What might Dominate in the Retail Industry this Year?

According to the 53rd Retail Business Survey by the Retailers Association of India (RAI), the Indian retail industry grew by 2% in 2024 compared to the corresponding period in the previous year. Of the various retail categories, food and grocery recorded the highest growth, at 6%, followed by a 3% increase in apparel and jewellery.

As 2025 approaches, the retail industry across categories is expecting a range of trends for the year. Shish Kharesiya, the founder and CEO of Baby & Mom Retail Pvt. Ltd., states that the Indian retail market is set to experience growth in Quick Commerce. "Major players like Reliance are entering this space, aiming to compete with established platforms such as Zomato, Swiggy, Blinkit, and Zepto," he says, adding that there is an increasing trend of brands bypassing traditional retail channels to engage directly with consumers. 

Investments from global retailers and luxury retailing

The retail market size in India is projected to reach approximately $1.7 trillion by 2026, up from $883 billion in 2020, according to Statista. Kharesiya anticipates the growth of D2C brands this year, along with a surge in India's luxury market, which is "becoming increasingly attractive to global brands." While sustainable approaches are likely to grow further, the founder also mentions that there has been increased investment from global retailers. "International companies are recognising India's market potential, leading to increased investments and partnerships. For instance, French companies are expanding their footprint in India, viewing it as a burgeoning market similar to China two decades ago," he adds.

In the next five years, traditional retail sales are estimated to increase to $1.38 trillion, reflecting the sustained importance of traditional retail channels in India. Expecting growth in luxury retailing, the founder and MD of Divine Solitaires, Jignesh Mehta, says that the rising popularity of an omnichannel retail presence will further boost sales. "The natural diamond sector has seen its fair share of ups and downs post-COVID, but we do hope to see some form of stability this year. High-net-worth individuals will continue to drive demand for large-carat natural solitaires. We will see the market strive to adapt to the dynamically evolving behavioural shifts among consumers," he says, adding that the luxury category in the market is likely to see significant growth, reflecting renewed consumer confidence and aspirational spending habits.

A relaince on the young gen

Mehta counts the "rising aspirations and digital penetration" from Tier-2 and Tier-3 cities as key factors for growth, especially in luxury retailing. "We will see shifting behaviour for jewellery among customers, particularly driven by generational shifts. Young consumers will continue to drive brand enthusiasm as they choose to purchase jewellery from companies that represent their values," he adds.

Harsh Somaiya, co-founder of The Bear House, says the younger generation will be responsible for driving sales. Their spending patterns will reflect their conscious fashion choices, and we will see customers opting for considered purchases rather than impulsive buying. Brands that prioritise authenticity and transparency while delivering personalised shopping experiences will be well-positioned to capture a larger market share, as they will be more adept at meeting consumer expectations."

AI shaping the industry

Somaiya, who is planning to diversify his brand's presence through a number of offline retail stores as well as by utilising digital mediums, also hints at the "transformational shift" that AI has brought and is likely to accelerate. "New-age technologies like AI will help brands master personalisation and gauge customer sentiment, innovative omni-channel strategies adopted by brands to make their products accessible to all, and strong digital marketing campaigns are some of the drivers of growth in 2025," he further adds.

The growth of the retail industry has been the result of factors including increased disposable income, a growing middle class, urbanisation, and the rise of e-commerce. The retail sector's growth is also expected to contribute to employment, with projections indicating a 9% increase in hiring in 2025, led by sectors such as IT, retail, telecommunications, and banking. Bigger chains, like malls, have caught up with the trends of incorporating live shows and entertainment options to create engaging experiences, and as Gaurav Balani from Infiniti Mall suggests, the retail and mall industry will continue to focus on immersive and experiential shopping environments, investing in emerging technologies, and adapting to evolving consumer behaviours.

Challenges, a reality-check

Reportedly, Kumar Rajagopalan, CEO of the Retailers Association of India (RAI), while sharing the 2% growth in the retail sector for the year, also stated that the retail sector in India is facing challenges as businesses have yet to witness real growth compared to the previous year. "Most of the retailers are stating that they have negative growth on a like-for-like basis, which is a cause for concern," he had said.

Nakhul Joseph, Executive Vice President - Retail/Franchise & Human Resources at Paragon Footwear, mentions that after the spike in growth during 2021-2022, post-COVID-19, the offline Indian retail sector has been gasping for growth for the past two consecutive years, with reduced footfalls and bill values. "The growth rate of major Indian retail brands is either negative or in the minuscule single digits. Due to cautious spending by customers, the same-store growth rate of Indian retailers has fallen, with most stores experiencing de-growth," he says, adding that the impact is severe in the apparel, footwear, and fashion verticals. According to him, same-store growth rates, footfall growth, and average bill values are expected to remain flat throughout 2025 unless there is a price increase to offset higher input costs. "During 2025, profitability will still be a challenge at the store level due to higher real estate costs, especially for stores in key high streets and malls. Rationalisation in store count is inevitable during this year," he adds.

However, he states that things are expected to improve during the festive season of Q2 2025. "More action can be expected in Tier 2 and Tier 3 cities. With an increasing middle-class population in these cities and their aspiration for brands, there is definitely an opportunity for retail brands to establish a presence there. Affordable rentals can be an added advantage in these locations. We can expect more penetration of organised retail in Tier 2 and Tier 3 cities during 2025. So, overall, we can expect single-digit sales growth across retail brands during 2025," he says.

Talking about the trends that the industry might encounter, Joseph says, "2025 can be a watershed year for value brands due to their affordability. Affordable value brands can gain strength, both in terms of sales and store count, during the upcoming year." Reiterating the importance of young customers, he also says that "a sizeable number of fast fashion young customers will play a prominent role in the growth of Indian retail brands". "Retail brands will try to attract these young crowds with better product assortments. Similarly, with more and more younger customers in-store, we can expect the casual category to grow across the footwear and apparel verticals," he adds.

The total retail market is expected to surpass Rs. 115 lakh crore, close to Rs. 1.15 trillion, by 2027.