Indian fashion has been experiencing competition in the value-fashion segment due to rising disposable incomes and consumer aspirations in smaller cities.

The value-fashion market in India is witnessing intensified competition among significant retailers as the segment continues to gain momentum. Driven by increasing disposable incomes and rising consumer aspirations in smaller cities, Trent Ltd.’s Zudio has set a remarkable precedent, inspiring rivals to replicate its model for similar success.

Motilal Oswal Financial Services Ltd., analysts forecasted report stated that the value apparel segment will continue to grow at a 6 per cent compound annual growth rate (CAGR) from 2020 to 2025. However, the organised sub-sector is expected to surpass this growth, aiming for a 13 per cent CAGR, primarily attributed to rising disposable incomes, demographic trends favouring the youthful consumer base and ongoing urbanisation.

The value fashion segment, constituting Rs. 2.5 trillion as of CY ’20 (57 per cent of the total apparel market), is witnessing transformative dynamics. “Beyond the metros and Tier-1 cities, the market has untapped potential driven by favourable demographics, increased incomes, and heightened aspirations among consumers,” the report noted.

The success story of Trent’s Zudio has lured national retailers into this domain, including Yousta (Reliance Retail), Style-Up (ABFRL), and InTune (Shoppers Stop). Zudio, since its FY ’17 inception, has expanded to over 350 standalone stores, generating a revenue of Rs. 3,540 crore. Operating on a franchise-owned, company-operated model, the brand has appealed to franchisees with a capital expenditure approach while Trent manages inventory costs.

Zudio’s goal of combining high fashion with affordable prices contrasts with regional retailers like V-Mart, Style Bazaar, City Kart, and V2 Retail, which target lower middle-class families with a broader range of products and local preferences, albeit with limited differentiation. Consequently, they have faced fierce competition and have struggled to rebound to pre-COVID levels due to continued weak consumption in smaller cities.

The Indian value-fashion market is dominated by unorganised retailers, representing over 57 per cent of the overall market. Still, only a few regional retailers have gained traction in this cost-conscious segment, while larger retail entities continue to breach this market.