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2025 retail predictions: Mid-year reality check

Last November, our analysts made some predictions about how the retail category would fare in 2025. Now that we’re halfway through the year, it’s time to check back in on what has (or hasn’t) happened.

"We're seeing many of our predicted trends playing out, though not always in the ways we anticipated," said our analyst Suzy Davidkhanian on a recent episode of the "Behind the Numbers" podcast. "The retail landscape is evolving rapidly, with some developments accelerating faster than expected while others face unexpected headwinds."

AI integration is supercharging business growth

Generative AI is starting to unlock the potential of predictive AI, though much of this activity happens behind the scenes.

"I'm fairly certain that a lot of companies are doing this under the hood," said our analyst Carina Perkins. "The problem is that it's not really the kind of thing they tend to talk about or send press releases about."

What retailers are implementing is a sophisticated combination of AI technologies:

  • Predictive AI forecasts consumer behavior and inventory needs.
  • Generative AI provides a user-friendly interface for non-technical staff.
  • This combination allows for faster, more actionable insights.

Nearly two-thirds of "AI leader" companies—those integrating AI throughout their organizations—are reporting substantial benefits from their investments, according to a recent study from Rackspace Technology conducted by Coleman Parks Research.

The rapid emergence of agentic AI has become the new "shiny penny" in retail technology, according to Davidkhanian. These AI agents can link multiple AI systems to complete tasks without human intervention, potentially accelerating the adoption of comprehensive AI strategies.

China's ecommerce disruptors face major challenges

The prediction that Chinese e-commerce platforms would face disruption has proven accurate, though for more severe reasons than anticipated.

"When we wrote this trend, we were leaning into the tax loophole," said Davidkhanian. "Now, the disruption is much broader in that there's actually tariffs on the goods themselves being produced at any level, and the tariffs are astronomically higher than anyone could have ever thought about."

This disruption has forced companies like Temu and Shein to pivot strategies.

“Shein and Temu have turned their attention to the UK and France, they’ve both ramped up advertising spend in those countries,” said Perkins. “But in the UK, regulators are also considering scrapping the rule that allows small parcels to enter the UK duty-free. So they’re not looking at the same kind of astronomical tariffs that the US is, but they are trying to close that loophole.”

The scale of disruption has exceeded expectations, creating opportunities for established retailers to fill the void while presenting significant challenges for Chinese platforms.

Retail media networks face consolidation pressure

The prediction that mounting pressures would squeeze smaller retail media networks is playing out, with several contributing factors:

  • Brands and advertisers are more budget-conscious amid economic uncertainty.
  • Competition has intensified with non-retail players entering the commerce media space.
  • Advertisers increasingly prefer to concentrate spending with fewer, larger networks.

"There have not been new [networks] popping up in the retail world," Davidkhanian said. "There have definitely been some tie-ups between ad tech vendors trying to work with retailers."

The European market shows similar patterns but with regional differences.

  • In Germany, Amazon commands 80% of retail media spend, while the UK and France have more competition from grocery retailers, according to Perkins.
  • With over 100 local retail media networks operating in Europe, fragmentation remains a challenge, particularly for cross-border campaigns.

New predictions: Bold moves in response to tariffs

Looking ahead, the analysts offered three predictions for the rest of 2025 and beyond:

1. Walmart will launch a new online fashion marketplace to capitalize on the challenges facing Temu and Shein. This could allow Walmart to rebrand its fashion offerings without developing new private labels.

2. Retailers may turn to 3D printing for in-house production of goods affected by tariffs. Davidkhanian suggested Walmart could pioneer this approach for plastic goods, though questions remain about infrastructure readiness and environmental commitments.

3. OpenAI will partner with a major retailer to deploy GPT-powered digital store associates on smart screens in physical stores, especially in the UK where in-store digital infrastructure is extensive.

"If the AI were to know that you're a club card member, it would know what you've previously bought," said Perkins. "It could say, 'Oh, don't forget to buy your Twix because you really like them for tea time.'"

Listen to the full episode

This article was prepared with the assistance of generative AI tools to support content organization, summarization, and drafting. All AI-generated contributions have been reviewed, fact-checked, and verified for accuracy and originality by EMARKETER editors. Any recommendations reflect EMARKETER’s research and human judgment.

 

This was originally featured in the Retail Daily newsletter. For more retail insights, statistics, and trends, subscribe here.

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