Up to 40 per cent of store networks remain unprofitable despite category growth
Revenue leakage at the shelf remains a widespread issue in organised retail, with 91 per cent of stores failing to fully monetise their display space, according to a study by Vector Consulting Group.
The findings, released at the Retailers Leadership Summit 2026 hosted by the Retailers Association of India (RAI), are based on a survey of CXOs and business heads from 100 organised retail chains with annual revenues above Rs 500 crore.
The report points to a structural profitability problem beneath headline growth numbers. Between 28 per cent and 40 per cent of stores in a typical organised retail network remain unprofitable, cutting across formats and categories.
At the centre of the issue is shelf productivity. While shelf velocity is widely acknowledged as critical to store-level returns, only 9 per cent of surveyed retailers use shelf throughput to guide daily buying, replenishment and display decisions.
Inventory ageing continues to weigh on productivity. In Mobile and Consumer Electronics, 48 per cent of on-shelf inventory remains beyond its optimal selling window. The proportion stands at 24 per cent in Apparel and Footwear, 40 per cent in Home and Furniture, and 43 per cent in Jewellery and Personal Wear. Analysts say this not only locks up working capital but also reduces the full-price selling window for new launches.
The study argues that retailers’ preference for margin protection, bulk buying and expanding SKU portfolios often results in excess inventory. When stock builds up, corrective measures such as markdowns or transfers are delayed due to concerns over margin erosion, making the eventual hit steeper.
It also flags weak or absent processes around inventory freshness, with ageing stock typically managed reactively rather than through system-driven triggers.
Kumar Rajagopalan, Chief Executive Officer of the Retailers Association of India, said improving store-level economics and asset efficiency remains central to sustainable profitability. The report, he said, offers a framework for identifying operational levers to strengthen performance.
Among its recommendations are stricter portfolio discipline, performance-led space allocation, faster supply chains and rule-based exits for slow-moving products. It also suggests treating shelf space as a perishable asset, with decisions anchored to throughput rather than topline growth alone.
The findings come at a time when organised retail continues to expand its footprint and categories, raising questions about whether scale is outpacing execution at the store level.
