Currently pegged at $165 billion and estimated to reach $220 billion by 2020, the global kidswear market is a ‘big’ deal. And with India comfortably finding a place amongst the top two exporters of the product, for its exporters, it's a case of splendidly lucrative opportunities abound! The Dollar Business unearths what makes Indian kidswear so sought-after in foreign lands.
Neha dewan | August 2016 Issue | The Dollar Business
If you even had the slightest perception that the kidswear market was not a big affair, think again. A recent report titled, 'Global Children's Wear Market 2016-2020', from Research and Markets, predicts the global kidswear market to grow at a CAGR of more than 6% by 2020. What's more? The global kidswear market, as per industry estimates, is currently pegged at $165 billion. And a CAGR of 6% would mean the market crosses the $220-billion mark by 2020. That's a big number!
And while the domestic market is witness to a large number of Indian and international brands jostling for space, the scenario in exports from India is no less promising. A recent report by retail consultancy Technopak Advisors predicts the Indian kidswear market to reach $22 billion by 2023. At present, as per industry estimates, the kidswear market in India stands at $10 billion and is growing at a robust rate of 11% y-o-y.
Export wise, India comes in second, just after China, in the line-up of baby garment exporters (UN Comtrade data). While China is miles ahead with about 35% share in global exports (China exported $2.57 billion worth of kidswear in CY2015), Bangladesh (with exports of $690.91 million in CY2015) has taken great strides and plays a catch-up to India. When it comes to India, the exports of kidswear from the country have grown more than threefold over the last decade to reach $702.90 million in CY2015 from $204.90 in CY2006. UK, USA and UAE are some of the biggest export markets for Indian kidswear.
So, what makes Indian kidswear a much sought after product among international consumers? “Outside India there are many brands, so unless you have something unique it won’t make sense to sell in such a market. That is why we focus on our Indian collection for overseas clients. If you don’t have something that differentiates you from others, why would someone buy your product over something cheaper?” asks Karina Rajpal, Joint Managing Director of designer kidswear brand Kidology.
The brand – which was launched just six years ago and positions itself as affordable luxury – works with multi-designer stores in Dubai, Singapore, London, Toronto and New York and promotes its Indian line with NRIs abroad. Currently 30% of the company's revenues come from exports – but not without a clear strategy that gives their brand a distinct identity across international markets.
And then there are other reasons. Indian baby garments are also in demand as India is a major supplier of cotton apparels, which forms a significant part of the kidswear section. In that sense, India has a clear advantage over other countries since a large part of the summer range for children is cotton-based. Moreover, a lot of NRI clients look at Indian exports to source ethnic wear for their children due to the lack of feasible options in the country in which they reside.
The kidswear market in India is currently dominated by unorganised players, with the branded market accounting for a very small market share. "Over 95% of the market is still unbranded," states a recent Technopak analysis of Indian kidswear market. Despite this fact, exports of kidswear from the country has grown considerably over the last few years. "In the last financial year, India accounted for $945.5 million of the total global trade, worth $10,244.7 million, of kidswear. Through this enhanced trade, the country has made to the top 10 exporters and now holds the seventh position among all apparel exporters," Ashok G. Rajani, Chairman of Apparel Export Promotion Council (AEPC), tells The Dollar Business.
Rajani says that though exports have got a leg up now, they can be further increased by strictly adhering to the high international standards. “Global standards in this category are the most stringent – be it flammability, choke free, skin friendliness, dirt resistance, etc. Quality of fabric and accessory have to be high to succeed in gaining export orders in this segment, as consumers in our key export markets like US and Europe are very particular about the fabric that their children wear. Exports can also be improved by broadening the fabric base, as many fabrics are still not available in the right specifications,” he says.
In fact, the safety aspect of the garment is most seriously looked at in developed markets. There is also, understandably, more of an inclination for cotton-based clothing as opposed to synthetics for children due to its comfort and ease on the skin. Interestingly, it is also known that manufacturing of kidswear is far more complex than clothing for grown ups due to smaller garment sizes.
But the opportunity surely is huge and one which everyone is looking to tap into in a big way. A lot of relatively new domestic kidswear brands that have come up in the market are also toying with the idea of spreading their wings to overseas markets. For instance, designer brand Nee & Oink, which incorporates ‘whimsy’ in their range of kidswear has plans of expanding their portfolio into exports in the future. “Some of our customers have already reached out to us after moving out of India, so it is only a matter of time before we expand. We feel the convergence of east and west is still at an evolutionary stage outside of India. We want to ensure that we have a large and stable enough base in a market before we try to create retail and distribution options in that market,” Neelakshi Ray, Design Director & Co-Founder, Nee & Oink, tells The Dollar Business.
