Trends impacting Retail 2025-2026

Retail has had a turbulent few years around the world. We saw a steady build up till 2019, then a sharp nosedive during the onset of COVID in 2020, then online businesses booming in 2021-22, and then decline in growth since then. The turbulence of the global economy in the last few months has not left Retail unscathed with back and forth policy changes causing uncertainty, and impact of tariffs threatening already squeezed margins for retailers. 

Consumers have also been adjusting to changes in their life, driven by macro events. From aggressive online shopping to a renewed focus on household budgets driven by increased prices across the basket. And yet, a good part of the consumer expectations from retailers have remained similar - the need for quick & free delivery, seamless shopping experience across online & offline, and of course the need for quality & affordable products. 

So, what are the key highlights and focus areas for the Retail industry across the rest of 2025 and looking into 2026? 

1. Adjusting to tariffs & economic uncertainty

Tariffs have an impact on both retailers & consumers. The extent of course is different across countries and across categories - dependent not just on the tariff on the product line, but also the tariffs on the supply chain. Net net, it will still impact pricing. This will have two offshoots - consumers spending less because of an overall increase in prices, and retailers focusing on how to retain margins. 

Final policy dependent tariffs will still result in an increased price across products from phones to imported food items. This will force consumers to be more picky on what they buy and whom they buy with. Deals and discount-led strategies will become even more relevant as retailers fight for wallet share. A study by the Boston Consulting Group (BCG) indicates that 65% of consumers are more price-sensitive in 2025 compared to previous years, leading to a surge in demand for discount retailers and private-label products. Whilst it may not propel a drastic change in lifestyle (a la Covid), it will cause smaller changes - delayed purchases, tilt towards second-hand products esp on higher price items (fashion goods etc). 

Retailers’ battle to protect their margins is hardly new. That will continue and get more difficult, as suppliers start to increase prices, and consumers start to resist significant price changes. All whilst balancing stakeholder interests, including employee demands for higher wages to cope with inflation. And those that are listed will face EPS scrutiny with significant ramifications. 

2. The AI journey continues

And you thought AI would be number one on the list of things to affect Retail!

The AI journey which properly took off in late 2022 will see another year of Retailers trying to adopt AI in different aspects of their business, and more importantly, trying to extract the benefit of their investment. 

We have seen some changes across the board, from the immediately evident AI chatbots & AI agents tackling service queries, including how websites are designed and updated, to AI being used for inventory changes in the warehouse, as well as overall productivity changes in day to day work including search, email drafting impacting back & front office. 

However, like the last few years, the immediate impact of the AI changes is not very evident. We see some green shoots on pilots being tested, early go-live/ implementations. And yet, despite the costs and limited short-term gains, retailers continue to persist since the long-term story still stands. Take Amazon’s AI shopping assistant Rufus. Despite an estimated $285 million loss in 2024, Amazon anticipates that Rufus will contribute $1.2 billion in downstream impact profits by 2027, factoring in ad revenue from embedded responses.

Will 2025 or 2026 be the years where the impact of AI fully shows, and we see the RoI impacting the P&L? Not quite but incremental steps will be taken. 

Like every year, we will also see newer use cases coming up. A lot of the focus is shifting to AI in Robotics & Operations, to unlock some much-needed improvements in margin efficiency. 

3. Automation & focus on operational efficiency

Similar to the AI point above, the quest for increasing efficiency across the retailer's full scope of operations drives retailers to adopt & try new things. The focus is of course eking out the minor benefit in margins to give them the competitive edge, also on pricing out competition. 

Amazon has deployed over 750,000 robots in its fulfillment centers, including advanced systems like Sparrow (item handling), Proteus (autonomous movement), and Sequoia (AI-driven storage). These innovations aim to streamline operations and are projected to save Amazon up to $10 billion annually by 2030.

GXO Logistics has initiated a program to test humanoid robots in its warehouses, aiming to integrate advanced AI-driven automation into its operations. Robots like Agility Robotics' Digit are operational in warehouses, performing tasks such as moving containers and recycling materials, enhancing efficiency and reducing reliance on human labor.

