Gen Z and Tier II-III cities are rewriting the rules of Indian retail: Deloitte-FICCI report

20 October 2025, Mumbai 

The Deloitte-FICCI report, ‘Spotting India's Prime Innovation Moment’, puts the spotlight on a transformative decade ahead for the Indian retail and consumer ecosystem. The report reveals a market on the verge of nearly doubling in size by 2030, driven by a young, digitally-savvy population and the growing economic influence of non-metro cities.

Market growth and segmentation

The Indian retail sector, valued at $1.06 trillion in 2024, is on a high-growth path, projected to reach $1.93 trillion by 2030 at a Compound Annual Growth Rate (CAGR) of 10 per cent. This growth is largely due to strong domestic demand, a growing middle class, and rapid digital adoption. The report also segments the market by channel and key sectors, showing significant shifts in consumer behavior.

Within this broader market, the fashion, apparel, and textiles sector remains a dominant force. In 2024, the Indian fashion retail market was valued at $60.12 billion, with apparel accounting for approximately 55 per cent of the share. This sector is expected to grow at a CAGR of 12.87 per cent over the next six years, primarily driven by rising discretionary spending and increasing brand awareness.

The role of demographics and consumption

Demographic shifts are a primary engine of this retail transformation. The report identifies Gen Z as a powerful consumption driver, expected to contribute 43 per cent of India's total consumption in 2025, with a direct spending power of $250 billion. This generation is leading to a trend of aspirational premiumization, where value-conscious yet discerning consumers seek high-value purchases. This is particularly relevant for the fashion and apparel sector, where the luxury fashion resale market is projected to grow at a 13 per cent CAGR by 2032. This indicates a consumer base that desires high-end products but is also conscious of value and sustainability. The report also notes that over 60 per cent of millennials and Gen Z prefer brands with transparent sustainability practices, highlighting a shift toward eco-friendly packaging and ethical fashion.

The rise of Tier II, III cities

An important finding of the Deloitte-FICCI report is the growing economic influence of Tier II and III cities. These non-metros now account for over 60 per cent of all e-commerce transactions in India. This shift signals a decentralization of the retail market, where growth is no longer confined to major metropolitan areas. This is a significant opportunity for the fashion, apparel, and textiles sectors, as companies can tap into new consumer bases with localized production and tailored product assortments.

The role of inline and quick commerce

The report emphasizes the digital-first consumption trend. Online retail is projected to grow from $75 billion in 2024 to $260 billion by 2030, doubling its share of the total retail market. Online marketplaces now influence 73 per cent of purchase decisions, with YouTube reviews and peer recommendations gaining prominence as trusted alternatives to traditional influencer marketing.

Quick commerce, already operating in over 80 cities, is experiencing a 70-80 per cent CAGR, the fastest in the world. While known for groceries, quick commerce is rapidly expanding into other lifestyle categories, including fashion and accessories, offering a new avenue for instant gratification and last-mile delivery. The Direct-to-Consumer (D2C) market, which includes many fashion brands, crossed $80 billion in 2024 and is on track to exceed $100 billion in 2025, redefining how brands scale and connect with consumers.

Change drivers and leading aspects

The report identifies several change drivers.

Omnichannel retail: The future of retail is a seamless blend of online and offline experiences. While offline retail still holds a 60 per cent share in the fashion market due to the preference for physical try-ons, online channels are growing rapidly, forcing brands to integrate their strategies.

Hyper-personalization: Utilizing advanced data analytics, brands are tailoring product offerings and marketing strategies to individual consumer preferences.

'Made in India' preference: There's a growing preference for locally-made products, with 53 per cent of consumers favoring Indian brands in personal care and 55 per cent in home décor, suggesting a similar trend in fashion and textiles.

Sustainability: Sustainable, functional, and plus-size fashion is a growing segment, projected to exceed $18 billion by FY32. This reflects a shift in consumer values.

The D2C revolution in fashion

The rise of D2C brands is a perfect case in point for the Indian fashion industry. Brands like Zudio, a value-driven fashion chain, have gained market share by focusing on affordability and trendy products. These brands leverage the power of online platforms and social media to directly engage with consumers, bypassing traditional retail channels. While they face challenges like high return rates and inventory management, their agile, consumer-centric approach is reshaping the market. The ability of these brands to cater to the unique preferences of a diverse and rapidly digitizing population underscores the report's core message: India's retail future is being written by innovation and a deep understanding of its evolving consumer.

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