Reflecting on 2024 and Looking Ahead at 2025: Retail

As we entered 2024, we predicted a slow start to the year, with consumer confidence remaining fragile following the cost-of-living crisis. On a positive note, we expected inflation to settle and interest rates to drop slowly and cautiously. We also discussed the continued growth of experiential spending across sectors such as travel and parts of hospitality in 2024.  

Yet despite the challenges, many businesses enjoyed a positive golden quarter, with Sainsbury’s, Tesco, and M&S leading the way. 

However, we cannot look at 2025 without acknowledging the impact of the Autumn budget and the global trading challenges yet to come. We expect more brands to announce further restructures and continued shifts in commercial priorities as the year progresses. 

There are 6 key themes that will continue to impact the retail sector moving forward into 2025: 

1. Challenging Economic and Global Political Landscape

The economic and political landscape in 2025 is expected to remain challenging. A slight rise in inflation is anticipated, which will likely temper the Bank of England’s willingness to reduce interest rates quickly or frequently. This cautious approach is necessary to maintain economic stability but may also slow down consumer spending and investment. Additionally, global political tensions and trade uncertainties could further complicate the economic environment, affecting both domestic and international markets. 

2. Seamless Commerce 

In 2025, businesses will continue to prioritise creating a seamless and unified customer experience. This means investing in technologies and strategies that ensure a frictionless, integrated experience across all channels. From the moment a customer enters a store or visits a website to the post-purchase interactions, every touchpoint will be designed to enhance convenience and satisfaction. Innovations such as mobile payment systems, personalised marketing, and efficient customer service will play crucial roles in achieving this seamless commerce vision. 

3. Increased Sustainable Shopping Practices 

Sustainability will remain a significant focus for both consumers and retailers in 2025. Shoppers are increasingly aware of environmental issues and are more likely to support brands that demonstrate a commitment to ethical practices and waste reduction. This trend will drive the growth of resale platforms, where consumers can buy and sell pre-owned items, reducing waste and promoting a circular economy. Retailers will need to adopt sustainable practices, such as using eco-friendly materials, reducing carbon footprints, and ensuring transparency in their supply chains to meet consumer expectations. 

4. A Continued Focus on Value 

The cost-of-living crisis is expected to persist throughout 2025, with energy and food costs likely to rise further. As a result, consumers will continue to prioritise value when making purchasing decisions. Retailers will need to offer competitive pricing, discounts, and promotions to attract budget-conscious shoppers. Additionally, providing high-quality products and exceptional customer service will be essential in retaining customer loyalty during these challenging times. 

5. Artificial Intelligence 

Artificial Intelligence (AI) will play an increasingly vital role in the retail sector in 2025. Generative AI, in particular, will drive ‘hyper-personalisation’, creating unique and tailored experiences for each consumer. By analysing vast amounts of data, AI can predict customer preferences, recommend products, and personalise marketing messages. This level of personalisation will enhance the customer journey, making it more engaging and satisfying. Retailers that leverage AI effectively will gain a competitive edge by delivering exceptional and customised experiences. 

6. Supply Chain Efficiency 

Supply chain efficiency will be a critical focus for retailers in 2025. The ‘cost of doing business’ is expected to rise due to economic and geopolitical uncertainties, impacting the entire supply chain from production to delivery. Retailers will need to optimise their supply chain operations to minimise costs and ensure timely delivery of products. Transparent supply chain systems will also be crucial in building consumer trust and brand loyalty. By providing visibility into the sourcing and production processes, retailers can demonstrate their commitment to ethical practices and quality assurance. 

There is no doubt that many factors are set to influence the year ahead for the retail and consumer sectors, but we should not underestimate the power of confidence—both consumer and market confidence. A positive outlook and strategic adaptability will be key to navigating the challenges and seizing the opportunities that 2025 will bring.