This is not just limited to the back office, and will spill over into the store as well. At the 2025 Osaka Expo, 7-Eleven introduced "newme" robots—remote-controlled avatars operated by staff to assist customers with tasks like using self-service tills and ordering food. This innovation addresses workforce shortages, costs in high labor-cost markets and enhances customer service.​

4. It’s still about the experience

No matter the ups and down in the Retail sector over the past many years, the consumer shopping experience has still remained paramount. And, it will continue to do so. 

Whilst we have seen features like live commerce, AR filters, and virtual try-ons come and go come and go, the essential friction or lack thereof in a consumer’s shopping journey has been the benchmark for consumers to choose one brand over another. Unified commerce has evolved from the omnichannel approach, integrating all sales channels into a cohesive system to provide a seamless customer experience. Consumers expect the flexibility to browse online, purchase via social media, pick up in-store, and return through an app without friction. Hence, retailers would be well poised to continue keeping their focus on this, both online and offline as well as the handoff in between. 

This of course includes personalisation at its core. According to a report by McKinsey & Company, companies that extensively personalize their offerings can achieve a 5-15% increase in revenue and a 10-30% improvement in marketing-spend efficiency.

The influence of AI to make the shopping experience more seamless and personalised will only increase  through hyper-personalized recommendations, dynamic pricing, and real-time customer support. AI can analyze browsing behavior, past purchases, and contextual data to suggest relevant products, optimize checkout flows, and tailor promotions to individual preferences. For instance, Sephora uses an AI-powered “Color IQ” system and chatbot assistant to match customers with ideal foundation shades and skincare products both in-store and online, enhancing personalization and reducing product returns.

5. China

Contentious as this topic may be at the political and macro level, retailers around the world can scarce ignore the rapid growth of China across the retail sector. This will continue into 2025, albeit with a twist given the tariffs finally imposed. The overall impact takes the shape of three specific dimensions. 

One, as competition. Cheaper Chinese goods flooding markets is not new. However, the prevalence and reputation attached to them, thanks to brands like Temu & Shine is changing, posing challenges to domestic retailers. Also, the shift in proportion between countries will change with the US imposing tariffs and changing de minimis provision. 

Second, as suppliers. Retailers around the world over the last few years have increasingly depended on Chinese suppliers towards their supply chain. With Chinese suppliers losing the prevalence of US as a dominant target, they will look to Europe and other countries to fill the gap. The price competitiveness of these will play a critical decision role in retailer’s margin computation as well. 

Third, as consumers. Foreign retailers have had success in China, especially amongst luxury brands. But that has not been without its share of challenges. Nevertheless, it will continue growing into 2025 and beyond. Once again, loss of American sales to retailers around the world will create a need for alternate demand sources, China being one of them. 

These and more will make China an unmissable player in the global retail-geopolitical landscape. Retailers will need to get both their strategic thinking and execution on China spot on.

So, what should retailers take away from all of this as they navigate the rest of 2025 and look to 2026? Maybe the following could be top of mind: 

1. Margins will remain under pressureTariffs, inflation, and cost-of-living pressures are here to stay. Retailers must build nimble pricing strategies and consider margin-friendly levers like private labels and alternate sourcing.

2. Bet on AI, but with a long game mindset AI is not a silver bullet—yet. But those who stay the course and continue to test, learn and scale use cases across personalisation, service and ops will benefit when the tide turns.

3. Automation isn't just a nice-to-have Whether it's robotics in warehouses or automated store assistants, every percentage point of efficiency matters. Operational automation will be key to offsetting rising input costs and labor pressures.

4. Seamlessness wins loyalty Consumers will keep expecting a smooth experience across all touchpoints. Unified commerce, backed by strong personalisation, will be the differentiator.

5. China’s not optional Whether you view China as a competitor, supplier, or consumer base—it’s a critical part of the retail equation. Global retailers need a clear, agile China strategy in place.

If you have an opinion or two about this article or any points therein, I’d love to hear it! Or if you would like to learn more, please drop in a line to vinayvaswani@strivo.nl

Written by Vinay Vaswani, for Strivo B.V.