The fashion and lifestyle space is India’s second largest consumer category, valued at $110 billion with approximately 10% online at $11 billion. The online fashion market overall is expected to grow to approximately $35 billion by financial year 2028 (FY28) at a 25% CAGR, according to a report jointly published by Bain & Company and TMRW, a house of brands within the Aditya Birla Group.
This market has been historically fragmented into several small brands and sellers. The vibrant local manufacturing ecosystem and rich tradition of native fabrics have led to a structurally unbranded market (particularly in certain categories such as ethnic wear). Venture capital/private equity funding in the lifestyle space has historically been relatively muted. However, this market is undergoing a significant change, the report indicates.
Consumer preferences are shifting, with an increasing willingness to experiment with new brands and a growing desire to wear aspirational brands. E-commerce has democratized access to fashion, including fashion brands. The category has seen around 30% historical growth, compounded annually, since 2019. Certain historically fragmented subcategories, such as ethnic wear and kids wear, are also undergoing significant transformation with the growth and scaling of new digitally led brands.
Market “brand-ification”
The online fashion market is approximately $11 billion and has grown at around 30% per year since 2019, led by four categories of players: national brands, private labels, digital disruptor brands, and unbranded sellers.
These players have seen different trajectories over the past four years:
National brands have turbocharged their online businesses, doubling online share, and now constitute $2.5 billion online in FY23, having grown at 34% between 2019 and 2023. However, most national brands expect to see a more balanced growth pattern with offline channels as the impact of the pandemic wanes.
Private labels have scaled to address underserved categories and price points, thereby expanding the target consumer base for branded products.
Digital disruptors have grown, especially in certain fragmented categories, to $2.4 billion, with 33% growth yearly since 2019. These new brands have focused on underserved parts of the market and created new offerings that index on value, design aesthetics, speed to market with new trends, or community engagement. Their digital-first operating model enables speed and data-led decision making.
Bain research suggests that the digital disruptor segment will grow rapidly. With a large current market size of approximately $2.4 billion and a projected annual growth rate of around 35%, digital disruptors have the potential to reach a value of $10 billion by FY28. Four major factors will underpin this shift:
Young audiences have a greater propensity to try to buy from new brands. As they constitute a growing share of online fashion purchases, the market for digital disruptors will grow.
Certain categories with underserved niches and brand fragmentation, such as expressive wear, ethnic wear, and fashion jewelry, allow digital disruptors to create new-scale brands.
Brands that have invested in creating greater awareness are already seeing nonlinear returns on conversion and share of wallet (SoW). Increasingly, this will support returns to scale for such brands to achieve significant leadership positions.
Over the last five years, beauty and personal care (BPC) ($950 million) attracted more funding than apparel ($430 million), excluding the top two outliers in each category. However, as brands demonstrate their scaling playbook, apparel is expected to attract more money.