Denim Demand

8/14/2019 Denim Demand

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Trends and Patterns of DenimDemand in India

By: Nayak Paramananda


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Trends and Patterns of Denim Demand in India

By: Nayak Paramananda

Email: [email protected]@gmail.com

Market Profile:

India is the world's fourth-largest economy, the third largest in Asia and the second largest amongemerging nations

1.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 thepopulation (an estimated 200 million people) has significantly higher income. A study by the National Councilof Applied Economic Research (NCAER) projects that India's middle calls will expand to include nearly halfthe country's total population by 2006 and also projects that the rich and the middle income class togetherwill increase from 29.6 million households in 1997-98 to 97.1 million households in 2006-07. Along-with theshift of the lower income households to the high-income categories, the Indian consumer credit is growingby 35 to 40 percent annually; new cardholders are increasing by 25 to 30 percent annually. Buying hasbecome 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 marketsare 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 in2004. A number of factors have fueled consumer spending growth, including rising prosperity and theemergence of a thriving consumer finance business. Indian Demographics Report 1998, suggests that theconsumer preferences have shifted from low-valued items toward the higher priced products

2.

Consumers in India spend approximately 9 percent of their disposable income on clothing andfootwear, and nearly 47 percent on food, alcohol, and toboacco, compared to 5 percent for clothing andshoes, and 36 percent on food, alcohol and tobacco in the United States. Clothing expenditures in India tendto be relatively higher for households with higher incomes. Currently, disposable incomes of the majority ofIndian consumers are so low relative to their basic needs that there is little residual for spending on betterquality clothing. As disposable income increases, consumers are expected to spend more on purchases ofquality 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 forbranded products such as jeans, trousers, shirts and other consumer goods is estimated at no less that 40million 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 previouslypurchased apparel. The survey also revealed that brand is the second most important factor in purchasedecisions. 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 arenot yet popular in India, though consumers are aware of these distribution channels. Indian consumers liketo touch and feel the product before they buy it.

On the demand side the future trends will be influenced by increased consume purchasing power, astronger world economy and weaker cotton prices all of which encourage consumption. Since the productionof denims depends on the cost of cotton, which is the principal raw material for denim fabric production, thefall 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 theestablished players such Levis Trauss are facing new web of competition from the Asian producers. TheAsian production of denim today accounts for about 50 percent of the world denim capacity and most of theproduction are generated in primarily in China and India. Some of the capacity expansion has been takingplace in the counties like Bangladesh, Indonesia, Pakistan and Turkey. It is estimated that the denimdemand in the world will increase by 5-6 percent while the supply will increase roughly by 8 percent, therebyindicating a buyers market.


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The consumption of denim products in the world has increased in the last few years. The jeans market wasworth US$ 49 Bn in 2004, has gone upto US$ 55 Bn in 2005. The Americans are the major users of thejeans. During 2005, the total consumption of jeans in America was approximately US$ 3.9 Bn taking a shareof 7.96 percent of the total world consumption. The estimated share of Americans denim use is likely to fallby 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 householdsegments. Trousers, Waist coasts, Shirts, Shorts, Jump Suits, T-Shirts, Maternity Dress, Skirts, Caps, Jackets, and Shoppingbags are more popular items used in India. The consumption ofdenim in quantitative terms shows an increasing trend over thelast 8 years staring from 1998. During 2005, an estimated 221million metres (184.41 Million pieces) of denim was used in thecountry with an urban share of 55 percent and rural share of 45percent. The most interesting feature of the trends inconsumption shows monotonously increasing rural shares asagainst the urban. It means the penetration of jeans markets to

the rural segment is increasing much faster and denims arebecoming more popular among the rural population.

