Start-up, the ecosystem that is the epitome of innovation in India, is flourishing on the backing of major investors, both indigenous and foreign. With the apparel retail market being valued at a whopping US $ 40 billion in India, both the new gene of apparel companies in the form of start-ups and conglomerates are thriving despite all odds.
There is no stopping Indian start-ups from raising funding, notwithstanding several challenges in the form of general election, economic slowdown, frequent regulatory skirmishes and an unfavourable taxation system. These young firms have the attention of investors, who look beyond the current political and economic climate to fund disruptive ideas, passionate founders and the limitless potential the big Indian market offers.
According to a funding report released by YourStory for the period January-September 2019, start-ups in India raised US $ 7.67 billion, with over 21 deals crossing the US $ 100 million mark. Not only has the ease of funding become a huge impetus to creating a bigger and better team, but it has also improved the logistics and involvement of artificial intelligence (AI).
However, it is not all hunky dory when it comes to surviving in this ecosystem. Numerous brands are struggling to find their niche in the market as conditions become tougher and the percolation of Government benefits is restricted to the crème de la crème of start-ups. While many names have entered the unicorn club and increased profits manifold, many popular ones have been forced to shut shop as the funding tap runs dry or the uncooperative taxation system bears heavy on the business. The fight against established retail brands is another impediment that is ongoing and start-ups have sustained them through various strategies or the sheer ingenuity of their innovative product offerings.
The nitty-gritties of back-end procedures
When it comes to production, established brands are out-and-out winners in terms of order volumes, and hence, are able to cut costs with larger quantities. However, start-ups have some distinct advantages that may end up taking up considerable portion of the market these retail brands capture.
Millennials are driven not by value as much as the response time to a particular style or trend. Start-ups’ design to market timing is way shorter than that of established brands. In essence, start-ups have more adaptability.
Suprathik Reddy, Co-founder of Krate and Alpha, says, “The biggest advantage for a start-up is the time to market. Bigger brands have to follow seasons and protocols for every collection for which they plan the whole year. Start-ups, on the other hand, are data-driven and can introduce new trends to the market with shorter lead times. They also do not have the restriction of waiting for products to reach physical stores. Most start-ups have e-commerce portals for which selling can happen through warehouses.”
“Another advantage is that they have to cater to a niche sensibility as opposed to a larger market base that brands have to design for. It is easier for us to source fabrics according to our stipulations and play around with them to suit our smaller audiences,” he adds. Based on the subscription model, Krate curates men’s clothing according to the lifestyle and preferences of their customers. Priced at Rs. 1,599 per box, the apparel is trendy and made with premium, export-quality fabrics. They have also branched out to include the same apparel in their online brand Alpha.
Talking about operating costs, brands have to bear larger expenses as compared to start-ups because most of them operate both online and offline stores. Marketing costs also tend to be much higher. Start-ups, on the other hand, have found social media to be the best bet to market products as most of their audiences are based out of metropolitans and Tier-1 towns.
Survival of the fittest
An innovative approach to apparel seems to be a major advantage for start-ups trying to sustain themselves in the apparel ecosystem. There are many new ventures that have taken up unconventional business models such as rental, barter, subscription and B2B selling for apparel, apart from concepts that involve sustainability and divergent product categories like sustainable fitness clothing, wellness products or handlooms and handicrafts.
One such home-grown online portal, Deivee offers organic and sustainable yoga mats, yoga clothes and accessories. Not only is their market distinctly made up of fitness aficionados who are cautious of their carbon footprint as they buy new products, they pride themselves in offering a category unmatched by any other company.
Talking about his outlook on the scope of start-ups in the apparel segment in the coming years, Darshan M, Co-founder, Deivee, says, “In the near future, I see more investment dedicated towards sustainable causes which will help get the industry to focus back on building profitable, yet sustainable businesses. Over the next few years, many more brands may go bust and only the ones who have clear market understanding and have logical businesses built on strong fundamentals will thrive.”
Though there are many benefits to the effect of starting a new venture, they are often outweighed by cons. While the Government seems to have taken initiatives to bring up the start-up economy in India, most business heads are of the opinion that the chances of availing those aids are circumscribed.
Arijit Mazumdar, CEO and Co-founder of Northmist, asserts, “To be very honest, we got no help from Government initiatives. The criteria listed for start-ups to get funding are quite impossible to meet. They ask for such documents that cannot exist for start-ups. So, if you are a start-up in India, the possibility of getting aid from the Government is quite slim.” Northmist specialises in creating 100 per cent organic T-shirts both for B2B and B2C clients. The brand will soon be diversifying into womenswear and hoodies.
Additionally, Reddy affirms, “Recognition by the DPIIT can help exempt you from a few taxes but the platform lacks purpose thereafter. More active involvement and participation by VCs and accelerators can help make the scenario for start-ups in India better.”
“Another issue that is plaguing not only start-ups but companies across the board is the poor implementation of GST. The rules change every other month leading to mass confusion and hurdles for businesses,” he adds.
Scope of apparel retail in India and challenges associated with it
The blooming apparel industry in India has remained unaffected largely due to the penetration of internet to smaller towns where people are turning more and more to online shopping. There are over 300 international brands that are slated to enter India even as their counterparts the world over experience lukewarm sales. As store closures become more common than store openings in the USA, India’s market is slated to grow at 11.6 per cent CAGR from 2020-2023, according to Statista.
That being said, the struggle remains very real for both established brands and start-ups to remain viable in today’s economy. As some conglomerates face the blow of changing consumer trends, growth of e-commerce and rising costs, start-ups are at an added disadvantage of having to build a brand image from scratch. Not only do consumers tend to trust brands they popularly know of more, start-ups also have to invest in educating their audience at every step about their product, concept and brand value.
Bearing a more positive outlook, Mazumdar avers, “The Indian retail market offers great promise, especially when it comes to fashion and apparel. Despite structural challenges that include inequality, infrastructure, and market fragmentation, the speculations of strong economic growth, scale, and rising tech awareness ensure that the retail market can grow globally.”
What works in the favour of established retail is the fact that they are able to provide cost effective clothing that caters widely to the masses instead of just a niche, hence garnering massive revenue opportunities. Millennials are more experiential and while start-ups may provide that through innovative, online concepts, brands are able to translate that better through their access to larger marketing budgets and in-store perks along with better customer service.
The competition for both sides is mounting as they navigate the throes of the retail market and struggle to emerge victorious from the hurdles they’re up against. Both have their own set of advantages and disadvantages but as the start-up economy grows stronger in the country, they have manifested themselves as tough contenders in the race to woo customers.
