Several of India’s leading retailers, including Reliance Retail, Aditya Birla Fashion and Retail, Shoppers Stop and Arvind Fashions, have accelerated store expansion in FY ’26 and signalled further additions in FY ’27, after remaining relatively cautious in FY ’24 and FY ’25.
The renewed expansion drive follows improving demand conditions in urban markets, aided by policy measures introduced in 2025, including income tax and GST reductions as well as interest rate cuts aimed at stimulating consumption.
However, a recent study by Vector Consulting Group has highlighted structural profitability concerns within organised retail. The report found that between 28% and 40% of retailers’ store networks remain unprofitable. It further noted that nearly 91% of organised retail stores in India experience revenue leakage at the shelf level, with many operating below optimal profitability.
While shelf velocity is a critical determinant of retail margins, only 9% of surveyed retailers use shelf throughput as a key metric for guiding daily buying, replenishment and display decisions.
P. Senthilkumar, Senior Partner at Vector Consulting Group, stated that retailers tend to protect margins tightly, often tolerating long lead times and engaging in opportunistic bulk buying. He added that the simultaneous expansion of stock-keeping unit (SKU) portfolios, combined with such procurement practices, leads to elevated inventory levels.
The study found that ageing inventory continues to occupy a significant portion of shelf space, particularly in apparel and footwear, where around 24% of on-shelf stock remains beyond its optimal selling window. Senthilkumar stated that this undermines shelf productivity and compresses the full-price selling window for new product launches. He observed that when corrective action becomes unavoidable, the volume of accumulated stock often results in significant financial impact.
Some industry executives regard unprofitable stores as an inherent feature of a dynamic retail business. P. Venkatesalu, Managing Director of Trent, stated that for businesses continuously evolving their customer proposition, it is necessary to reposition towards the centre of gravity of demand. He added that stores failing to represent the desired customer experience would eventually be phased out.
Consultants at Kearney observed that a hyper-local strategy may be more effective for retailers whose performance depends heavily on location advantages. They noted that some pan-India retailers reported store closures of 10%–15% in FY ’25, attributed to misalignment between location, format and local demand conditions.
The Vector study also indicated that processes to maintain inventory freshness are often weak or absent, resulting in reactive rather than systematic stock management. The findings were based on a survey of CXOs and business heads from 100 organised retail chains with annual revenues exceeding Rs. 500 crore (US $ 55.08 million).
Officials from Boston Consulting Group stated that retailers may need to define clear focus segments, make deliberate strategic trade-offs and align business decisions around a distinct core value proposition. They added that disciplined execution of store expansion plans could help reduce revenue leakage and improve profitability.
