India is the world's fourth-largest economy, the third largest in Asia and the second largest among emerging nations1. The Indian market reflects considerable diversity in income levels and lifestyles. Although India's per-capita GDP is one of the lowest among the developing countries, a significant segment of the population (an estimated 200 million people) has significantly higher income. A study by the National Council of Applied Economic Research (NCAER) projects that India's middle calls will expand to include nearly half the country's total population by 2006 and also projects that the rich and the middle income class together will increase from 29.6 million households in 1997-98 to 97.1 million households in 2006-07. Along-with the shift of the lower income households to the high-income categories, the Indian consumer credit is growing by 35 to 40 percent annually; new cardholders are increasing by 25 to 30 percent annually. Buying has become a year-round phenomenon in India than the seasonal demand earlier.
Nearly 72 percent of the Indian population lives in rural areas. While both rural and urban markets are growing significantly, the rural market is estimated to be growing approximately twice as fast as the urban market. The rural share of total consumer purchases rose from 62.6 percent in 1998 to 64.7 percent in 2004. A number of factors have fueled consumer spending growth, including rising prosperity and the emergence of a thriving consumer finance business. Indian Demographics Report 1998, suggests that the consumer preferences have shifted from low-valued items toward the higher priced products2.
Consumers in India spend approximately 9 percent of their disposable income on clothing and footwear, and nearly 47 percent on food, alcohol, and toboacco, compared to 5 percent for clothing and shoes, and 36 percent on food, alcohol and tobacco in the United States. Clothing expenditures in India tend to be relatively higher for households with higher incomes. Currently, disposable incomes of the majority of Indian consumers are so low relative to their basic needs that there is little residual for spending on better quality clothing. As disposable income increases, consumers are expected to spend more on purchases of quality clothing.
The size of the Indian market for consumer durable is estimated at 100 million people, according to a recent survey3 which covered some 7,300 consumers in 12 major cities in India. The Indian market for branded products such as jeans, trousers, shirts and other consumer goods is estimated at no less that 40 million consumers. Indian consumers are typically more loyal to their stores than to brands. About three-fourths of the survey respondents reported that they would revisit the stores where they had previously purchased apparel. The survey also revealed that brand is the second most important factor in purchase decisions. In south India, consumers are generally more brand loyal than consumers from the north. Price, however, is the most important factor for the consumers in east India. Home/TV shopping or mail order are not yet popular in India, though consumers are aware of these distribution channels. Indian consumers like to touch and feel the product before they buy it.
On the demand side the future trends will be influenced by increased consume purchasing power, a stronger world economy and weaker cotton prices all of which encourage consumption. Since the production of denims depends on the cost of cotton, which is the principal raw material for denim fabric production, the fall in prices of cotton has a significant effect on the prices of denim. The reports published in various journals indicate that the average world cotton price (per lbs) of US$0.82 during 1995-97 has fallen to US$ 0.6 during 2002-05.
World Scenario of Demand and Supply
The world production of denim fabric is expected to reach 2.7 bn metres during 2006 and the established players such Levis Trauss are facing new web of competition from the Asian producers. The Asian production of denim today accounts for about 50 percent of the world denim capacity and most of the production are generated in primarily in China and India. Some of the capacity expansion has been taking place in the counties like Bangladesh, Indonesia, Pakistan and Turkey. It is estimated that the denim demand in the world will increase by 5-6 percent while the supply will increase roughly by 8 percent, thereby indicating a buyers market.
The consumption of denim products in the world has increased in the last few years. The jeans market was worth US$ 49 Bn in 2004, has gone upto US$ 55 Bn in 2005. The Americans are the major users of the jeans. During 2005, the total consumption of jeans in America was approximately US$ 3.9 Bn taking a share of 7.96 percent of the total world consumption. The estimated share of Americans denim use is likely to fall by 1.16 percent during 2006.
Domestic Demand of Denims
Table-1
Trends in Rural-Urban Demand of Denim
In India the denim use is mostly done in household segments. Trousers, Waist coasts, Shirts, Shorts, Jump Suits, T-Shirts, Maternity Dress, Skirts, Caps, Jackets, and Shopping bags are more popular items used in India. The consumption of denim in quantitative terms shows an increasing trend over the last 8 years staring from 1998. During 2005, an estimated 221 million metres (184.41 Million pieces) of denim was used in the country with an urban share of 55 percent and rural share of 45 percent. The most interesting feature of the trends in consumption shows monotonously increasing rural shares as against the urban. It means the penetration of jeans markets to the rural segment is increasing much faster and denims are becoming more popular among the rural population.
Demand in major cities
The Indian cities are the major consumer of the denim products. The total consumption of denim trousers in the 15 major cities is estimated at 21.46 million pieces. The table below provides the consumption of denim trousers in 15 major cities of the country. The total consumption in these 15 cities accounts for 11.6 percent of the total consumption of all denim products. As regards to the share of these cities they exceed more than a fifth of the total urban consumption. Mumbai leads in the use of denim trousers followed by Delhi. Kolkata as a metro city ranks at 8th
position while Hyderabad, Chennai, Lucknow, Bangalore and Kanpur are ahead in the consumption as against Kolkata. The smaller cities like Indore, Chandigarh, Coimbatore and Guwahati have made adequate dent in the consumption of denim trousers.
Demand by age groups and gender
The demand pattern across various age groups indicate that, about 48 percent o the market share of jeans goes in favour of the young generation in the age group of 15-24 years followed by 25-39 years (24.36%). The younger generation of the population below the age of 14 and the older generation above 40 are also using denim trousers generously. The consumption reduces at a higher age of 60 and above. The gender differential of the consumption shows a remarkable market penetration to the mens wear segment than the womens wear. The womens wear segment of denim trousers goes to lower age groups and the higher age groups very quickly discard the denim use. This may be because of Indian tradition and comforts of other wears while the women are indoors.
Conclusion:
Given the increase in the level of prosperity in the Indian population and shift of preferences to the high priced product, mostly directed to ready to wear segment particularly the denims; the vast Indian consumer market present a unique opportunity to the domestic an International retailers and wholesalers of denim products. Since the prices of denim product is falling on account of excess supply position, the price of the denims are setting to fall further which becomes a bonanza to the consumers. The buyers market of the denims is likely to remain for another 5-10 years. Therefore, all the international producers and retail chains are looking for India as a fabulous market for them. In view of the above, the coming years will see larger penetration of denim products to the Indian markets, in the face of a strict competition between the retailers and suppliers.
Notes :
1.Indian economy is the fourth largest in the world. When ranked on the basis of GDP by purchasing power parity, India is now behind only the United States, China and Japan. When ranked with exchange rate method, India is the 13th largest Economy in the world. The Hindu; at htpp://www.thehindu.com
2.Indian Demographic reports 1998 by NCAER, New Delhi. The share of low priced goods in rural basket (less than Rs.1000) declined from 83 percent in F.Y 1989 to 90 to 75% in F.Y 1995 to 96, while the share of medium price items (Rs.1000 to 6000) rose from 13.5 percent to 20 percent, and the share of high valued items (greater than Rs.6000) rose from 3.6 percent to 4.9 percent.
3.KSA Technopak survey on market potential for brands such as Peter England Shirts, Levis Reebok and Colgate Tooth paste in their reports The Indian Consumer is a hard one to Pin Down.
About the author:
Nayak Paramananda is Director (Market Research) Textiles Committee Mumbai, You can reach him at: nayak_p@ hotmail.com , drpnayak@gmail.com
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