Brazil leads, India #3 apparel retailer market

BANGALORE, INDIA: Brazil's high spending on apparel items and strong clothing imports - along with its consumers' preference for the latest fashions - make the country the most attractive emerging market destination for apparel retailers, according to a new study from global management consulting firm A.T. Kearney.

Brazil finished ahead of China and India in the A.T. Kearney Retail Apparel Index, which looks at ten drivers including apparel consumption and clothing imports/exports to rank the top 30 emerging markets for retail apparel investments.

"The Retail Apparel Index was published for the first time this year as a companion to A.T. Kearney's Global Retail Development Index (GRDI), a study of retail investment attractiveness among 30 emerging markets conducted annually since 2001. The analysis evaluates more than 20 apparel markets to identify the top 10 countries in terms of market size, growth prospects and consumer affluence" said Saurine M. Doshi, Partner, A.T. Kearney India.

"There is great potential for global apparel retailers to succeed in Brazil," said Hana Ben-Shabat, a partner with A.T. Kearney. "Brazil is the most attractive apparel market for reasons of demographics and demand."

Brazil's clothing market is growing at more than 7 percent annually and is estimated at $37.2 billion. The country is young, with more than 60 percent of population below the age of 29, and its consumers spend $402 annually on apparel - six times more than the average Chinese consumer. Brazilian consumers use credit for apparel purchases far more frequently than in other emerging markets. In addition, small, local retailers make up more than 60 percent of a highly fragmented domestic retail apparel market.

China and India closely trail Brazil in the Apparel Retail Index. Both countries have significant potential to increase the average spend per capita on clothing as prosperity continues to rise.

At $84 billion, China's apparel market is the world's third largest and organized apparel retail accounts for just 17 percent of it. Average monthly apparel spend is $45 to $90, which is significantly lower than most other countries. However, an affluent middle class that regularly buys mid- to high-end apparel is emerging in urban areas. These consumers buy up to three mid-to-high end outfits every year for special occasions, such as Chinese New Year, weddings and important meetings.

"There are emerging customer segments in China that are much more fashion-focused and brand aware," said Mike Moriarty, a partner with A.T. Kearney, "but international apparel retailers will need to adapt to the Chinese consumer's fashion sense."

"In India, apparel is the second largest retail category (behind food and groceries), representing 10 percent of the $37 billion retail market. It is expected to grow 12-15 percent per year as disposable income grows at rates higher than in China or the United States. Apparel retail growth will be driven by the burgeoning Indian middle class, the increasing development of apparel-focused shopping malls and the continued penetration of credit cards", said Hemant Kalbag, Principal - Consumer Industries & Retail Practice, A.T. Kearney India.

The top seven apparel companies account for less than 10 percent of the total apparel retail market in India and Indian consumers tend to be more loyal to a specific retailer than to an apparel brand. The result is a thriving private label apparel market.

"Like many developed countries, apparel retail in India is driven by sales promotion, with end of season sales, special events and frequent promotions utilized," said Ben-Shabat. "This behavior presents a challenge to retailers who are used to building their ranges and sales plans around a few key seasons and will now have to think more creatively about adjusting their merchandise plan to the local market."

Places number four through 10 on the Retail Apparel Index are occupied by Turkey, Chile, Romania, Argentina, Thailand, Russia and the United Arab Emirates, respectively.