However, despite all the bullishness about the kidswear market and a more ‘evolved’ clientele, certain key challenges faced by an exporter continue to obstruct growth in this segment. Neelakshi Ray rues the logistics challenge, which act as a major downer. “Given the high cost of transportation and shipping, and an exorbitant cost of producing and maintaining inventory in a consignment-based market (as is the case with most boutiques), the required investment is daunting,” she adds.
Beside these, there are hurdles like congestion at ports, labour laws not complying with contemporary times, high labour costs in India and a lower investment on marketing and branding of such products that hamper business. “This market has immense potential but it is yet to be tapped completely. India will need another 4-5 years to experience the real status and demand that the kidswear segment offers. This market will surely come on par with the other segments in the next few years,” says Isha Arora, Founder, PNK, a brand which does fairy-tale inspired designs for girls.
The fact that a host of international kidswear players have stepped into the market has also helped in creating a positive image about Brand India. This has helped spur up imports as well. Malaysian kidswear brand Poney stepped into India and has plans of opening 25 more stores. Pepe announced plans of entering the kidswear segment, joining the likes of Zara, Tommy Hilfiger, Benetton and Gap in the flurry of brands vying for a chunk of the enormous baby garments’ market in India. The Children’s Place – America’s largest specialty retailer of children’s apparel and accessories – also made an entry in the Indian market last year, catering up to the 14 year-olds.
Indian Exporters Are Supplying To Some Best Known Kidswear Brands Across The World
Perhaps then, with a bit of tweaking of strategies, exporters can hope to gain a competitive advantage and play up on their strengths to capture a larger share in the international market. Support from the government in terms of creating awareness internationally about India’s design capabilities in this space, well-planned initiatives to promote Indian kidswear designers and brands in overseas markets and provision to claim incentives and duty drawbacks without any tedious hassles can go a long way in giving the much-needed thrust to this sector. No kidding about that!
Ashok G. Rajani Chairman, Apparel Export Promotion Council (AEPC)
TDB: What promotional activities have AEPC taken up to boost exports of kidswear from the country?
Ashok G. Rajani (AGR): There is no product specific support that AEPC offers. It’s an industry body which helps promote interests of all apparel exporters by providing them various platforms and opportunities. It acts like a body representative of apparel exporters and works towards exploring opportunities for exporters in general. It also helps in obtaining policy support in the form of MEIS and duty drawbacks, apart from helping exporters gain better access to raw materials and various other inputs.
However, in terms of market entry strategy, AEPC does conduct awareness workshops, colour forecast seminars, etc., which can help exporters in developing better products.
TDB: In your opinion, how mature is the market for kidswear in India? How do you compare it with other developed markets in the West?
AGR: When we talk about kidswear segment, the segment has witnessed substantial growth in the last few years. In the last financial year, India accounted for $945.5 million of the total global trade, worth $10,244.7 million, of kidswear. Through this enhanced trade, the country has made to the top ten exporters and now holds the 7th position among all apparel exporters, from being among the top 20 a few years ago.
TDB: How well have Indian kidswear brands positioned themselves in overseas markets? And what about competition from countries like China, which offer more options at a lower price?
AGR: Indian baby garment exporters are suppliers to some of the biggest brands across the globe. However, when we try to locate an Indian brand which could compete with foreign brands, we find that most exporters have evolved only as a supplier to a big brand. Indian brands are yet to create a unique space for themselves. And for that they need to focus on brand development.
TDB: Is AEPC also promoting ‘Brand India’ globally, specifically when it comes to kidswear domain?
AGR: AEPC has been promoting ‘Make in India’ campaign through India pavilions and standalone fairs in several important markets across the globe.
TDB: How have exports in this segment shaped up over the years? Is it seen as a lucrative business proposition?
AGR: As far as exports from this segment are concerned, there has been a remarkable improvement in the last few years. It is, indeed, a lucrative segment and holds immense potential. Indian apparel industry has benefitted from the rise of international brands in this segment and is today a prominent supplier to many global brands. Kidswear from India are in great demand worldwide.
TDB: In what ways do you think can exports be pushed up in this segment?
AGR: Exports can be increased further by strictly adhering to international standards. Global standards in this category are the most stringent – be it flammability, choke free, skin friendliness, dirt resistance, etc. Quality of fabric and accessory have to be high to succeed in gaining export orders in this segment as consumers in our key export markets, like US and Europe are very sensitive about the fabric that their children wear. Exports can also be improved by broadening the fabric base, as many fabrics are still not available in right specifications. Specialty fabrics, like stain resistant, dirt free, etc., can offer better price realisation in this segment.
