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This Week in Retail will be recapping the majority of these events and bringing the cant-miss action to your inbox.
As always, I like to start by sharing my outlook for the industry in the upcoming year. This is one of my favorite pieces to write because theres no real fact-checking or research involved. Sure, my opinions are shaped by my day-to-day industry experience but this piece allows me to throw some spaghetti at the wall and see what sticks. But as I write this one question continues to come to mind: Is my perspective influenced more as a consumer or as a retailist? (is that officially a word? if not I’m keeping it)
If you missed my 2024 predictions, they can be found here.
So what do I think retail will look like in 2025? Here are some trends I’m tracking
The Economist predicts easing inflation will help global retail volumes grow by an expected 2.2% in 2025. Despite moderate growth, consumer optimism is projected to remain low throughout the majority of the year. Early retail sales I’m expecting to be weak, influenced heavily by a new presidential administration, holiday hangover and a bit of supply chain inconsistency. Pending tariffs are causing everyone to diversify their supply chains and to me, any level of diversification usually results in disruptions.
Im going to start at a place of controversy…….I’m sick of hearing about AI. I’m not saying this from a place of “I don’t think AI works” - I’m coming from a place of it’s not the savior riding in on the white horse that we want to believe it is. AI is addressing many of the task automation, data accuracy and shopper personalization workflows successfully. That said, AI is not going to fix poor customer engagement and shitty retail experiences. If we can’t overcome locking up product to deter theft and managing self-checkout vs. not, we are doomed. I’ll give an example, AI is a phenomenal tool for demand forecasting and shopper analytics and can provide the best data view as to what products your customers need and when. But if you decide to stock shelves at 9:30 on a Saturday morning, and leave pallet jacks and stocking carts lining the aisle because you can’t staff appropriately, and you impede customer flow long enough, people will find other places to visit.
I am all for leaning into technology, but too often we rely solely on technology to solve our problems.
eCommerce will begin to own the pharmacy and grocery markets. Nearly 2,300 pharmacies have closed in the United States in 2024. This amounts to approximately eight pharmacy closures per day since the beginning of the year. The closures affect both large chain pharmacies like CVS, Walgreens, and Rite Aid, as well as smaller independent pharmacies. These closures are part of a larger trend, with nearly a third of U.S. retail pharmacies having closed since 2010. The situation is considered critical, with some experts describing it as a "nationwide epidemic" and warning of potential "catastrophe for seniors" and a "devastating blow to the overall healthcare system. Let’s take Amazon’s strategy for example……As of August 2024, Amazon Pharmacy offered same-day delivery in eight cities, including Los Angeles and New York. By the end of 2025, the service is expected to cover 45% of the U.S. population - which looks eerily similar story to their final mile delivery program.
Customer interest in Amazon's pharmacy services has risen significantly, with 45% of Amazon customers now "extremely interested" or "very interested" in buying medications online, up from 34% in 2023. The percentage of Amazon customers who have purchased pharmaceutical products from Amazon has increased to 13%, compared to 9% in 2023.
Now lets look at grocery……Total online grocery sales are projected to reach nearly $120 billion by the end of 2028 with ecommerce grocery sales growing at a compound annual growth rate (CAGR) of 4.5% - more than three times faster than in-store sales. In October 2024 alone, U.S. online grocery sales jumped 28% year-over-year to $10.5 billion. Digital acceleration since COVID has opened the door to alternative fulfillment methods and companies like Instacart have made multiple grocers accessible via a single platform.
With grocery comes the dilemma, or opportunity if you will, of alcoholic beverage distribution and someone like an Amazon or Walmart has the resources to navigate the complications of State ran liquor commissions. I personally feel like there is huge upside in this space but I’m not going to pretend like there isn’t some grey area to it as well.
I think you’ll see grocers start to leverage AI/AR to help create guided experiences such as “pick your own produce” to help give digital engagement a more human feel. Now that digital is a major component of the omni-channel experience, I expect retailers to begin to leverage digital technologies to address more personalized selection criteria.
The concept of the “third place” will dominate the retail conversation throughout 2025. Creating “third places” transforms their physical spaces into destinations that foster community, interaction, and experiences. This strategy is particularly significant as it helps drive foot traffic and customer engagement in an increasingly digital shopping landscape.
Why it matters:
Community Engagement: By fostering a sense of belonging, retailers strengthen their relationship with customers.
Differentiation: In the age of e-commerce, unique in-person experiences set brands apart.
Increased Time Spent: Encouraging customers to stay longer often translates into higher sales.
Versatility: Third-place environments adapt to various needs—socializing, working, or relaxing.
While capturing the “third place” offer significant potential, retailers must ensure that these spaces complement rather than distract from their core offerings. The key is to create an environment that enhances the overall shopping experience while still driving sales. While the coffee shop is a popular trend, I’m expecting retailers to experiment with different social concepts throughout the year.
A big player (think Amazon,Walmart, Target, etc.) will get into the fashion and event rental space…….Last week I was sitting at a UPS store, returning an Amazon package, as one typical does at that establishment and I had a bit of an epiphany. I was returning a Halloween costume that my daughter didn’t wear, and I realized if you analyze the return crisis or “amazombie” experience for what it is, they have created the perfect market for rental programs. I would venture to say that many people, more than they like to admit, buy goods off of Amazon and return them afterwards citing one of the common dropdown menu items, when in fact, the item was never meant to be used for the long-haul. They have the logistics for it, all it would take is a little productization around goods that are the most prone to wardrobing.
