Retailers in the country are adjusting business strategies, enhancing supply chain efficiency and focusing on new trends – particularly in fast fashion – to meet the evolving consumer behaviour.

According to the Crisil Ratings report, retailers will focus on enhancing efficiencies at existing stores, controlling costs and limiting reliance on external debt, which will help maintain their operating margin at 7.2-7.4 per cent despite continued high marketing expenses, thereby ensuring stable credit profiles.

The mass market segment accounts for 60 per cent of total sales now, compared with 56 per cent before the pandemic, due to the rising popularity of fast fashion, which is expected to be the primary revenue driver this fiscal, said Anuj Sethi, Senior Director, Crisil Ratings.

The likely increase in demand for premium clothing during the upcoming festive and wedding seasons will also contribute to overall revenue growth of 8-10 per cent this fiscal, he added.

Fast fashion, a growing subset of the mass market, offers the latest trends, frequently updated throughout the season with a shorter lead time to reach customers quickly.

The report mentioned that with consumer spending shifting towards travel experiences and luxury goods in major urban locations, retailers will be cautious at store expansion there, while continuing to expand in tier 2 and 3 cities, which are transitioning towards organised retail.

However, area addition will be lower on-year at 2.2 million square feet, compared with 3.6 million square feet last fiscal as store sizes will be smaller. Revenue density is expected to remain flat at Rs 11,900 per square foot, the report mentioned.