India’s apparel retail market is poised for significant growth, with e-commerce leading the way. India Ratings and Research (Ind-Ra) projects e-commerce in the apparel sector to increase by 17 percent year-on-year (y-o-y) in FY25, outpacing the 7 percent y-o-y growth forecast for brick-and-mortar retail. Fast fashion, luxury, and ethnic wear segments are expected to outperform the broader market.
Social media influence, Gen Z’s preferences, rising consumer aspirations, and the trend towards organized retail in tier-2 cities and beyond will contribute to this growth. Ind-Ra expects EBITDA margins in the apparel retail space to remain stable in FY25, with improvements anticipated in FY26 due to cost optimization measures. Physical retail will continue to be relevant for customers who prefer in-person experiences, especially for high-value purchases.
Despite recent challenges, revenue growth is expected to recover in the second half of FY25 and FY26.
E-commerce drives India’s apparel surge
This recovery is linked to improving consumer financial health, increased wedding dates, and favorable monsoon conditions.
Retailers are expected to adopt controlled expansion strategies focusing on fast fashion and ethnic wear formats. The overall retail space is projected to expand by 9 percent y-o-y in FY25 and 11 percent y-o-y in FY26. Direct-to-consumer brands are opening physical stores, and established retailers are moving into under-penetrated markets.
Advertising and promotional spending trends among retailers have varied, with some investing heavily to attract consumers and others reducing expenditure. EBITDA margins across the apparel retail space are expected to grow by nearly 30 basis points y-o-y in FY26, driven by ongoing cost-efficiency efforts. Adarsh Gutha, Associate Director of Corporate Ratings at Ind-Ra, said, “We expect a recovery in revenue growth over H2FY25/FY26, supported by improved consumer financial health and favorable market conditions.
Organised retailers’ focus on rationalizing stores and targeting high-performing segments will bolster their credit profiles.”
India’s apparel retail market is set for robust growth driven by e-commerce and strategic brick-and-mortar expansions, with fast fashion and ethnic wear segments leading the way.
