Article Monday, January 20, 2025

U.S. Retail Insights in 2025

The retail landscape is evolving rapidly, driven by shifting consumer priorities, technological advancements, and macroeconomic factors. Our latest Retail Proposition Index provides an in-depth analysis of these trends, drawing from insights across 48,171 consumers in 9 countries and 568 retailers. Our research shows both challenges and vast opportunities for US retailers in 2025.

Our key themes for 2025 include:

Compete on Value, Win Through Differentiation

While value remains a cornerstone of consumer choice, its definition is changing. U.S. consumers increasingly associate value for money with product quality rather than only low prices. Price leadership alone is insufficient to incentivise consumer spend and loyalty. Retailers must now invest in trade-up ranges, offering variety and premium options to create differentiation. Despite a fall in U.S. consumer confidence through 2024 due to labor and cost-of-living concerns, easing inflation is likely to boost consumer spending.

Don’t Forget the Fun: Reigniting Retail Engagement

U.S. consumers are increasingly prioritizing experiences over material purchases, and the concept of ‘fun’ in retail has become a critical factor for differentiation. Our research indicates how younger generations, particularly Gen Z, value engaging and interactive shopping experiences. Retail disruptors like Shein and Temu are leading the charge by delivering low prices paired with highly interactive, ‘fun-to-shop’ journeys that foster engagement and loyalty.  Moreover, U.S. consumers are increasingly spending more on leisure activities over retail goods, further emphasizing the importance of injecting ‘personal experience’ into the consumer journey and memory. Retailers that fail to adapt risk losing market share to competitors who understand the new standards set by digital leisure platforms and innovative retail propositions.

Ageless appeal or a more targeted approach

Retailers are faced with an important question, should their proposition translate into an ageless appeal, but risk alienating the new generation of shoppers; or should retailers use a more targeted approach to future-proof Gen Z/Gen Alpha loyalty? Gen Z/Gen Alpha now contribute a meaningful share of consumer spend (25%+), however over 45’s still account for the majority share of spend at ~50%. The emerging generations show diverging needs and requirements from their predecessors. In the U.S. the gap between Gen Z and Gen X/Baby Boomers is even greater than other countries when it comes to retail propositions resonating with them. Overall, Gen Z has a notably worse perception of retailers than older generations. For retailers, having clarity on where to align in the generational choice will improve strategies for 2025 and beyond.

AI as a Strategic Imperative

Artificial intelligence is reshaping retail, with nearly 80% of U.S. retailers adopting AI technologies already. These tools can generate a significant competitive advantage by effectively addressing customer pain points, for example, 58% of US respondents stated to have used at least 1 type of AI/Tech feature when shopping. Moving beyond the customer, AI presents a unique opportunity to improve operating models for retailers. Large players like Walmart have already installed an AI-powered inventory management system using machine learning to predict demand and manage stock.

For retail leaders, 2025 presents a critical juncture. Success will require a balanced strategy that addresses the needs of diverse consumer groups, integrates AI strategically, and redefines what value is beyond price. By focusing on quality, fun experiences, and innovation, retailers can position themselves to thrive in this dynamic market.

If you want to discuss our findings and how we can support you in 2025, please contact our experts below.

Key Contacts

Coye Nokes

Coye Nokes

Partner

Rebecca Henshaw

Rebecca Henshaw

Associate Partner

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