Retail will continue evolving at a rate of knots in 2025. Change will be driven by the economy, technology and customer expectations, with top-performing retailers focusing on key issues like cost control, personalised loyalty and social selling.
A review of 2024.
What’ll make the ‘history of retail’ books in 2024? Spiralling prices, for starters. The cost of living and goods continued to rise. Customer expectations did too – and many retailers, like Toolstation, responded with same day delivery offerings. Other retailers focused on delivering omnichannel shopping experiences, with branded apps bringing together physical and online shopping.
Meanwhile, the loyalty programme space became even busier, with names like Wagamama, Flying Tiger and Poundland joining the ranks. The most successful retailers invested in data-driven personalisation – delighting customers with relevant and targeted shopping experiences.
Retail in 2025.
Whilst we don’t have a crystal ball, our retail analytics team knows the retail landscape like the back of their hands. Our Chief Commercial Officer Thomas Hill and Head of Analytics Michael Shaw have a few predictions for what’s ahead in 2025.
Prediction one: Cost control.
The rising cost of living and goods just isn’t going away. Buckle up, it’s going to be another rollercoaster in 2025.
Winning retailers will optimise two key areas of cost operations:
- Supply chain. Using data for resilient supply chains is really important. Availability issues plagued 2024, so predicting and understanding substitutability and demand transference will remain critical to protect supply chains in 2025.
- Automation. Customers love ease, speed and value. Automated stores create ease and speed – whilst reducing costs for retailers. Win, win. We’ll continue to see retailers moving towards self-checkouts, automated warehouses and automated delivery.
Prediction two: Personalised loyalty.
Loyalty programmes are still the talk of the (retail) town. More and more are cropping up – but many are going nowhere.
2025 is the end of automatically rewarding customers (a surefire way of giving away revenue). Instead, personalised loyalty will become a point of differentiation.
Grocery retailers led on personalised loyalty with member pricing. But all retailers can benefit by moving away from margin-hitting mass discounting, and opting for targeted, data-driven discounts that’re personalised to individual shoppers.
How? Understanding the way customers shop is the key to delivering tailored product recommendations, promotions and discounts. It’s better for retailers, and it’s better for customers. Need we say more?
Prediction three: Social selling.
The cost of Google Ads, including Performance Max, is rising. On top of this, returns on media effectiveness are declining.
Retailers can’t afford to put all their eggs in one basket. Instead, the focus in 2025 will be:
- Reaching audiences on social media platforms, like TikTok and Instagram. Take Glossier as a great example. They’ve built a devoted social community by engaging with followers and reliably reposting user generated content (UGC) e.g. ‘get ready with me’ (GRWM) videos.
- Owning first party data and leveraging it for targeted media. The insights from existing customer behaviour (like preferences and buying patterns) help inform more effective digital marketing – ensuring the right ads reach the right people, at the right time.
Prediction four: GenAI, but experience not optimisation.
GenAI in 2025 will focus on consumer experiences. For example, by providing quick access to product information, summarising reviews, improving live chat, and creating immersive marketing.
It won’t play a huge role in retail optimisation just yet (there’ll be no clicking a button for recommendations of what to do next) – but watch this space.
Prediction five: Efficiency through AI.
We’ll see more retailers improving commercial decision-making using AI-driven decision intelligence and tech. It’ll be a competitive differentiator for innovative retailers seeking efficient operations based on provable recommendations – not gut feel.
For a comparatively small investment, decision intelligence delivers outsized commercial results, including substantial margin uplift and improved processes. We’re already seeing this in the work we do with our clients.
Prediction six: Sustainability.
With each passing year, the importance consumers place on sustainability and transparency is growing. We’ll likely see more resale platforms and marketplaces popping up in 2025, joining the likes of Depop and Vinted. We’ll also see more circular and/or rental business models.
One thing is clear: more retailers will make commercial decisions based on sustainability. Nobody’s Child is a great example.
In a constantly shifting sector, investing in data and analytics is critical for retailers wanting to stay on top of costs and lead the way in customer loyalty. Chat to our team to find out how decision intelligence delivers outsized commercial results.
