As the world enters the post-epidemic era, the game of great powers is facing a new pattern.
In the 2022 economic data disclosed by Asian countries, Singapore, Japan and South Korea performed unsatisfactorily, but emerging countries such as Vietnam and India ushered in high growth, Vietnam ranked as the highest GDP growth country in Asia, and India ranked among the world's most populous countries, and is expected to surpass the United Kingdom to become the world's fifth largest economy.
According to the first official estimate released by India's Central Bureau of Statistics on January 6, economic growth is expected to be around 7% in the 2022-2023 fiscal year ending in March this year. This follows that, in November 2022, Morgan Stanley's chief Asia economist Chetan Ahia predicted that India would become the world's third-largest economy by 2027.
Obviously, India's economic growth has long been seen by the world. However, for the fashion industry, India is not what it used to be. On the one hand, the mainstream of this rising market still pursues high cost performance, but consumers are not only as price-sensitive as before; On the other hand, Indian capital is optimistic about local high-end design, or represents the beginning of a luxury retail market to mature.
The third largest unicorn hub in the world,
E-commerce retail growth under the demographic dividend
India's economy recovered early from the pandemic. As the world's third largest unicorn hub after the United States and Chinese mainland, India has more than 100 unicorn companies, and the demographic dividend, especially the large scale of young consumers, has accelerated the rise of this fashion economy and consumption hotspot.
According to the Global Entrepreneurship Watch 2021/22, India is ranked as one of the top five easiest places in the world to do business. Thanks to the improved business environment, India's ability to attract industrial finance is gradually improving, climbing from 142 to 63 places in the World Bank's Doing Business report.
Behind such achievements, what is the positive fashion investment in India's business environment? First of all, in order to help enterprises enter the Indian market and vigorously develop cross-border e-commerce and new retail, the Indian government has adopted free trade and warehousing zones as a special category of special economic zones, focusing on trade and warehousing. The goal of the free trade zone is to create trade-related infrastructure to facilitate the import and export of goods and services with greater flexibility, allowing 100% direct investment by foreign businesses. The scheme allows duty-free import of all goods used for warehousing, which provides ample benefits for businesses to enter the Indian market. At the same time, India's express delivery network now extends to Tier 4 towns with a population of less than 50,000, providing the basis for online shopping.
According to Dr. Hitesh Bhatt, Marketing Director of the Indian Retailers Association, at the "Retail and E-commerce in India – Development and Opportunities" webinar held earlier by the Hong Kong Trade Development Council's T-box Transformation Program, the size of the Indian retail market is expected to expand to $1.1-1.3 trillion by 2025. India's GDP per capita is growing at a CAGR of 10%, far outpacing other major markets including the US, UK, Germany and France.
Of course, retail growth is inseparable from the demographic dividend. According to the United Nations, India's population will surpass China in mid-April 2023 to become the world's most populous country.
Since independence in 1947, India's population has increased by more than 1 billion. Moreover, its population size will continue to grow over the next 40 years. This gives India a younger customer base than other mature markets. Around the world, 1 in 5 people under the age of 25 are from India. 47% of Indians are under the age of 25. That is to say, in today's India, two-thirds of the population was born after economic liberalization in the early 90s of the 20th century, and these young Indians have a very distinctive feature - the largest consumer group in the knowledge and network goods economy.
Rapid economic growth, coupled with the demographic dividend, especially the large consumer base of the younger generation, these favorable conditions make India promising in the e-commerce retail market. While the opportunities are clearing, the competition in the Indian retail market has also entered a new phase.
Before 2020, and especially in 2018, Indian fintech payments company Paytm raised a staggering $445 million for Patym Mall from SoftBank and Alibaba. At that time, it was the last historical stage of Chinese enterprises investing in India. But since 2020, geopolitical and other uncertainties have also forced Chinese companies represented by Alibaba to adjust their investment strategies in India. At the same time, with the continuous entry of international companies and brands in recent years, the Indian market has become increasingly competitive, and the menacing Amazon, Flipkart, acquired by Walmart, and Reliance Retail, a subsidiary of Reliance Group, have made Ali's Paytm Mall profit performance not as good as before. Under the dual role of macro situation and market performance, Chinese companies represented by Ali have begun to move differently in the Indian market.
India is now the eighth largest e-commerce market in the world, with a turnover of $50 billion and 140 million online shoppers in 2020, ranking third in the world behind Chinese mainland and the United States. India's e-commerce market is expected to reach $200 billion by 2026 and as high as $350 billion by 2030.
Attracted by strong purchasing power, international retail giants such as GAP, ZARA, M&S, IKEA, Uniqlo, Amazon, Walmart, etc. have entered India, and some Chinese sellers such as Club Factory, SHEIN, and Banggood have also entered the Indian market in the form of independent overseas and have performed well in the market segment.
Take Club Factory, for example, a fashion, beauty and lifestyle e-commerce platform headquartered in Hangzhou that accounts for nearly 40 million customers out of a total customer base of about 70 million in India, making it one of the top online shopping portals in India.
Club Factory, founded by former Facebook employee Yun Lou, focuses on global markets, particularly India.
