the expertise of the foreign
firm in the market, especially in large, competitive markets where it is difficult to
acquire property to set up retail outlets or where there are other kinds of obstacles
that require co-operation with a local company to which Zara regards its stores as
one of the related elements in its business sculpt. The shop is regarded as the
boundary among the buyer and the motor of the whole business – mode design,
development, logistics and finally retail.

The main concerns that Zara had wile entering into the Indian market were
Demography and cultural concerns. Speaking of demography India has a population
of about 1.2 billion people and the target market would be no doubt wide than what is
expected. As the income become larger in India, there will be more demand in the
quality and fashionable clothing. Cultural Concerns: it is the major concern that has
to be given tremendous attention when entering into a foreign market. It must accept
the perspectives and beliefs of the role of culture in influence and as in India social
security is given special attention.

In order to effectively achieve their goals, Zara pursued a strategy of selling a variety
of its local clothing lines and international clothing lines, but maintaining Zara as the
primary brand in India. Zara also targeted the larger positions including either the
first or second positions in the Indian market of clothing lines. Any of these positions
would be sufficient enough for Zara to create an outstanding level with regards to
manufacturing, marketing and distribution. These positions can set up a stage from
which Zara can sell their clothing lines and other special fashion products.

To promote the organization and its clothing lines, Zara utilized video
advertisements, print ads and the idea of e-marketing which fulfilled the varying
needs of consumers from India and beyond; particularly those priority Indian markets
or the consumers in the urban India areas. For this promotion campaign, the perfect
information that Zara Company utilizes is “Providing quality and fashionable clothing
lines that fulfils your needs. Zara has been able to set up its reputation as one of
Spain’s primary clothing line companies for several years now. It is able to rise up to
the challenges in most of its markets directly (year ’99). This is made possible
through the efficient promotional and positional strategies established in order to
maintain not only large profits, but also on establishing the foundations of Zara’s
clothes and fashion trends. The promotional strategies of Zara in India are easily
implemented by the local employees themselves which enables the organization to
vastly improve without the burden of implementing costly technologies.
Target Market
Zara has maintained a reputation for targeting the teenagers, those in their twenties
and even the individuals considered young at heart. This is a customer sector that
other clothing companies have previously ignored in place of the adult consumers.
Zara Company also has the unique strategy of portraying the generations in their
campaigns. These campaigns in India will tell that Zara Company is not a mere
simple clothing line for the next generation; its users are also a generation ahead of
their competitors. Zara Company can establish an image for itself in India as the
clothing line for the present generation. It has discovered that the purchasing power
of the youth and the marketing power of celebrities were similar (1998). They have
garnered significant profit gains out of this strategy, and there is no reason why this
won’t also work in India.

Nevertheless, Zara undergoes quite a few hurdles like the existing rules on FDI in
India require that foreign single-brand suppliers are obliged to surpass a 49% stake
to a resident associate. This includes the vendor to share its organizations
information and data it would usually not reveal. Moreover, franchising stores means
that the merchant loses certain jurisdiction over how these are operated, which
numerous businesses worry that it might harm their brand name. As a result, single-
brand retailers are regularly cautious of entering the Indian market. For a apparel
seller akin to Zara, further considerations contain the relative need of seasonal
modification and the separate, consolidated manner of dress amongst Indian
females that differs significantly to Zara’s offered ranges.