In this episode of Retaili$tic, the Coresight Research team discusses the outlook for various retail segments in 2025—namely, beauty, e-commerce, apparel, home improvement and luxury. Key trends in focus include the influence of AI in retail technology, the growth of online shopping, and the importance of consumer preferences in shaping market dynamics. The conversation also touches on the impact of economic factors on consumer spending and the evolving landscape of retail media.
Takeaways
Chapters
00:00 Introduction to Retail 2025 Outlook
04:18 Beauty Sector Predictions for 2025
06:10 E-commerce Trends and Projections
09:30 Apparel and Footwear Market Insights
10:56 Home-Improvement Sector Analysis
13:22 Luxury Market Trends and Predictions
Read our Retail 2025 Sector Outlooks: Ebook to dive into prospects for retail in 2025.
Welcome to Retaili$tic, the official podcast of Coresight Research for January 14th, 2025. 2025 is shaping up to be a year of great change, and this week, Georgina and Stephan are back to share the Coresight Research outlook for five more retail segments, beauty, e-commerce, apparel and footwear, home and luxury.
But before we get to the sector predictions, Georgina is here to highlight some of the latest research reports available on Coresight.com.
We're having an exciting and busy first couple of weeks of 2025. We've been publishing our analysis of major developments and critical focus areas in retail with insights on the appointment of a new CEO at Alta Beauty, the JCPenney merger to create Catalyst brands and potential tariffs on imported goods proposed by the US.
Over the past week, Coresight Research has also continued our Retail 2025 series with three highly anticipated reports focused on the fascinating and ever-evolving field of technology. Firstly, we present 10 key technologies that we expect to be influential in retail this year, spanning the physical store, e-commerce, and operations. I think most listeners will be unsurprised to hear that AI appears practically everywhere through our list of retail tech trends, from computer vision and visual shopping and search, to data analysis and personalization. We touch on agentic AI and the power of generative AI in the supply chain as well as topics such as retail media expansion. Read our new report to understand what is significant today and what will be important in the year ahead. This report is free to read through its sponsorship by Intel.
Secondly, we dive into 10 key trends in retail media, which is a fast growing high margin revenue opportunity. The retail media landscape is transforming into a complex marketing channel that will require retailers to establish strong, distinctive technical capabilities. We expect the market to mature in 2025, but success will require retail media networks to have compelling value propositions and work with advertisers and strategic partners to extend their reach and effectiveness. I encourage you to look out for this new report, which categorizes 10 retail media trends into three areas, innovation and technology, market shifts, and data and measurement. This report is free to read through its sponsorship by Critio.
Finally, we present 10 recommendations based on key trends that are revolutionizing the use of AI and transforming the retail and consumer market. Our new research report explores the implications and opportunities of applying the power of AI to catapult product development to a new level, unlock data analysis, enhance demand forecasting, empower workforces, and much more. This report is free to read through its sponsorship by invent.ai.
Elsewhere in research, the new Coresight 100 for 2025 has landed reflecting the rapid rate of change and evolution in the retail industry, we have reviewed and updated our focus list of retailers and brand owners. Our updated Coresight 100 comprises the most significant and influential companies that our readers and subscribers should pay attention to this year, spanning the US, Canada, Europe, Asia, and Australia.
We're also excited to unveil the newest version of our retail tech coverage list, Tech25. The list comprises public companies that are making waves in retail, driving innovation in line with our expectations for key technology trends in 2025 and beyond.
Turning to events, last week, the Coresight research team attended the CES trade show in Las Vegas, Nevada. Deborah emceed the retail track there, offering a presentation and remarks to open panel sessions on computer vision, putting AI to work in retail, shopping in the metaverse and shoppable video. You can find our full coverage of CES on coresite.com. We hope our insights help you digest what you've learned through the event and catch up on what you may have missed.
You can also meet the team at NRF 2025 Retail's Big Show if you are attending the event in New York this week. During one session at NRF, Deborah will reveal insights from our Retail 2025 report on 10 Trends in AI in a session with invent.ai. We are publishing our insights from NRF in daily reports, so keep up to date on coresight.com.