TDB: Have you lined up any activity to boost kidswear exports from India?
AGR: Yes, the baby garments segment is one of the target segments for AEPC’s product development strategy. Awareness generation on potential markets and quality requirements are some of the activities planned for the promotion of exports in this segment.
Karina Rajpal Joint Managing Director, Kidology Design India LLP
TDB: How did Kidology evolve as a brand in India?
Karina Rajpal (KR): When we started, there was really no one in this segment. However, the biggest challenge for us at that time was to break the mindset about pricing. Our average price point was Rs.4,000 per product. So, when we came in, we had to try to push the mindset of the consumer and introduce them to this new price point. We experimented with adjustable features and tried to make kids comfortable in their clothes so that parents get a lot of wear out of them. And, it did take customers some time to get used to our price point. Today, they are far more willing to spend on kidswear. Adults see children as a representation of themselves and they want their kids to look good. The market was different when we stepped in six years ago. Today, customers seek us for a product. We have positioned ourselves as an affordable luxury brand in this segment.
TDB: What percentage of your revenues come in from exports? How do you plan to further increase the share?
KR: What we are doing now in terms of exports is that we have our own website and we also have partnered with other websites. There are about 15-20 websites that we are currently working with. Besides, we are also working with multi-designer stores in Dubai, Singapore, London, Toronto and New York. We export to them – while some are bulk orders, we also cater to individual customers who approach us through our partner websites. We are, in a big way, trying to promote our Indian collection with NRIs abroad because there is a big demand for designer kidwear right now and nobody is really serving that market. No one is focussed on doing a designer wear or an occasion wear from an export perspective, and that is the market that we are focusing on. It is still a market which is getting built up.
At present, about 30% of our revenues come from exports. The focus going forward is to grow this segment even further, especially now with our focus on e-commerce. We would like to keep it going higher since there is a big market internationally. Even though the Indian market is huge, we have seen that there is a big surge of demand outside of India and to tap into that we are using these websites as they have a wider reach in terms of marketing. Largely for our exports, it is our Indian line that we are selling because consumers are not able to get something of the quality and design value that we provide in the countries in which they reside. Our design, detailing and fabrics is our USP and that works well with
our clientele.
TDB: Do you import any material to design the kidswear collection?
KR: No, we don’t import – whatever we use is locally sourced. We try to use, as far as possible, cotton for lining to make it soft on the kids’ skin and breathable, so that the kids are comfortable wearing our designs and clothes. We have, however, in the past used some Korean fabrics or prints in our Gauri and Nainika collections and also some taffetas and silks from China, but now all our fabrics are sourced locally. We don't import anything directly as of now.
TDB: What challenges do you face as an exporter?
KR: The main issue is that shipping is very expensive. When we are sending single orders – it becomes quite a big cost for us. Duty drawbacks are there on the bigger orders, but it is very hard to meet the requirements. One has to fulfil certain criteria to be able to claim duty drawback. Further, it is quite difficult to get duty drawback on single orders that we receive through our website. As an industry, if we can get our shipping costs down, that would really help us in growing our business at a much faster rate.
TDB: In your opinion, how evolved is the market for kidswear in India? How does India stack up vis-a-vis other developed markets?
KR: Ours is still a very young industry in India and is dominated by unorganised players. Further, a vast majority of customers are still shopping from mom-and-pop shops. And then, there are very few local brands. But as more international brands are now entering the market, the landscape is becoming better and there are definitely more choices for the customer. However, we are still way behind the developed economies when it comes to kidswear market. People are still price conscious and prefer to buy an unbranded product from a smaller shop. Hence, we are not trying to specialise in the mass market, but rather keeping our focus on occasion wear where the customer knows what they want.
TDB: There are a lot of international kidswear brands that are now present in the Indian market. More choices exist for the consumer. In such a scenario, what makes Kidology stay afloat?
KR: If people are looking for something more price sensitive and casual, they will go to these brands since we are not competing in that category. We are more focused on occasion wear. Our segment is more defined in that sense.
TDB: What expansion plans do you have in mind for the brand?
KR: We will continue working online. For the moment, we are not expanding our retail format unless it is with shop-in-shops. Export wise, we do a lot of trunk shows in different cities across the globe. These shows help us in getting some awareness in these markets. And then, we partner with various multi-designer stores internationally. For instance, in Singapore, we have partnered with Mythology which carries different Indian designer brands. Similarly, in Toronto we have partnered with stores that work with designers from South East Asia. All these efforts will continue to build our market.
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