2025 - the shape of things to come

Guy Elliott from Publicis Sapient looks at the trends to shape retail in 2025

As we bid farewell to 2024, it’s worth looking back at the changes the retail industry has faced this year.

Technological breakthroughs, shifting consumer preferences and economic challenges have been reshaping the landscape. Rising inflation and reduced disposable incomes have created distinct customer segments, with many prioritising value over other considerations.

In response, retailers have implemented price reductions to meet customer demands, adopting cost-conscious strategies to maintain profitability. Mobile and social shopping, coupled with significant investment in generative AI (Gen AI), are driving rapid transformation across the industry. All these factors pose the retail industry for remarkable change as we approach 2025.

Entering the new year, several trends are set to redefine the retail landscape. Businesses need to stay agile and forward-thinking to navigate these exciting changes.

AI will be key to surviving volatile supply chains

Throughout 2024, retailers have grappled with increasing complexities and unpredictabilities in their supply chains, from sourcing raw materials to delivering final products. These disruptions impact costs, product availability and overall business reliance.

Therefore, retailers will increasingly invest in AI and machine learning (ML) to mitigate risks and streamline operations. Research by Publicis Sapient reveals that 34% of retail executives prioritise supply chain efficiencies as their top engagement focus – higher than any other industry. AI technologies offer a powerful opportunity to achieve significant returns on investment.

Looking to 2025, AI can be utilised for inventory management, dynamic routing and sourcing and even returns optimisation, providing solutions for fraud prevention upfront and cost optimisation during the returns process. AI-powered supply chain optimisation can allow retailers to thrive in an increasingly volatile market. By embracing these technologies, businesses can build efficient, resilient supply chains.

Health and wellness will drive consumer spending

Consumers are increasing their spending on wellness products and experiences globally, especially younger generations. As Gen Z progressively gains more and more purchasing power, we’ve seen health move from a trend to a core consumer value which will continue into 2025.

Driven by the influence of social media platforms like TikTok, trends including “wellness routines” from creators such as Steph Grasso, Tamanna Kaur or Tabitha Brown are gaining massive traction.

To benefit from these developments, retailers need to integrate wellness offerings across various categories. Target has seen $1 billion in sales of its wellness line offering vitamins, organic snacks and plant-based protein options. By strategically incorporating mental wellness products and services, while emphasising the intersection of health and beauty, brands like Sephora are effectively tapping into this expanding market to drive sales growth.

For 2025 and beyond, retailers should use AI-powered trend forecasting to navigate social media platforms to help predict consumer demands in a constantly changing space. Doing so will give them the agility they need to act on these trends and come out on top.

Gen AI will turn shoppers into co-creators of retail experiences

Research reveals that 63% of retail executives consider personalisation and hyper-personalisation extremely important for Gen AI applications in the next three years. Hyper personalisation helps understand what consumers want and tailor offerings to their needs.

Instead of making educated guesses based on past data, using Gen AI allows shoppers to organically reveal their preferences, enabling retailers to engage in real-time interactions with customers.

Leading retailers like Walmart and Home Depot are at the forefront of this innovation, implementing personalisation at scale. These companies are harnessing customer data to enhance both online and in-store experiences, driving sales and improving engagement.

Publicis Sapient has worked with Marriott Bonvoy to adopt these intent-based search technologies. With its Homes & Villas offering, Marriott implemented Gen AI search capabilities to provide a more intuitive and responsive experience. The result was akin to having a personal digital shopper, providing more individualised and engaged answers to boost customer satisfaction.

As we move into 2025, more retailers need to adopt these technologies to revolutionise how they connect with and serve their customers.

The future could be bright

What will the year ahead look like for retail? The ability to rapidly prototype and develop functional applications through AI promises to revolutionise the way retailers operate. While this technology is still evolving, its potential impact is huge.

AI will supercharge not just the retail industry but society as a whole, propelling it into a period of unprecedented change. In 2025 and beyond, retailers must embrace innovative AI solutions or risk being left behind. Innovative businesses that make these new technologies core to their strategy are well-equipped to step into a bigger brighter era for retail.