Fig-1

Year Urban Rural All India

1998 69 (71.13) 28 (28.87) 97

1999 98 (73.13) 36 (26.87) 134

2000 83 (69.17) 37 (30.83) 120

2001 106 (77.37) 31 (22.63) 137

2002 116 (75.86) 37 (24.14) 153

2003 118 (61.51) 74 (38.49) 192

2004 120 (58.59) 85 (41.41) 205

2005 122 (55.26) 99 (44.74) 221

101.91 82.5 184.41

Consumption of Denim fabrics in India

(in Mn Mtrs)

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003 2004 2005

Urban Rural All India


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Demand in major cities

The Indian cities are the majorconsumer of the denim products.The total consumption of denimtrousers in the 15 major cities isestimated at 21.46 million pieces.The table below provides the

consumption of denim trousers in 15major cities of the country. The totalconsumption in these 15 citiesaccounts for 11.6 percent of the totalconsumption of all denim products.As regards to the share of thesecities they exceed more than a fifthof the total urban consumption.Mumbai leads in the use of denimtrousers followed by Delhi. Kolkataas a metro city ranks at 8thposition while Hyderabad, Chennai,Lucknow, Bangalore and Kanpur areahead in the consumption as against

Kolkata. The smaller cities likeIndore, Chandigarh, Coimbatore andGuwahati have made adequate dentin the consumption of denimtrousers. Fig. 2

Demand by age groups and gender

The demand pattern across various age groups indicate that, about 48 percent o the market share of jeansgoes 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 alsousing denim trousers generously. The consumption reduces at a higher age of 60 and above. The genderdifferential of the consumption shows a remarkable market penetration to the mens wear segment than thewomens wear. The womens wear segment of denim trousers goes to lower age groups and the higher agegroups very quickly discard the denim use. This may be because of Indian tradition and comforts of otherwears while the women are indoors.

Table-2Demand of denim in 15 major cities in India

Cities Mn Pieces Share Rank

Mumbai 6.47 30.1 1

Delhi 5.65 26.3 2

Hyderabad 1.53 7.1 3

Chennai 1.21 5.6 4

Lucknow 1.08 5.0 5Bangalore 1.03 4.8 6

Kanpur 1.00 4.7 7

Kolkata 0.8 3.7 8

Nagpur 0.79 3.7 9

Ahmedabad 0.64 3.0 10

Jaipur 0.63 2.9 11

Indore 0.33 1.5 12

Chandigarh 0.19 0.9 13

Coimbatore 0.06 0.3 14

Guwahati 0.05 0.2 15

0.2

0.3

0.91.5

2.9

3.0

3.7

3.7

4.7

4.8

5.0

5.67.1

26.3

30.1

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

(in Mn mtrs)

Guwahati

Coimbatore

Chandigarh

Indore

Jaipur

Ahmedabad

Nagpur

Kolkata

Kanpur

Bangalore

Lucknow

Chennai

Hyderabad

Delhi

Mumbai

Consumption of Jeans in Major Cities of India


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Table-3

Demand of Denim Trousers by age groups

Age Group % Share

0 to 5 6.03

6 to 14 16.94

15 to 24 47.80

25 to 39 24.36

40 to 59 4.41

> 60 0.46

Total 100.00

Table-4

Gender differential Demand of denim trousers

Conclusion:

Given the increase in the level of prosperity in the Indian population and shift of preferences to thehigh priced product, mostly directed to ready to wear segment particularly the denims; the vast Indianconsumer market present a unique opportunity to the domestic an International retailers and wholesalers ofdenim products. Since the prices of denim product is falling on account of excess supply position, the priceof the denims are setting to fall further which becomes a bonanza to the consumers. The buyers market ofthe denims is likely to remain for another 5-10 years. Therefore, all the international producers and retailchains are looking for India as a fabulous market for them. In view of the above, the coming years will seelarger penetration of denim products to the Indian markets, in the face of a strict competition between theretailers and suppliers.

Age Group Male Female Total

0 to 5 89.66 10.34 100.00

6 to 14 73.37 26.63 100.00

15 to 24 79.00 21.00 100.00

25 to 39 84.43 15.57 100.00

40 to 59 97.00 3.00 100.00

> 60 100.00 0.00 100.00

Total 86.03 13.97 100.00

Age group wise Consumption of Jeans

6 to 14

16.94%

15 to 24

47.80%

25 to 39

24.36%

40 to 59

4.41%

> 60

0.46%

0 to 5

6.03%


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Notes :

1. Indian economy is the fourth largest in the world. When ranked on the basis of GDP by purchasingpower parity, India is now behind only the United States, China and Japan. When ranked withexchange rate method, India is the 13

thlargest 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 ruralbasket (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, andthe 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 Reebokand 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 , [email protected]

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Denim Demand