Thanks, Georgina. Let's dive into our sector coverage with your review of our outlook for the beauty sector.
We define the beauty sector as color cosmetics, fragrances, hair care and skin care. Coresight Research estimates that total US beauty retail sales will grow 2.5 % in 2025. Beauty products are affordable indulgences that make consumers feel good, meaning they prioritise these purchases even amid economic pressures. Barring a prolonged period of economic stagnation or consumers pull back of their spending, we believe that sales of beauty products in 2025 will continue to be driven by their position as low-cost, feel-good purchases and the fact that, as consumables, they need to be replaced regularly.
Additionally, an increased focus on health and wellness, with consumers viewing beauty more as a wellness category, will help the sector to grow. Digital and e-commerce channels, along with the support of physical stores, will drive incremental engagement opportunities in the beauty sector this year. We expect beauty shoppers to continue to traverse both online and in-store channels as they seek convenience and efficiency.
We also point to premiumization as a market factor. Consumers trading up in quality and price points will continue through 2025 in the US beauty market, specifically in the fragrance, haircare and skincare categories, due to a combination of new formulations and enhanced educational and marketing efforts.
Finally, while diversity and inclusivity are trends we have watched across the retail space for many years, the fashion sector seems to have received the bulk of media attention around these trends previously. However, we believe that the beauty industry is better positioned to fulfill these cultural mandates over the next few years.
Looking and feeling good seems to be a big theme this year. Now let's bring Stephan in to share what we expect from e-commerce in 2025.
Coresight Research expects online retail sales, excluding food service in the U.S., to total $1.2 trillion in 2025, representing high single-digit percentage growth year over year and a marginal slowdown from 2024.
Consumers' preference for online shopping remains on the rise in US, with 5G networks making significant headway and offering online retailers the ability to provide seamless, low-latency digital interactions. Additionally, the combination of GEN.AI and advanced data analytics is empowering retailers to offer highly customized shopping experiences, increasing customer retention and driving sales growth.
However, at the same time, macroeconomic challenges such as still high interest rates will continue to impact online and offline consumer spending in the U.S. We also expect the effects of global tensions, including the Israel-Hamas and Russia-Ukraine wars and the ongoing U.S.-China trade dispute, to remain elevated, spurring supply chain shifts and sourcing diversification, as well as negatively impacting overall consumer sentiment.
In the U.S. e-commerce market, Amazon remains the largest player, holding a 39.8% share of the market in 2023, based on our estimates of its gross merchandise value. Walmart, the market's second largest player, only holds a 6.3% share. Moving on to China, we expect online retail sales of physical goods, including food service, in the country to total $2.1 trillion in 2025, representing year-over-year growth of 8%.
Currently, the country is seeing a slower economy, largely due to the downturn of its housing market. However, the Chinese government has started rolling out measures to combat this downturn, stimulate the economy and increase spending, a trend we expect to continue throughout 2025. These measures include consumption vouchers and trade-in programs. Additionally, China has a high online shopping penetration rate with its internet penetration standing at 78%, while approximately 82.3% of China's internet users had engaged in online shopping as of June 2024 according to the China Internet Network Information Center.
Still, macroeconomic uncertainty and geopolitical risks pose a significant challenge for the Chinese e-commerce market. Most notably, U.S. President-elect Donald Trump has stated he intends to raise tariffs on Chinese goods, which would negatively impact retailers' abilities to sell to customers in the U.S. Although China's online retail market is dominated by traditional e-commerce players, namely Alibaba, JD.com, and Pinduoduo, emerging platforms such as Douyin are challenging traditional platforms with their unique value propositions.
In both the US and China, Gen.AI is unlocking new avenues for e-commerce platforms to innovate and adapt to rapidly changing consumer behavior. Likewise, live streaming has become an essential sales and marketing channel for retailers and brands in both countries. At the same time, driven by the accelerated development of enhanced logistics processes and consumers increased expectations for fast delivery, Quick Commerce is gaining traction in China and the US.
Thank you, Stephen. Georgina, what do we expect for apparel and footwear this year?
Coresight Research projects that total US apparel and footwear sales will increase by 2.9% year over year in 2025, accelerating slightly from estimated 2.6% growth in 2024. For the specialty apparel and footwear retail sector specifically, we project low single digit sales growth.
