Apparel Retailers Betting On Big Fat Indian Wedding After Diwali Lull

This year, the festive season brought a little less sparkle for apparel retailers. But as India's wedding season kicks off, they remain optimistic.

The upcoming wedding season, which runs from Nov. 23 to Dec. 15, is expected to result in spending of Rs 4.74 lakh crore on items like gold jewellery, clothing and other consumer goods and services, according to the Confederation of All India Traders, the country's largest traders' group. Bulk of this spending will go towards jewellery, closely followed by suits to sarees, it said.

CAIT's estimates point to a buoyant economy. But weaker-than-expected sales in the festive season this year left India's Rs 6.8 lakh-crore largely unorganised apparel market unsure of how the wedding season would pan out. The festive and wedding period are key drivers of growth in the third quarter which, according to Crisil Ltd., accounts for 35% of the annual revenue.

"Consumer sentiment remains subdued," said Rahul Mehta, chief mentor, Clothing Manufacturers Association of India. Citing a recent survey among 166 apparel manufacturers in the middle of the festive season, Mehta said that the uncertainty is more pronounced in the metro cities.

"Nearly 80% of respondents expected tier 2 and tier 3 cities to outshine metros," he said. "About 67% projected that clothing in the mid-price range would do better than the expensive clothes or even the low-priced ones."

CMAI, the apex retail industry body that represents 20,000 retailers, however, said that there has been an "encouraging" upswing in demand over the last few days.

"Ethnic wear is doing particularly well, and we are hoping that the wedding season will turn out to be brighter," Mehta told BQ Prime.

The expected splurge in the wedding market also underscores the K-shaped recovery in the Indian economy. While consumption at the higher end remains strong, it's yet to pick up among value-conscious consumers.

"At an overall level, the picture looks flattish to marginally positive for some businesses, extremely good for wedding-related businesses, but for the lower end, the business continues to suffer from the underlying demand challenges," Ashish Dikshit, managing director of Aditya Birla Fashion and Retail Ltd., told analysts during a conference call on Nov. 10.

The value segment is stressed due to an increase in personal indebtedness, elevated rental and health costs as well as low wage hikes, he said. The premium brands—which occupy a niche between mass-market retailers and luxury brands—are doing relatively better, he said.

"We are already beginning to see a tremendous shift in trajectory as far as wedding-related and ethnic businesses are concerned at the higher end, at least the designer wear, Jaypore, Tasva, etc."

For Arvind Fashion, too, the business had been sluggish till early November. While demand scenario was "uncertain, Shailesh Chaturvedi, managing director and chief executive officer told investors in the second-quarter earnings call that he was hoping for a pick-up in the later part of the quarter that coincides with wedding shopping.

Crisil Ltd. expects formalisation and expansion by larger brands to drive growth. Based on its analysis of 39 organised apparel retailers—which contribute a fourth of the Rs 1.9 lakh crore revenue of the formal segment—Crisil estimates demand should improve with continuous store expansion and the onset of the wedding season in the third quarter.

Nitin Mohan, co-founder and director of Blackberrys, is targeting higher growth in the wedding season than the festive period. The menswear brand, known for its premium formal and wedding suits, expects to clock more than 30% growth. "We are fully equipped to meet the needs of both those getting married and those attending."