INDIAN RETAIL SECTOR CONSUMER PREFERENCES TECHNOLOGICAL ADVANCEMENTS POLICY INITIATIVES GROWTH OPPORTUNITIES DELAWARE MCKINSEY KPMG INDIAN RETAIL INDUSTRY MARKET SIZE ORGANIZED RETAIL E-COMMERCE GROWTH RISING DISPOSABLE INCOME URBANIZATION I NATIONAL
MUMBAI, MAHARASHTRA, INDIA
By IFAB MEDIA - NEWS BUREAU - December 20, 2024 | 536 9 minutes read
The Indian retail sector, already one of the fastest-growing in the world, is set to undergo a transformative journey in 2025. With a dynamic mix of evolving consumer preferences, technological advancements, and policy initiatives, the Indian retail landscape promises immense growth opportunities. Leading research firms such as Deloitte, McKinsey, and KPMG have highlighted significant trends that will shape the sector, presenting a holistic view of what lies ahead.
The Current State of Retail in India
As of 2024, India’s retail industry stood at a market size of approximately USD 950 billion, making it the fourth-largest retail market globally. The sector has been growing at a steady CAGR of 9-10% over the past decade, driven by rising disposable incomes, urbanization, and increasing internet penetration. According to Deloitte, organized retail in India is expected to grow from its current share of 18-20% to about 25-30% by 2025, as modern trade and e-commerce continue to expand.
E-commerce and Omnichannel Growth
One of the most prominent trends shaping retail in India is the rapid growth of e-commerce. According to a report by McKinsey, the Indian e-commerce market is projected to reach USD 120-140 billion by 2025, up from USD 75 billion in 2023. This growth is driven by an increasing number of internet users, affordable smartphones, and widespread adoption of digital payments.
However, the real game-changer is the rise of omnichannel retailing, where online and offline experiences merge seamlessly. Research by KPMG suggests that 60-65% of Indian consumers prefer an integrated shopping experience, highlighting the need for retailers to invest in both physical stores and digital platforms. Leading players such as Reliance Retail, Tata Neu, and Aditya Birla Fashion are already setting benchmarks by blending online convenience with offline experiences.
Tier 2 and Tier 3 Cities: The New Growth Frontiers
The untapped potential of India’s smaller cities is expected to drive the next phase of retail growth. Deloitte’s report indicates that 60% of India’s retail growth in the next 2-3 years will come from Tier 2 and Tier 3 cities. Factors such as improved infrastructure, increasing aspirations, and higher disposable incomes in these cities are encouraging brands to expand their footprint beyond metros.
Brands are increasingly localizing their strategies to cater to regional preferences. For instance, retail chains are focusing on product customization, vernacular advertising, and local collaborations to connect with consumers in smaller towns. As a result, these markets are expected to deliver higher trading densities and better ROI for retailers.
Entry of New Brands
In the last one decade over 300 International brands have made their inroads into the Indian retail with most of them being successfully accepted by the consumers. It is expected that over 100 new brands from across the globe with enter the Indian retail market, thereby boosting presence of premium products across the retail sector, in various categories such as Fashion, Cosmetics & Perfumes, Healthcare, Leisure, etc. The Indian consumer would be more and more pampered and cajoled by all these new entrants.
D2C Brands to explode
In 2025, D2C brands in the Indian retail market are poised for significant growth, driven by increasing internet penetration, digital payment adoption, and the expanding e-commerce ecosystem. Personalization, superior customer experiences, and innovative product offerings will help D2C brands build loyal consumer bases. Many successful D2C brands are expanding their “Brick and Mortar” presence, thereby fuelling the consumption and market.
The integration of technology like AI for analytics and customer insights will refine marketing strategies and enhance engagement. Additionally, tier 2 and tier 3 cities will emerge as growth hubs, fueled by rising disposable incomes and aspirational consumption. A strong omnichannel presence, leveraging both online platforms and offline touchpoints, will be crucial for sustained success.
Technology and Digital Innovation
Technology is revolutionizing the Indian retail ecosystem. Artificial Intelligence (AI), Augmented Reality (AR), and data analytics are playing pivotal roles in enhancing customer experience and operational efficiency. According to McKinsey, AI-driven personalization alone can boost retail revenues by 10-15% by 2025.
Smart retail technologies, such as cashier-less stores, automated inventory management, and virtual try-ons, are no longer futuristic concepts but emerging realities. For instance, leading fashion and electronics retailers are increasingly adopting AR-based solutions to enhance in-store and online shopping experiences.
