The retail industry is on the cusp of significant transformation as we enter 2025. A confluence of technological advancements, evolving consumer behaviors, and economic shifts is reshaping the landscape. Economic pressures, including inflation, have reduced disposable income for many, creating distinct customer segments with a growing emphasis on value.
To navigate these challenges, retailers have reduced prices on many products and, to offset that cost burden, have become more cost-conscious, prioritizing profit maximization and gaining a share of customers’ wallets. Simultaneously, shifting demographics, such as declining birth rates and increasing diversity, are influencing retail strategies. The rapid adoption of mobile and social shopping, coupled with the surge in generative AI investments, has accelerated the digital transformation of the industry.
Several key trends are emerging that will redefine the retail landscape next year, and retailers need to be prepared. In this report, Publicis Sapient retail industry experts break down the top five trends that will shape the industry a year from now, based on our market research and industry expertise.
Economic pressures are forcing retailers to reinvent themselves. The share of private brands in total unit sales has risen from 24.7% in 2022 to 25.5% in 2023, while name brands have dropped from 75.3% to 74.5% over the same period (Circana, 2023).
"There’s a continually increasing gap between the richest and the poorest. Very distinct segments are emerging."
— Saba Arab, Managing Director at Publicis Sapient
This trend is unlikely to reverse in 2025. Although inflation has cooled since its peak in 2020, it remains a significant factor. In the U.S., inflation has hovered around 3% throughout 2024 and is not expected to drop to 2% until 2025 or later. Similarly, while inflation in the U.K. decreased to 2% as of July 2024, consumer spending habits remain cautious, suggesting that shoppers will continue to tighten their purse strings.
Adding to the financial strain on consumers, U.S. customer debt has surpassed $17 trillion, compounded by persistently high interest rates. This debt burden is a major factor driving down retail sales, forcing retailers to rethink their strategies.
This continued inflation means retailers need to tailor their offerings to both value-based shoppers, the majority, and those willing to spend more on premium products.
Tesco, the U.K.’s largest supermarket chain, has successfully navigated this economic downturn by focusing on minimizing spending, enhancing operational efficiency, and leveraging its Clubcard loyalty scheme to deliver more value to customers. This focus on value has been a key part of Tesco’s strategy, aligning its offerings with customer needs during tough economic times. The recent launch of its third-party marketplace further demonstrates Tesco’s commitment to diversifying its growth strategies, following in the footsteps of Walmart, Kroger, and Carrefour.
"If retailers just take a bit of risk, there are a lot of ways they could unlock significant savings through investing in loyalty programs, back-end AI, retail media networks, and supply chain optimization."
— Guy Elliott, Retail Industry Lead at Publicis Sapient
Artificial intelligence is becoming essential for retailers to manage increasingly volatile supply chains. By leveraging AI, retailers can optimize inventory, predict demand more accurately, and respond swiftly to disruptions. This not only reduces costs but also ensures better product availability for customers, helping retailers maintain competitiveness in a challenging environment.
Retail media is the fastest-growing advertising channel in the world, and it’s only getting bigger. According to the Guide to Next 2024 report, global retail media ad spend is expected to reach $140 billion in 2024, up from $110 billion in 2023. This growth is being driven by the increasing importance of first-party data, the decline of third-party cookies, and the need for brands to reach consumers at the point of purchase.
Retailers that fail to capitalize on this trend risk being left behind. As retail media networks (RMNs) become more sophisticated, they are offering brands more targeted and effective ways to reach shoppers. This is creating new revenue streams for retailers and new opportunities for brands to connect with consumers.
But the competition is fierce. As more retailers launch their own RMNs, the market is becoming crowded. To stand out, retailers need to offer unique value to brands, such as access to exclusive data, innovative ad formats, and seamless integration with ecommerce platforms.
The key to success in retail media is collaboration. Retailers, brands, and technology partners must work together to create a seamless and effective advertising ecosystem. This means sharing data, integrating technology, and aligning on goals.
"Contribute [data] to a marketplace and create a bigger clean room where everyone does data sharing, because CPGs are just looking for the place where their advertising will be the most powerful, and then ultimately, your onsite retail media properties can still be a valuable part of that buying process."
