Retail Prospects / India Story Commentary

Retail in India – 2025: A Promising Future Backed by Insights and Statistics

With India poised to become a USD 1.3 trillion retail market by 2025, the opportunities for growth are boundless. Although challenges like rising inflation, supply chain disruptions, and fierce competition could pose hurdles, retailers who remain agile, consumer-centric, and forward-thinking will not only thrive but also shape the future of retail in the country. An insider’s analysis.

Susil S Dungarwal

2 January 2025

4 minutes

Long Story, Cut Short

Organised retail in India is expected to grow from its current share of 18–20% to about 25-30% by 2025.
The retail sector in the country is expected to attract USD 15–20 billion in investments by 2025.
Research highlights that 70% of Indian consumers now consider sustainability as an important factor in their purchase decisions.

The untapped potential of India’s smaller cities is expected to drive the next phase of retail growth. A research report indicates that 60% of the country’s retail growth in the next 2-3 years will come from Tier 2 and Tier 3 cities.

New Growth Frontiers The untapped potential of India’s smaller cities is expected to drive the next phase of retail growth. A research report indicates that 60% of the country’s retail growth in the next 2-3 years will come from Tier 2 and Tier 3 cities. StockSnap / Pixabay

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 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.

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, urbanisation, and increasing internet penetration. According to Deloitte, organised 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.

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 the country’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 localising their strategies to cater to regional preferences. For instance, retail chains are focusing on product customisation, 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.

Susil S Dungarwal

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 ‘Board room’ in the retail & shopping mall sector. Over the last 38 years, he has headed various retail chain stores and shopping malls. He has also advised a staggering 100+ malls, collectively spanning about 35 million square feet across six different countries.

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Entry of New Brands

In the last one decade over 300 international brands have made inroads into Indian retail with most of them being successfully accepted by the consumers. It is expected that over 100 more brands from across the globe will 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 these new entrants.

D2C Brands to Explode

In 2025, D2C brands are poised for significant growth, driven by increasing internet penetration, digital payment adoption, and the expanding e-commerce ecosystem. Personalisation, superior customer experiences, and innovative product offerings will help D2C brands build a loyal consumer base. Many successful D2C brands are expanding their brick-and-mortar presence, fuelling consumption and the 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, fuelled 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 revolutionising 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 personalisation 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.

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.

India’s young demographic, growing middle class, and increasing digital adoption will ensure that the retail sector remains on a robust growth trajectory.

Poised to grow India’s young demographic, growing middle class, and increasing digital adoption will ensure that the retail sector remains on a robust growth trajectory. StockSnap / Pixabay

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 organised 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 the country.