IMPRESSIONS from a Cross-section

We have been in the lingerie industry since 28 years. The lingerie industry has evolved in a very big way since the time we started. Until 1994 innerwear was only seen as a necessity, only basics and few floral prints on pastel color would be ultimate in the design element. What mattered then was only quality and fit which was crucial to keep the customer happy. If the fit was perfect, she was with you forever, which is the case till date with our customers.

Lingerie industry in India has exploded to an unfathomable scale. It is being seen as a parallel category with apparel and in retail as well. It is a mix of organized and unorganized manufacturing facilities. I would say it is only 2/3rd being unorganized and the balance 1/3th would be organized and branded. The unorganized market is all done with a minimum of 7 machines to 30 machines, operating from a small room, without adhering to the government formalities or proper systems in place.

Globally, the lingerie industry is way too organized, and have expanded their marketing network all over the world, and since about 5-7 years, they have seen immense potential for them to set shops in India, considering our population and demand with the recession so high internationally, they have now moved to more developing markets like ours.

The overall innerwear market is estimated to be Rs. 120 billion, and it growing at an average rate of 15% year over year. There is so much more potential to grow, if the scenario around would be more organized.

In volume terms, the men’s innerwear is about 48% and that for women is at 52% whereas in value terms the women’s lingerie segment enjoys 66% share of the total market. It’s worth about Rs. 80 billion, and again has been growing at the rate of about 16.8%. This would be attributed to the rising disposable income and growing preferences for lifestyle products.

The lingerie market can be divided into four segments based on price points, at which they sell in the market. They are classified as SUPER PREMIUM, MID MARKET, and ECONOMY AND LOW MARKET SEGMENT.

(Contd.)

Approximately 60-75% is in the mid market and economy segment. The super premium segments are relatively smaller, but fast catching up. The mid market segment is largest in the pie of prices. It currently contributes 43% to the total lingerie market, and is expected to go to about 47% by year 2014. The economy and low market segment will grow at a much slower pace, thereby losing its share in the overall pie.

The key factors that influence the customer is COMFORT, PRICE, and BRAND AND DURABILITY.  The mid market segment, takes care of all four, which would be a deterrent for the economy and low price segment, because one of the factors would be missing. Even if the price is low, and the comfort or brand is missing, that sale is lost. Our customer is growing very brand conscious, and would not want to sacrifice that. We Indians are a very cost conscious consumer group, and when it comes to pricing, it is very imperative that a brand, if it wants to achieve volumes, has to give a great insight in pricing itself. The very fact that the lingerie market is being seen as a parallel with the apparel industry, a lot of insight, does take us to the core, and that is ‘the end consumer’.

With so much disposable income, growing consumer class, advent of international brands, huge advertising campaigns (which was never even thought of a decade back) has taken the market by storm. Bold Advertising, fashion shows of lingerie + Bollywood + Celebrity endorsements has played such an immense role in the consumer buying pattern.

Over the years, lingerie has grown as an optional part of the wardrobe, to essential clothing for women; it is totally fashion driven. There are ranges available as ‘All day’ lingerie to an ‘evening wear’ to ‘bridal wear’ to ‘honeymoon wear’ and it is all so mind boggling!

All this has taken the industry on the rise. Since a decade the markets are flooded with various brands, where the consumer has so much more choice, than it had earlier.

(Contd.)

Plenty of bottlenecks, if taken care of would have the lingerie industry being one of the main contributors of revenue in terms of market. These are enumerated as follows:

1. Rising raw material costs, especially cotton yarn.
   
   
2. Unavailability of yarn: whenever the Government deems fit, it will open up exports leaving the local market in a lurch with the result being shortages of cotton yarn, and thus the rising prices.
   
   
3. Very stiff labour laws: Union intervention if the manufacturing set up goes beyond 50 people is one main reason as to why MNC’s are reluctant to set up manufacturing facilities in India; they mostly sourced from Bangladesh and Sri Lanka.
   
   
4. Excise net: This was the last straw that broke the camel’s back. In spite of a consistent growth, and way too much competition, the industry was faring pretty well, until the excise got into our system.  As mentioned above, the volume sales is in the economy and mid market pricing, where every Rupee counts to generate the sales. So, with a 10.36% excise, the retail prices went haywire, as a result of which most of the industry was stuck with stocks and, they are all liquidating them through schemes and discounts.
   Today, after the levy of excise from March 2011, it has been observed, that the excise revenue from the apparel industry is a major contributor to the government resources.
   
   
5. Too many taxes put on the product: VAT, CST, Service Tax, Excise, and Contract tax - All these make the end product so expensive. There should be a onetime GST, which we have been hearing for long yet it has still not seen the light of the day.
   
   
6. Too many government tax procedures: The very fact that the procedures are so rigid, we are seeing the unorganized market having a major share in the industry because that market does not even want to look at the rigorous procedures.

If these areas are looked into by the Government, the industry can see a vertical rise, and contribute significantly to the revenues of the Government.

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