The changing trends in the fashion industry have opened up an avenue for fashion retailers: Organised Value Fashion.
Key Highlights
- Value Fashion segment to overtake the non-value segment by 2025.
- Various big players like Shoppers Stop and Reliance Retail have entered the segment.
- Due to lower profit margins, execution is the key to maintain profitability.
A recent report by Motilal Oswal Financial Services has postulated that the Organised Value Fashion Industry is likely to report a 13% CAGR growth during CY 2020-25, even exceeding the CAGR expected from the overall value apparel industry.
According to the report, the success of Trent’s Zudio has prompted other fashion retailers like Shoppers Stop and Reliance Retail to enter the value fashion industry.
Shoppers Stop, which has hitherto functioned in the premium clothing segment has entered the value fashion segment with its brand ‘InTune’, while Reliance Retail has entered the segment as ‘Yousta’. Aditya Birla Fashion and Retail Ltd. (ABFRL) has entered the value apparel segment with its offering ‘StyleUp’.
On the entry of these companies into the value apparel segment, the report mentioned that Tier-1 and Tier-2 cities provide a great opportunity for retailers to enter the value apparel segment, which was hitherto dominated by regional players like V-mart, City Kart, and Style Bazaar.
In addition, the report believes that growing aspirations with higher disposable income and a demographic change have acted as pull-factors for the big players to enter the market.
According to the report, the Value Fashion Industry is projected to overtake the non-value apparel industry by Calendar year 2025.
What is Value Fashion?
Value Fashion is the segment in the apparel industry that targets the value-conscious consumer. The pricing of the products plays a major role within this segment.
Due to the consumer being budget-conscious, the margins within the segment are comparatively lower. The average selling price of clothing articles within the value fashion segment usually ranges from INR 300 to 600.
Zudio, which was launched by Tata’s Trent Ltd. focused upon the young generation and kept its gross margins low (at around 35-40%). Due to its unique design portfolio and high productivity, it was able to achieve a revenue of around INR 35.4 Billion with more than 350 standalone stores, according to the report.
However, the report further mentions that organised players may face competition from the regional players and unorganised players, thus it is important to focus upon store-level efficiency to ensure profitability.
