The Indian economy was roughly about $ 3.5 trillion in 2022 and is expected to cross the $5 trillion mark in 2027. By 2031, the economy will hit $8 trillion.
Every economy is driven by private consumption and in India, the share of private consumption is roughly $2 trillion out of $3.5 trillion. Of this $2 trillion, the current share of retail merchandise is $1 trillion and the rest goes to services.
With a population of approximately 1.4 billion people, the next 10 years see consumption doubling for the Indian economy, said Saloni Nangia, President at Technopak, India. She made this statement at the 22nd India Fashion Forum held earlier this year.
The Retail Bucket
She said that $1 trillion in merchandise retail is expected to double, but the share of food and grocery is expected to come down since the Indian economy will become more evolved, she said.
“But fashion will become 3x or 4x of what it is today, be it in beauty, footwear, or jewellery. Food, services, travel, and leisure are all segments expected to grow, but services as a whole will grow faster than merchandise retail,” she explained.
India today has the largest road network in the world, overtaking the US with 7 million miles of road network. This change in connectivity is bringing more people together, be it in urban, semi-urban, or rural areas. In terms of mobile connectivity, there are about 750 million smartphones in the country, and that number will cross 1 billion by 2026.
Meanwhile, digital payments like e-Rupee or UPI, is another key shift enabling a lot of digital conversion in the country.
“Open network digital commerce, which the government is setting up with the objective of building an economy completely focused on digital, will lead the way, and has a lot of implications for a lot of fashion retailers. This needs to be adopted in every aspect of
business,” Nangia said.
These are enabling a lot of aspirations to converge across the country; be it in metros or in non-metros, similar aspirations are converging, and yet there is a lot of disparity in terms of purchasing power. But it’s the aspiration that’s converging, she elaborated.
In the segmentation of the market, she pointed out that a few states contribute a lot more to the economy, and understanding them can help companies decide where they should be present and plan their future.
The per capita GST in India is $115. Maharashtra, Haryana, and Delhi’s per capita GST collection stands at about $260. While Gujarat’s and Karnataka’s, with 9% of the population
and 16% of the GDP, stand at about $180 to $260. Tamil Nadu, Chhattisgarh, Telangana
and Uttarakhand are the emerging and are expected to grow faster; they can be used in
planning for future growth, she stressed.
“The top 75 cities in the countries account for 60% of consumption, and 200 cities account
for the rest, where digital is really helping tap into these cities rather than companies
positioning themselves with stores.”
The New Audience
The key shifts, coupled with the fact that 50% of Indians were born after 1995, make
companies wonder what really is a Gen Z.
“Born with a smartphone instead of a silver spoon, everything for them is digital. They are, of course, more environmentally friendly, self-confident, risk-takers, and entrepreneurial,” Nangia explained.
“The fact that we have 360 million Gen Z, which is way larger than any other country, is really going to shape the next decade. This is the kind of audience we are going to deal with. This is really the reason why we are aiming at digitally enabled commerce or retail.” It is digital that will drive modern retail,” she said, adding that traditional commerce will continue, but when it comes to modern commerce, it will be the digital that paves the way.
The Fashion Industry
In 2022, the market share of apparel stood at $65 billion, indicating, over the years, what makes the fashion industry is no longer apparel.
52% is currently branded and 50% is unbranded, and that will change as the market grows.
Ethnicwear is a small portion of menswear; it is about 6-7%. So you can see almost all brands are covering footwear, eyewear, accessories, and smartwear, and add to that beauty, she stated. This has resulted in companies offering complete collections.
In further break-up, menswear is the largest category in India at 40%, women’s at about 37%, and the rest are kids. Nangia said that it would take another 15-20 years to reverse the gap.
Technology: A Value Creator
Technology will be the largest value creator, she said. “But it should be a part of the ecosystem; in organizations, in people, and in the entire ecosystem, one is functioning.”
On design and omni-customers reach-out, she predicted a completely digitally integrated ecosystem. “But in manufacturing and sourcing, we tend to undermine the kind of investment that’s required to ensure their efficiency and productivity, including cost-saving technology. Then, there is the consumer experience in ensuring that we are connected with them and that we are offering the right experience.”
In the game of technology, AI will be a disruptor, but it is generative AI that is generating a lot of interest, she observed.
She stated that the retail experience is no longer about life in metros; it’s beyond metros. This has resulted in the complete democratization of the retail experience.
“Many lines are getting blurred: there is no serious categorization of formal and casual, it’s more all-day fashion. Internationally, general and neutral come into play. Fashion is seasonless, ensuring that we don’t have too much inventory left. Green is the new black, mainly in Europe, with many parameters being introduced. Recycling and resale as a service is a trend.”
“Most importantly, slow fashion, high-quality products, and low volume have come into play. All these are going to become more important in the coming years, Nangia stated.
As India consolidates itself as the third largest fashion market after the US and China, it remains to be seen what fashion stories will be told in the rapidly evolving retail climate of the country.