India’s retail story is entering a new phase. Even as digital adoption continues to rise and millions of consumers shop online, many of the country’s biggest and fastest-growing brands are shifting their focus back to physical stores. For years, online platforms were the primary route for digital-first brands to reach customers. Now, the momentum is clearly turning as companies invest aggressively in malls, high streets, and experience centres.
This shift raises two important questions. Why are brands returning to offline retail at a time when e-commerce is expanding, and what does this change mean for stock-market investors? Let’s break it down.
What’s Happening?
India’s digital-first brands are rapidly moving into physical retail. In the first half of 2025, they accounted for 18% of retail leasing, up from 8% last year. Delhi NCR leads this shift with 26%, followed by Bengaluru at 22% and Hyderabad at 18%.
High streets attract 46% of new leases due to steady footfall, while malls capture 40% as brands tap into organised retail hubs. Standalone stores form the remaining 14% and are usually used for flagship or experience-led formats. In the first half of 2025 alone, D2C brands leased 5,94,848 square feet of retail space. Their share in total retail leasing has risen steadily from 8% in H1 2024 to 15% in H2 2024, reaching 18% in 2025.
Brands are also using flexible formats such as micro stores, shop-in-shops, and curated lifestyle setups to reach different customer groups and strengthen in-person discovery.
Sectors Exploring the Offline Market
Out of the 18% share in overall retail leasing, fashion and apparel are leading the move to physical stores and make up nearly 60% of D2C leasing in the first half of 2025. These brands rely heavily on trial, touch, and fit, making offline shopping essential for building customer confidence. Seasonal demand during sales and festivals further boosts footfall in malls and high streets, making a physical presence even more rewarding.
Homeware and jewellery follow with 12% each, as both categories depend on sensory experience and in-person evaluation. Health and personal care brands hold 6%, while food and beverages contribute 5%. The remaining share comes from categories such as electronics, hypermarkets, entertainment, and financial services.
Industry leaders note that this shift highlights the rising importance of omnichannel growth. Physical stores still dominate most purchases and are helping digital-native brands move into the mainstream.
Why Popular Brands Are Shifting to Offline
Brands are expanding their physical presence, but the key question is, why? Here are some of the main reasons:
Offline Dominance: Even though online buying surged during the pandemic, more than 70% of purchases still take place in physical stores. Brands are opening outlets to reach this larger customer base, especially in smaller cities.
Faster Offline Expansion: What once took five to nine years now takes only two to three. Brands like Snitch, Pilgrim, GIVA, The Sleep Company, and Tagz are opening stores rapidly to scale in new markets.
Greater Visibility: Brands prefer high streets and malls because they attract consistent footfall and allow them to stand alongside established names. Stores today are larger and more experience-driven.
Lower Customer Acquisition Cost: Digital ads have become expensive and highly competitive. Offline stores offer natural discovery and long-term recall without daily ad spending. In many tier two to tier four cities, offline expansion is even more cost-effective per customer. Physical stores help balance rising digital costs and improve margins.
Customer Experience and Trust: Physical stores allow customers to try products, seek instant assistance, and face fewer returns. This improves satisfaction and builds trust. Stores also enhance brand discovery and lead to higher repeat purchases across both offline and online channels, helping brands grow more steadily and sustainably.
What Does This Mean for Investors?
For investors, the growing shift toward offline expansion reflects increasing confidence in India’s consumption cycle. As brands deepen their presence in tier two to tier four cities, demand is becoming broader and more stable. This trend benefits retail companies, mall operators, and consumer-focused FMCG players that rely on higher footfall and the growth of organised retail.
Investors should track companies that are strengthening both their physical presence and digital capabilities, as these players are better placed to capture the next wave of spending. While evaluating such companies, investors must also monitor key metrics that reflect the effectiveness of offline investments, including sales per square foot, gross margins, return on investment, average transaction value, customer retention, and conversion rates.
What’s Next?
Smaller cities continue to rely more on offline retail because quick-commerce services have not scaled widely in these markets. Meanwhile, metro cities depend more on e-commerce, especially quick-commerce delivery. With rising incomes and new malls opening across India, brands now have a wider opportunity to expand beyond metro locations.
Alongside this shift, a strong wave of consolidation is underway. Large players are acquiring fast-growing digital-first brands to tap into new consumer preferences and scale faster. Examples include Hindustan Unilever acquiring Minimalist, Marico buying Beardo, ITC taking over Yoga Bar, and Emami securing ownership of The Man Company.
Furthermore, India’s D2C market is expected to cross $300 billion by 2030, which means competition will intensify and the boundary between offline and online will become seamless. Brands that combine physical stores with strong digital reach and deliver smooth shopping experiences are likely to lead the next phase of growth.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
