Top Ten For Twenty-Five
As traditional as mince pies and a Gavin and Stacey Christmas special, the lead up to the Big Day means it's time to predict retail trends for 2025. A peek into the crystal ball reveals my top ten.
Will 2025 be the year of generative AI? Will drones deliver stuff we don’t need? And will Rachel row back on her rates? In no particular order here are my top ten retail trend predictions for the coming year.
Self-service - self-service checkouts (SCO) are becoming more and more ubiquitous and their presence in both retail and hospitality shows no signs of abating, spurred on by the measures introduced in the recent Budget. Familiar in a grocery scenario, expect to see other sectors such as fashion and general merchandise more widely adopt the technology. And as 'unexpected item in bagging area' becomes a distant memory, consumer adoption will naturally follow. In a recent study, over half (53%) of Gen Z and millennial shoppers said that they prefer self-checkout over the traditional manned alternative. And a separate survey found that 52% of Gen Zs would switch retailers for checkout-free stores.
Sustainability - there is no doubt that consumers are becoming more and more aware of the implications on the planet of their shopping habits, however there still remains a behaviour gap where sentiment and actions remain misaligned. The gap is likely to continue to close, however, this will continue at a gradual pace. Retailers, on the other hand, will begin to get to grips with tougher legislation as a raft of measures begin to come on stream. Sustainability Disclosure Requirements, the Corporate Sustainability Due Diligence Directive, Extended Producer Responsibility and the proposed Digital Markets, Competition and Consumers Act 2024 are just some of the UK specific pieces of legislation which will impact retailers in the coming years.
Back to bricks - consumer pandemic fears have long since dissipated and, with this, the tactile experience of returning to stores will continue. In its annual Future Consumer Index of 23,000 people across 30 countries, EY found that 57% of consumers want to see and touch products before they purchase them. 2025 could be the year when digital and physical finally find their point of equilibrium, where consumers see both a) as a single means to shop and b) whilst at the same time using each in a more strategic, calculated manner, depending on the type of purchase.
Generative Artificial Intelligence - AI is such a vast topic that I've chosen probably the most exciting and scary (in equal measures) - Gen AI. 2025 looks set to be the year when the novelty value of Gen AI wears off; after all, there are only so many 'monkey riding a giraffe on the moon' images we can create. In its place, as we are beginning to see, real world use cases will appear, especially for merchandisers for Search and Product Discovery. According to Gartner, with the emergence of generative AI, conversational search interfaces are now appearing, significantly improving the customer experience.
Unified commerce - a personal plea (hope?) is that 2025 is the year that the industry finally sunsets the term 'omnichannel'. However, whether it survives or is replaced by the (slightly) more meaningful 'Unified Commerce', demand from a consumer perspective, will be for retailers to blend digital with physical in a seamless fashion. Executed well, fears of intrusiveness will evaporate as more value is delivered to the consumer. But this is taking time to materialise, even a year ago, Forrester were discussing a '6E Strategy for Digital Store Transformation'. Expect this evolution to 'singular shopping', to begin to manifest itself in 2025.
Retail business models - new retail business models in order to support a more circular economy will continue to evolve. According to the Ellen MacArthur Foundation, it requires eliminating waste and pollution, regenerating nature, and keeping products and materials circulating through the economy at their highest and best use. Black Friday will still exist in 2025, but it will be a softer version as the media continues to highlight the impact of consumer overconsumption. Expect more and more products to be redesigned to be more durable and made from recycled and other environmentally preferable materials.
Collaboration - expect brands and retailers to continue to collaborate as the challenges of Budget measures and increased legislation begin to impact. From Primark and Disney to Shein and Forever21, brand collaborations will continue and there's good reason why. In a recent study, 90% of companies said that collaborations support innovation and expansion, whilst also tapping into new consumer bases.
Retail media - will continue to grow in 2025, even back in 2021, Forrester said that on average, most retailers told them that their retail media margins ranged from 50-70%. And according to IAB UK advertising spend on retail media in the UK will exceed £1bn in 2025.
Social commerce - mobile (social) commerce in particular will grow exponentially in 2025, fuelled to a large extent by TikTok shopping where Temu and Shein remain dominant. eMarketer reports in this Forbes article that social commerce sales are projected to more than double to $144 billion by 2027 from $67 billion in 2023.
Productivity & efficiency - this neatly bookends all of the above in terms of what retailers will be facing in 2025. Whilst 81 retailers including the likes of Tesco, Amazon, Boots, Kingfisher and Sainsbury's have written to the Government to request a softer introduction of the NICs, National Living Wage and business rate changes announced in the Budget, it remains unlikely that any change of approach will happen. Retailers are currently assessing the impact of the changes, however, the net outcome is likely to mean they will explore ever more robust and innovative ways in order to mitigate the increase in costs they are now facing. Which brings us back to where we came in; already more than one high street retailer has shared that they are accelerating the roll-out of self-service checkouts as a direct result of the Budget. 2025; the year of innovation at pace.
Andrew Busby is Senior Industry Adviser at BOXTEC