The Coresight Research team discusses our outlooks for retailing in 2025, covering five sectors in the US market: CPG, department stores, drugstores, grocery and mass merchandisers. Discover our growth predictions, dive into consumer behavior trends and understand the challenges facing retailers today, including the impact of economic pressures and competition from e-commerce.
Takeaways
Chapters
00:00 2025 CPG Sector Outlook
02:22 Mass Merchants and Warehouse Clubs Predictions
04:45 Grocery Store Trends for 2025
07:06 Department Store Challenges and Opportunities
08:30 Pharmacy and Drugstore Market Insights
Read our Retail 2025 Sector Outlooks: Ebook to discover the prospects for retail in 2025.
Welcome to Retaili$tic, the official podcast of Core Site Research for January 7th, 2025. This week, we have a very special edition of the podcast as our research team reveals our sector outlooks and predictions for five segments: CPG, mass merchants and warehouse clubs, grocery, department stores, and retail pharmacies. We'll share another five segments next week.
First, let's visit with Stephen Deemer to hear what we can expect from CPG companies in 2025.
We estimate that the total US CPG sector, covering both in-store and online sales, will grow by 3.2 % year-over-year in 2025 to $1.4 trillion. Despite inflation having lessened in recent months, the lingering impact of high prices will cause consumers to continue to seek value and promotions while buying CPG products in 2025.
As such, we expect CPG companies to continue to lean on promotional activities and look for new ways to differentiate their products, including increased investments in innovation. Many CPG companies, including established giants such as Procter and Gamble, continue to explore innovation in their product categories, allowing them to better cater to consumer demands and trends, such as the shift toward value-seeking behaviors. We expect this trend to continue in 2025, with companies focusing on promotional activities to broaden their base.
Additionally, amid consumers' focus on preventative health, we expect to see a proliferation of health and wellness offerings by CPG companies to cater to this growing demand, driving the category's growth in the coming years. Looking ahead to 2025, we will be watching three key trends in the US CPG space.
First, amid a cautious consumer environment, CPG companies will likely focus on increasing promotional activities and offering more discounts to consumers to drive sales volume growth.
Second, CPG companies will look to innovate in many areas, such as ingredient formulation and packaging to drive value, differentiate their offerings, and meet evolving consumer demands around value and sustainability.
Third, as CBG companies look to personalize their products, we expect that they will leverage consumer data and artificial intelligence and machine learning models in order to improve personalization and better match products to specific consumers' needs and expectations.
Thank you, Stephen. Now let's hear from our chief editor Georgina Smith about what the big mass merchants and warehouse clubs will bring to the show this year.
We project that the combined revenues of U.S. mass merchandisers, warehouse clubs and discount retailers will grow 4.8 % year over year to just over $989 billion in 2025, accelerating from estimated growth of 3.5 % in 2024. Overall, the market will continue to face headwinds in regard to discretionary and big ticket purchases, particularly as consumers remain cautious spenders due to economic pressures.
However, retailers are to benefit from consumers' focus on value and their redirection of spending toward essentials. Warehouse clubs have tended to be outperformers compared to discount stores and mass merchandisers in recent years, and we expect this trend to continue in 2025 due to value perception and the treasure hunt approach at these retailers, driving shopper traffic, spending, and membership renewal. Furthermore, warehouse clubs serve a relatively affluent clientele who are less likely to be impacted by the challenges posed by economic headwinds.
The ongoing trade tensions between the US and China pose a significant risk for mass retailers, especially dollar stores, as a large portion of their imported inventory is from China. If tariffs or restrictions on imports increase, these retailers could face higher costs that may threaten their ability to offer low prices, a key factor in attracting their budget-conscious customer base.
Mass merchandisers, warehouse clubs, and discount stores will face increased competition from the growth of value-led e-commerce players and marketplaces such as Amazon Hall, Shein, and Temu. The product mix of these offerings, especially in non-food categories such as apparel and homeware, overlap with the portfolios of mass retailers, and their ultra-low price points and wide product ranges make them particularly attractive to price-sensitive consumers.
Dollar stores are poised for a comeback in 2025 as they implement strategies to address competitive pressures and better align with consumer demand. Examples include Dollar General's Back to Basics initiative and Dollar Tree's multi-price strategy.
Fantastic, Georgina. Now back to Stephen for a look at something we're all curious about, food. What do we predict for grocery stores this year?
We expect that the US grocery retail sector will go 3.1 % in 2025, recovering from 1.1 % growth in 2024. This modest rebound will be driven by grocery inflation, which we expect to average to 2.1 % for the year. Volume growth will remain a challenge, inching up by just 1%, reflecting the sector's ongoing struggle to drive unit sales as consumers remain judicious spenders.