The global online clothing rental market was valued at $2.06 billion in 2023 and is projected to reach $4.61 billion by 2031, growing at a CAGR of 10.6%. Other estimates suggest growth from $1.33 billion in 2023 to $2.56 billion by 2031 at a CAGR of 8.5%. Platforms like Rent the Runway and Nuuly lead the market, with younger generations driving adoption, but to me feels like an untapped space for these larger retailers, especially as you see some of their competition getting into resale or second-hand. According to Forbes, Nuuly's average active subscribers grew to over 224,000, which is a 45% increase from the previous year. Rent the Runway leads in scale and speed to market, and offers a vast inventory of over 10,000 rotating designer styles. Most of these services have try-before-you-buy options if something is worth keeping which and being that Amazon and Walmart already offer subscription-based added services, this seems like an achievable tie-in.
Retailers will invest in their own forms of social networking - It won’t compete with the X’s or Instagram but live and social shopping will hit record highs
I’m watching closely what happens with the pending TikTok ban coming up on January 19. I’m still not convinced that someone’s not going to come in at the last minute with an offer for ByteDance. It feels weird that the incoming administration a day prior to inauguration is gonna allow something as controversial or groundbreaking as selling or forcing to sell TikTok.
But the TikTok brand allows for a bigger player, potentially a retailer, to come into the space. Retail is missing that hook that keeps people on their sites outside of just shopping and I think this is a great opportunity for that. I believe that social media is the next wave of the Omni channel experience, but I don’t believe that retailers are going to rely on just the traffic that they’re seeing through TikTok Instagram, Facebook if that’s still a thing.
Drop and collaboration culture will drive new revenue streams across non-traditional partnerships. There’s a reason why streetwear and DTC brands have been successful. Overhead is considerably lower like your retail footprint is considerably smaller and you have the opportunity to control product launches with a more personal touch. You get the chance to drive engagement prior to product launch, gauge customer interest and drive demand prior to having someone just double up on your product the next time they’re in your store. It creates a consistent stream of marketing collateral it allows you to expand out of your comfort zone from a brand imaging perspective. To expand on this I believe preorders and made to order culture will expand.
As retailers continue to bottle up that feeling of nostalgia I’m a expecting trend of value-added services coming back to retail. Remember the days of personal tailors and cobblers, or specialists in specific accessories? These areas offer considerable upside for brands to partner with local and artisanal craftsmen and retailers can use these outlets to foster creativity and brand appeal.
As mentioned above, if you can capture the “third place”, utilizing these tactics becomes considerably easier.
Digital passports and connected technologies will drive technology investments in retail. I believe RFID and digital passports will be this year’s equivalent of AI. RFID had a huge moment in 2024 with retailers leveraging RFID for inventory and supply chain efficiency. We even saw some retailers such as Uniqlo leverage RFID for self checkout. Packaging will get smarter and more connected and therefore pull technology infrastructure in to support it. Parcel and delivery partners are already leveraging RFID to drive efficiency through accuracy and leveraging RFID to make informed decisions across the supply chain.
In retail, especially in industries like fashion and electronics, DPPs enhance transparency, sustainability, and customer trust by enabling traceability and informed purchasing decisions. These passports often use technologies like QR codes, RFID tags, and blockchain for secure data sharing. Digital passports store information about a product's origin, materials, and manufacturing process. This ensures authenticity, especially for luxury goods and collectibles. Brands like Gucci and Louis Vuitton use digital passports to combat counterfeiting. Every retailer has sustainability goals and resell/vintage have never been more popular, and this technology will lead the way.
Media and ad revenue will significantly influence the retail landscape in 2025, driven by evolving consumer behaviors, advanced technology, and strategic partnerships. Retail media networks and shoppable content will drive ad revenue growth by leveraging first-party data and integrating shopping with platforms like TikTok and CTV. AI-driven ads and interactive technologies like AR/VR will enhance targeting and engagement. Influencer marketing will focus on niche audiences, while in-store and omnichannel campaigns blend physical and digital experiences. Privacy regulations will push retailers to balance personalization with ethical data use, transforming ads into key drivers of retail success.
My final prediction is this….. I am expecting a shift back to quality vs. value in 2025. Discount and dollar stores have reigned supreme over the past 18 months but foot traffic and weakening sales are starting to suggest otherwise. In some cases, quality means more expensive but, I think we have seen experiments in retail throughout 2024 that suggest quality in experience is just as key to value in which you offer. I think shoppers will continue to be price-conscious but will also be looking at purchasing from the lens of investment rather than purchase. I think “over consumption” will take a backseat in 2025 and personally I believe it is a healthy reset.
I don’t talk restaurant and hospitality, technology, and trends too much on this newsletter. There are so many newsletters that talk about the trends, culture, and the overall restaurant/hospitality scene. I try to always look at it from a retail first perspective however, I do believe that the reservation system is broken. To counteract this I believe we will start to see more “loyalty” and “reward” programs hitting the restaurant scene. I think joining a social club is out of reach for most, but I am expecting restaurants to begin exploring loyalty and reward tiers that let you buy into a more premium experience. The problem with the current reservation culture in the restaurant industry is that it limits exposure and leads to fatigue. Getting reservations has turned into a nightmare, fueled by influencer culture.
I say all that to say this, retail is going to be personal, connected and extremely fun in 2025. This coming year will be a turning point for retail of the future and I’m eager to see what becomes of it.
Let me know your thoughts……. What have I missed and what do you think will have the largest influence over the retail landscape in 2025?