Moreover, unlike the rapid development of the DTC model in the Chinese market, the relationship between brands and consumers is highly intimate. Although there are also many personal care, beauty and footwear DTC brands in India that have repeatedly gained capital favor and expanded significantly in 2022, the distribution model is still the backbone of the current Indian market, supporting its huge retail system across the country.
India's e-commerce market has become a must-see for fashion brands to grow. Throughout 2022, there are many fashion companies that have announced their entry into India. But unlike the previous fast fashion brands, the fashion companies anchored in the Indian market have been significantly upgraded.
At the end of November last year, Galeries Lafayette France announced its official entry into the Indian market, entering into a partnership with India's Aditya Birla Group to open two stores in Mumbai and New Delhi in 2024 and 2025; At the end of July, ELC announced the launch of the BEAUTY & YOU India program in partnership with Indian omnichannel beauty and lifestyle retailer NYKAA to support Indian beauty brands; Earlier, in June, Estée Lauder's skincare brand, The Ordinary, acquired in 2021, partnered with Nykaa to enter the Indian market, which was expected to become one of the three major international markets for The Ordinary in the next five years.
The Estée Lauder Group, the skincare brand of Deciem announced last year, officially entered the Indian market through a partnership with Indian cosmetics shopping site Nykaa.
The high-end retail market is maturing,
How to deal with invisible cultural barriers?
At Paris Haute Couture Week Spring/Summer 2023, Indian fashion designer Gaurav Gupta debuted with a near-perfect collection after nearly 20 years after launching his eponymous label. With the concept of zero and infinity, volcanic erosion, the snake of Kundalini, and the Egyptian pyramids with obvious regional culture became the inspiration for the designers.
Gaurav Gupta, a graduate of Central Saint Martins, is the third Indian designer ever to appear at Haute Couture Week. This may mean that the strategy of Indian consortiums to support local designers in recent years has begun to work or even expand.
The Gaurav Gupta Couture 2023SS haute couture collection opens with an extreme silhouette with a sensual texture
Back in August 2022, Reliance Brands Limited (RBL), a subsidiary of oil telecommunications giant Reliance Group, announced the signing of a strategic agreement with Balenciaga, another brand of the Kering Group, following Bottega Veneta, as the brand's sole partner in India. In fact, RBL's list of international brand partners also includes Armani, Bally, Burberry, Clarks, Coach, Diesel, Tiffany and Tod's, with 2084 stores in India, divided into 821 stores and 1263 shop-in-shops.
In the next two months, RBL acquired a 40% stake in the eponymous brand of Manish Malhotra, the royal designer of many of Bollywood's stars. A week later, it acquired a 50% stake in Ritu Kumar, one of India's oldest fashion families.
Manish Malhotra's virtual store
Another giant, Aditya Birla Fashion & Retail, part of the Indian multinational Aditya Birla Group, has implemented similar strategies in the past few years, such as investing in Indian designer brands Sabyasachi, Tarun Tahiliani and Shantanu & Nikhil.
On the one hand, Indian consortiums have a stake in local designer brands to help them expand their scale and become local brands comparable to international brands. On the other hand, international brands are also seeing the spending power behind India's economic growth. According to McKinsey, the size of India's apparel market will reach $60 billion in 2022, ranking sixth in the world, comparable to the size of the United Kingdom and Germany. For fashion brands, how to chase the huge market?
Taking fashion as an example, ordinary international brands are generally attractive to Indian consumers, because India's custom fashion consumption is largely driven by weddings and religious festivals, so local brands with their emphasis and understanding of weddings and national costumes are more likely to obtain the cultural identity of consumer groups and drive consumption. It can be seen that for foreign brands that focus on the Indian fashion market, it is particularly important to understand the particularity of Indian taste.
India has 28 states, 6 UTs and 1 National Capital Territory, all with differences in language, culture, perspective, laws and regulations. Therefore, businesses should recognize this fact when trading or investing in India and take advantage of the various advantages of each state. At the same time, India is one of the most religiously influenced countries in the world, almost everyone will practice one religion, of which 82% of the country's population believes in Hinduism, and religious influence has penetrated into every part of society, politics, economy, culture.
Compared with religion, the Indian language system is more complex, according to statistics, there are more than 1600 languages and dialects, of which more than one million speakers as many as 33, the official languages are Hindi and English, of which the most spoken Hindi proportion is 30.3%, language issues are the first priority for all enterprises entering the Indian market.
According to the logic of the past fashion business, the trend of consortiums injecting capital into high-end designer brands indicates the beginning of the maturity of the luxury retail market. Looking at the rapid development of e-commerce brought about by the demographic dividend, and the accelerated entry of international brands... It seems that India today has many similarities with China of yesteryear. However, for fashion brands, cultivating this emerging market is by no means a simple model copy.
Due to the advantages of the number of young people and the improvement of the business environment, India has successfully attracted the attention of a large number of fashion companies and brands. Of course, as one of the developing countries, its rapid economic growth can provide huge space for the development of brands. But in the face of great attraction, how to prepare enterprises to face the challenges brought by the "new continent" is also a question that must be faced.
In the past, India was an explosive market among emerging Asian countries, attracting international giants to enter; Now the Indian market has been upgraded to a certain extent, the optimism of traditional experience has begun to expire here, and new challenges are coming. WWD