New store openings in India decline during 2024 as retailers prioritize cost-cutting

With subdued consumer demand in discretionary categories forcing retailers to prioritize cost-cutting and curtail expansion, India's retail sector experienced a significant deceleration in new store openings throughout 2024.

As per an analysis by ET, examining twelve prominent listed quick-service restaurant (QSR) chains, apparel, and grocery retailers, shows, on an average only three new store opened per day in the past year, a stark contrast to the approximately ten daily openings observed in 2023.

These companies, including Reliance Retail, Aditya Birla Fashion & Retail, DMart, Tata's Trent, Titan, etc collectively increased their store count by a mere 3 per cent to 34,839 outlets in the last calendar year, according to data from their latest investor presentations. This figure represents a significant drop from the 12 per cent increase, from 33,670 outlets, recorded in 2023. The store network data reflects net additions, factoring in store closures during the year.

However, retailers assert that the store consolidation phase has concluded, and they are gearing up for renewed network expansion. Vishak Kumar, CEO- Lifestyle Business, Aditya Birla Fashion and Retail, states, elimination of margin-draining stores has paved the way for renewed expansion efforts. Similarly, Kavindra Mishara, Managing Director, Shoppers Stop indicates, store rationalization will largely cease in the current fiscal year, with plans to open 12-15 new stores in FY26.

Slowdown in sales of discretionary items, such as apparel, footwear, and beauty, which began in 2023 following two years of pandemic-driven growth, persisted throughout 2024. According to the Retailers Association of India (RAI), sales growth in organized retail segments slowed to mid-single digits last year, compared to 15 per cent in 2022. Consequently, many retailers closed underperforming stores to enhance profitability.

Retailers attribute the consumption slowdown to factors including high food inflation, stagnant salary growth, increased consumer debt, limited job creation, and rising housing costs. Additionally, elevated real estate prices have posed challenges.

Kaushal Parekh, CFO, Metro Brands, explains, post-FY23, rising rental costs prompted a cautious approach to lease agreements. However, with rental expectations now moderating, there is an opportunity to accelerate expansion, he adds.