— Sudip Mazumder, Retail Industry Lead, Publicis Sapient
Generative AI is revolutionizing the way retailers interact with customers, transforming shoppers from passive recipients into active co-creators of their own retail experiences. By leveraging advanced AI tools, retailers can now offer highly personalized recommendations, dynamic product bundles, and even custom product designs, all tailored to individual preferences and behaviors.
This shift is not just about improving the customer experience—it’s about driving business value. Retailers that embrace generative AI can increase customer engagement, boost conversion rates, and foster deeper brand loyalty. For example, AI-powered chatbots and virtual assistants can guide shoppers through complex purchase decisions, while generative design tools enable customers to personalize products in real time.
The impact of generative AI extends beyond traditional retail. Hospitality brands like Marriott Bonvoy and Homes & Villas by Marriott Bonvoy are using AI to curate personalized travel experiences, demonstrating the technology’s potential to transform any consumer-facing industry.
"If you go to a store, there is a personal shopper with you. Now, with AI tools, digital properties can offer similar personalized recommendations."
— Sudip Mazumder, Retail Industry Lead, Publicis Sapient
The health and wellness trend has fundamentally reshaped retail, transforming consumer behavior and driving significant growth. In 2025, we’ll see this trend expand even more, especially as Gen Z gains purchasing power. The surge in demand for fitness and wellness products, exemplified by the success of brands like HOKA at Dick’s Sporting Goods, has made health a core consumer value. HOKA, for instance, has seen its sales triple in the last two years, contributing to a 20% growth in Dick’s Sporting Goods’ overall footwear category.
To capitalize on this opportunity, retailers must integrate wellness offerings across various categories. For example, Target has successfully expanded its Good & Gather brand to include a wellness line that offers vitamins, organic snacks, and plant-based protein options, which saw $1 billion in sales in its first year and is currently on its way to $4 billion. While many retailers have already incorporated health services, the focus is increasingly shifting towards mental health. Despite challenges faced by tech companies and retailers in the health services space—like Amazon’s discontinuation of its Halo health-tracking devices—the growing prioritization of mental well-being presents a substantial market opportunity. The global mental wellness market is projected to reach $251.65 billion by 2031, growing at a compound annual growth rate of 6.15%.
Consumers are increasingly willing to invest in their overall health, with spending on wellness products and experiences rising, especially in the U.S. and for younger consumers. According to the Global Wellness Institute, the U.S. wellness economy is valued at $1.8 trillion, the largest in the world—and the two most profitable markets are physical activity and personal care and beauty.
The health and wellness trend has fundamentally reshaped retail, transforming consumer behavior and driving significant growth.
This is especially true for younger generations, who view health and beauty as interconnected aspects of personal care. The convergence of health and beauty is a key trend for 2025, driven by the influence of social media platforms like TikTok, where trends like “skin cycling” and “wellness routines” have gained massive traction. Demographic profiles for the “Clean Beauty” conversation on Instagram are uniformly female, age 30 and older, and white-skewing. In contrast, on TikTok, the category is gaining traction with a lower-income audience, making way for the democratization of clean beauty and even clean living.
By strategically incorporating mental wellness products and services, and by emphasizing the intersection of health and beauty within owned brands, retailers can effectively tap into this expanding market and drive sales growth. For example, Sephora has successfully launched its Clean + Planet Positive program, which focuses on clean beauty products that align with wellness values. Ulta expects overall revenue to grow 12% in the global clean beauty market by 2027, according to Retail Dive.
The concept of health and wellness is constantly changing. For retailers, this means AI-powered trend forecasting is more important than ever before—social media platforms like TikTok and Instagram are akin to a crystal ball to predict consumer demands in the health and wellness space, and retailers with an agile operating model and the right analytics tools to act on these trends will come out on top.
By strategically incorporating mental wellness products and services, and by emphasizing the intersection of health and beauty within owned brands, retailers can effectively tap into this expanding market and drive sales growth.
Publicis Sapient is a digital transformation partner helping established organizations get to their future, digitally enabled state, both in the way they work and the way they serve their customers. We help unlock value through a startup mindset and modern methods, fusing strategy, consulting and customer experience with agile engineering and problem-solving creativity. As digital pioneers with 20,000 people and 53 offices around the globe, our experience spanning technology, data sciences, consulting and customer obsession—combined with our culture of curiosity and relentlessness—enables us to accelerate our clients’ businesses through designing the products and services their customers truly value. Publicis Sapient is the digital business transformation hub of Publicis Groupe. For more information, visit publicissapient.com.