In terms of e-commerce, online apparel and footwear sales in the US will grow 6.5% this year, we estimate, representing nearly one third of total sector sales. Given the market's maturity, we expect annual e-commerce growth to moderate in 2026 and beyond, but remain in the mid-single digit percentage range.
From a retailer perspective, the US apparel and footwear industry is relatively concentrated, with the top 10 retailers accounting for over 40% of sector sales. Within that top 10, Amazon, TJX, and Walmart continue to be leading players and will remain so this year.
From a brand perspective, the market will remain fragmented in 2025, with Nike and the private label brands of Amazon and Walmart continuing to lead the way. A variety of factors are set to impact the apparel sector this year, including continued consumer enthusiasm for casual wear and sportswear, an increase in the prescription of GLP-1 medications, and growing consumer demand for environmentally friendly products. Cost control strategies, immersive experiences, and the expansion of inclusive categories will be key themes to watch in apparel and footwear retailing.
I guess shaping up means shaping up your wardrobe as well. How about shaping up the abode? Stephen, what's happening in the home improvement sector?
The US home and home improvement retail sector, comprising furniture and home furnishing specialist retailers and home improvement retailers, faced a difficult 2024 due to the impact of continued inflation and high interest rates. We anticipate a moderate recovery in 2025 with estimated year-over-year sales growth of 2.8%.
In September 2024, for the first time since March 2020, the Federal Reserve reduced interest rates. In November 2024, they dropped rates once again. However, despite these drops, both inflation and still high interest rates continue to pressure consumers' wallets. Mortgage rates remain stubbornly high, and there is a meaningful gap between current rates and homeowners' existing rates, according to an earnings call that Lowe's held in November 2024. These factors, combined with a lack of available homes for sale, have resulted in the U.S. housing turnover rates nearing a 30-year low, according to data from Redfin. As such, Coresight Research believes that an improvement in sector demand in 2025 will be dependent on the expected cuts to interest rates taking place and consumer sentiment improving this year.
Coresight Research will closely monitor three trends in the home and home improvement space. First, many companies in the sector are expanding their loyalty programs, a trend we expect to continue throughout the year. For example, in November 2024, Lowe's launched a new platform, its digital home platform, exclusive to members of its MyLowe's Rewards program.
Second, companies in the sector will increase their use of emerging technologies from the supply chain through to enhanced in-store experiences. For instance, both Tractor Supply Company and Williams-Sonoma have stated they intend to leverage AI and machine learning in 2025 to enhance decision-making processes, personalization, and in-store shopping journeys.
Finally, we expect continued DIY pressure and a renewed focus on pro-consumers. On recent earnings calls, many retailers in the sector, including both Flor Decor and Lowe's, have stated that they anticipate macroeconomic volatility to continue to pressure DIY purchases in 2025.
Thanks Stephen. Let's wrap our sector predictions with a look at luxury. Georgina?
Luxury retailing overall relies heavily on the physical channel. By geography, we expect China's share of the luxury market to increase between 2024 and 2028, totaling almost 20% in 2025, reflecting the growing affluence and purchasing power of Chinese consumers. Meanwhile, the US and Europe will remain key regions for luxury brands this year, with a share of around 25% each. Although we project a slight market share decline for the US this year, and a decline for Europe over the coming years.
The global luxury market is currently influenced by growing global wealth and ongoing geopolitical tensions and tariffs. Headwinds also include inflation, while tailwinds include rising global wealth and the recovery of international tourism. As well as mergers and acquisitions and social commerce, we see resale platforms as likely to have a significant impact on the global luxury market in 2025.
More luxury brands are working with third-party marketplaces or launching their own resale programs to highlight their sustainability efforts. The U.S. fashion resale market is set to grow by over 5% this year, building on its evolution from a single-digit billion-dollar market in 2008 to a value of over $30 billion today, we estimate.
Let's hope that global wealth trend continues. Thanks for sharing those sector predictions and your ongoing analysis. Next week, we'll have some in-depth commentary on what we learned at CES and NRF this year, so I hope you'll join us for that.
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.