Denim companies see boom in small towns on brand aspirations

Denims are selling briskly in Tier-2 and Tier-3 towns, reaping the benefits of a growing number of customers with rising aspirations.

The fabric, which was historically worn by sailors from Genoa, Italy and owes its denim name to the French town of Nimes, is known for its durability. In the latter part of the last century, however, it began to be promoted more as fashion wear, with brands focusing more on the urban market. In India, denims with labels such as Arvind Brand's Flying Machine, Spykar Lifestyles and Yepme, among others, are gaining popularity among consumers who are moving from unbranded or locally branded products to nationally well known labels.

"The aspiration levels of people are going up everywhere and so is their exposure to media and advertising," says J Suresh, MD and CEO, Arvind Lifestyle and Brands. "Brands have also taken chances and opened stores in these towns."

According to Technopak, the unbranded denim market in the overall denim business of $1290 million in 2012, is likely to fall by a tenth to 48 per cent by 2017, while the mass market and mid-premium brands will together be about 31 per cent of the market, up from 26 per cent in 2012. A report by the company says the denim category is expected to witness volume growth due to increased penetration in the rural geographies and smaller Indian cities and its association with 'casualisation' and fashion. "This is a reflection of the aspiration to engage with fashion percolating beyond metro centric urban centres," the report states.

Arvind Lifestyle, which moved to Tier 2 and Tier 3 towns about three years back with its Flying Machine brand, has stepped up its inroads into this region in the past one year. The company currently has 160 stores in the country, out of which about 100 are in Tier 2 and Tier 3 towns.

"Local brands were all sub thousand rupees earlier and they have also moved above up to Rs 1200-1300 now. This has also pushed denim consumption towards branded jeans because people have to pay just about Rs 300 more for known brands," says Suresh. He also feels that people, even in smaller towns, are increasingly willing to spend higher amounts on denims as rising cotton costs have pushed up prices of the overall category.

Spykar Lifestyles Pvt Ltd with its namesake brand is not just moving into Tier 2 and 3 towns, but is now looking at Tier 4 towns for expansion. Sanjay Vakharia, the company's director says, urban markets are already well explored and the growth for brands such as Spykar now lies in the smaller towns.

Denim consumption in India is at a mere 0.3 pairs per person, while that in the United States is as high as 8 to nine and stands at almost two in China, says Prashant Agarwal, joint managing director of Wazir Advisors. "When we say the consumption of 0.3 is to be taken to one, we have to go to Tier-2 and Tier-3 cities," Agarwal says adding that brands moving to smaller towns will create a fashion statement and result in more consumption.

Spykar, which currently has 60 per cent of its 300 stores in Tier 1 and Tier 2 cities, is looking at 200 more stores to be added in two to three years time and about 150 to 160 of them would be in Tier 2, 3 and 4 towns. Vakharia feels that being a brand with smaller format stores helps it reach out to these markets better than brands that are much bigger.

There are also a growing number of people who buy jeans online, looking at websites such as Yepme, Flipkart, Jabong and Myntra for these products. "These brands are mostly converter brands," an industry source says, adding that people who are used to spending around Rs 500 on a product, would not be willing to spend more than a 20 to 25 percent premium on the product. And this is where e-commerce brands benefit as they are able to manage costs better and reach places where lack of infrastructure makes distribution a difficult proposition.

Suresh, however, feels that denim e-retailers are much smaller at this stage but will contribute more in the future.