Sustainability and Conscious Consumption
Another key trend shaping retail in 2025 is the growing focus on sustainability and conscious consumption. Research by Deloitte highlights that 70% of Indian consumers now consider sustainability as an important factor in their purchase decisions. Brands are being pushed to adopt sustainable practices such as eco-friendly packaging, ethical sourcing, and reducing carbon footprints.
Retailers who align their strategies with environmental and social responsibility are likely to gain a competitive edge. For example, companies like FabIndia and Tata’s Taneira have built their brand ethos around sustainable and artisanal products, resonating deeply with evolving consumer sentiments.
Government Policies and Regulatory Support
The Indian government’s initiatives are playing a significant role in boosting retail growth. Policies such as FDI relaxation in single-brand retail and initiatives like Digital India and Make in India are driving investments and innovation in the sector. According to KPMG, India’s retail sector is expected to attract USD 15-20 billion in investments by 2025, further strengthening infrastructure and creating employment opportunities.
Additionally, the implementation of GST has streamlined taxation, creating a more organized retail ecosystem. Retailers now benefit from reduced costs, simplified supply chains, and improved logistics, leading to greater efficiency.
Challenges and Opportunities
While the outlook for retail in India remains optimistic, the sector is not without challenges. Rising inflation, supply chain disruptions, and fierce competition could pose hurdles. However, the opportunities far outweigh the challenges. India’s young demographic, growing middle class, and increasing digital adoption ensure that the sector remains on a robust growth trajectory.
Way forward…
The year 2025 marks a new era for Indian retail—one defined by innovation, inclusivity, and sustainability. Backed by insights from top research firms, it is clear that e-commerce, omnichannel strategies, Tier 2 and Tier 3 expansion, and technology adoption will drive the sector forward. As the lines between online and offline retail continue to blur, businesses that adapt to changing consumer behaviours and embrace digital transformation will emerge as industry leaders.
With India poised to become a USD 1.3 trillion retail market by 2025, the opportunities for growth are boundless. Retailers who remain agile, consumer-centric, and forward-thinking will not only thrive but also shape the future of retail in India.
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Beginning his career, as a salesman in 1985, Susil S DUNGARWAL, is one of the few, who has grown from the “Shop floor” to the “Boardroom” in the retail & shopping Mall sector. Over the last 38 years, he has headed various retail chain stores and Shopping Malls. Along the way, he left his mark on renowned retail brands such as Saint Mark, Sampath Jewellers, Paramveer, Silknots International, Big Kids Kemp, Saree Kemp, Shoppers’ Stop, Varsha Lifestyles, Haiko Supermarket, The Loft, The Culture Shop (now Suriti), and The Loot, to name a few. He has been an advisor of the best names in the Shopping Mall Sector prominent being Lulu Group, DLF Group, TATA housing, Malabar Group, Omaxe Group, Supertech Group, Gokulam Group, Chaudhary Group(Nepal), Alpine Group(Nigeria), Smile group (Oman), etc. Over the years, he has been actively advised on a staggering 100+ Malls, collectively spanning about 35 millions of square feet and spanning across six different countries. It is no surprise that he has earned the nickname as the "Mall Mechanic” a testament to his unparalleled expertise and invaluable contributions to the ever-evolving world of Shopping Mall development and management. He has been a keynote speaker & panellist in various Indian & International Shopping Mall forums, seminars and conferences. He is also winner of over 40+ national & international awards for his achievement in Retail & Shopping Mall Sectors. He recently authored a book titled “The Mechanics of Malls”, which has been globally appreciated. His first 2 books as a part of the “Knowledge Series” covering the entire retail sector prospects of India, were released by The Economic Times Intelligence Group (ETIG) titled “Changing Gears – Retailing in India 2000-2001” and then the second edition of the same Knowledge series was published in “2002-2003”. |
About Beyond Squarefeet Beyond Squarefeet is India's first & largest Mall Advisory & Mall Management Company. Termed as the “Shopping Mall Specialists” Beyond Squarefeet specializes in end-to-end services managing everything from Mall Conceptualization to Mall Management. Beyond Squarefeet is recognized as the Mall Mechanics managing the entire spectrum of any Mall project including but not limited to Mall Conceptualization, Mall Positioning, Mall Marketing and Leasing, Fit-Out Management, Asset and Mall Management, Mall Re-orientation, etc. Beyond Squarefeet has hand-holded various real estate conglomerates such as Lulu Group, DLF Group, , Tata Housing, Omaxe Group, Malabar Group, Alpine Group, Smile Group, Utkal Group, etc. in over 87 projects spread across 33+ million sq. ft. in India, Iran, Nepal, Nigeria, Oman and Qatar.