In 2025, Corsight Research believes that food retailers, including supermarkets and specialized food stores, will remain the dominant channel for purchasing groceries. However, non-traditional grocery retailers, such as mass merchandisers, warehouse clubs, and discount retailers, have steadily siphoned sales from traditional food retailers in recent years, a trend we expect to continue next year.
Industry concentration in the US grocery space will also continue in 2025, predominantly in the supermarket space, as major grocery players reap the benefits of greater scale, invest in online grocery offerings, compete aggressively on price, and gain share at the expense of their smaller rivals. Meanwhile, smaller regional grocers, which often lack the scale and financial capacity required to invest in similar resources, will attempt to remain competitive by either banding together or being acquired by more prominent companies.
In 2025, we anticipate retailers will focus on expanding their retail media networks through in-store media touchpoints, including video displays and smart shopping carts. Given that physical stores attract a substantially larger share of consumer traffic than digital platforms,
In-store marketing presents a compelling opportunity for advertisers seeking to broaden their reach. The aggressive expansion of grocery discounters such as Aldi and the increasing penetration of dollar stores in the U.S. grocery space is set to continue in 2025, leading to intense competition with traditional retailers.
We also expect that Amazon will continue to cause market disruption next year as it works to grow its multi-channel grocery model, building on the efforts it made in 2024 which include rolling out private label brands, piloting a new small format store, and launching revamped Amazon Fresh stores and grocery delivery services.
All right. Always love more options for food. Georgina, what are we expecting to see from the department stores?
We estimate that the U.S. department store sector will total $76.4 billion in 2025, representing a 4.8 % decline year over year and reflecting continued post-pandemic structural challenges, including heightened competition from online-only rivals and brands selling directly to consumers.
By segment, beauty will gain share in 2025 as consumers are set to cut back on big-ticket items, instead splurging on smaller, attainable luxuries that offer a sense of indulgence without a heavy financial commitment, such as beauty products. We expect to see an outperformance by fragrances and prestige cosmetics, as these products are often associated with high-end brands that have a strong reputation for quality, exclusivity and luxury.
Given these developments, we have seen department stores actively expand their beauty businesses. For instance, Kohl's is opening more Sephora stores, while Macy's Blue Mercury banner is remodeling many of its stores and expanding its product assortment.
We anticipate that the department store sector will see a higher concentration of market control among the three leading players, Kohl's, Macy's and Nordstrom. These companies held a combined share of nearly 70 % of the total market in 2023. We expect this figure to increase to over 75 % through the next decade.
Okay. And finally, what are we predicting for the drug stores, Stephen?
In 2025, we expect US pharmacy and drugstore sales to increase by a low single-digit percentage year-over-year, totaling $387.2 billion. This growth represents a slight acceleration from our estimated 3% year-over-year growth for 2024 when retailers lapped the strong inflation-led growth that occurred in 2023.
We expect sector growth this year to be primarily driven by increased demand for prescription medicines and over-the-counter products, although soft demand for discretionary products may slightly offset this increased demand. Health and wellness products, supplements, and GLP-1 medications will also be crucial drivers of increased drugstore and pharmacy sales as consumers increasingly focus on their health and wellness.
In 2025, we anticipate that the drugstore sector will see a higher concentration of market control among the two largest drugstore retailers, CVS Health and Walgreens Boots Alliance. We estimate that Rite Aid will rank a distant third as the company has recently come out of its bankruptcy process and is currently realigning its business.
U.S. drugstores have enjoyed a large share of the prescription and non-prescription drugs market for many years. However, in recent years, these retailers have struggled to remain profitable as pharmacy benefit managers have reduced reimbursement rates, according to recent earnings calls from CVS and Walgreens, shrinking their already thin margins. Also, they have seen weakened demand for discretionary products due to consumers cutting back on these types of purchases.
Finally, they face increased competition from non-traditional pharmacies, such as Walmart, and online players, such as Amazon. Amid this evolving landscape, major US drugstores are reconsidering their store placement plans. CVS, Walgreens, and Rite Aid are all in the midst of store closure campaigns, resulting in the divestiture of hundreds of locations. For instance, Walgreens plans to close more than 1,200 U.S. over the next three years due to higher operating costs and declining profitability, per a recent earnings call. These companies are also attempting to optimize their product and service offerings at their remaining locations, and we expect that these cost-cutting initiatives will continue through 2025.
Interesting. Thanks Stephen and Georgina, can't wait to get the skinny on five more segments next week, including beauty, luxury, and apparel. We hope you'll join us for that. We also have some exciting episodes on the horizon with tech trends from CES and live coverage of NRF.
For more info on CoreSight's advisory service, our subscription data service, the CoreSight AI Council, access to our full catalog of in-depth research, and schedules of upcoming events, visit us at Coresight.com and follow Coresight Research on LinkedIn. We'll see you next week.