In this episode of Retaili$tic, the Coresight Research team discusses retail predictions for 2025, focusing on our outlooks for the China, India and UK markets. The conversation covers the implications of proposed tariffs, evolving consumer behavior, the rise of quick commerce, and key opportunities and challenges. Uncover trends such as the impacts of AI (artificial intelligence), experiential shopping and growing demand for luxury goods.
Takeaways
Chapters
00:00 This Week in Research: New Reports and Data
02:30 UK Retail Trends and Predictions
05:27 India's Retail Landscape and Quick Commerce
12:02 China's Retail Market: Opportunities and Challenges
Dive into our predictions for these retail markets in our comprehensive research reports:
Retail Horizons 2025: Predictions for China, India, and the UK
Welcome to Retaili$tic, the official podcast of Coresight Research for January 21st, 2025. This week, we're wrapping up our predictions for 2025 with a deep dive into the retail outlooks for China, India, and the United Kingdom. First, let's check in with Georgina from the London office to hear about the research we're publishing this week.
This week, which has seen the inauguration of US President Trump, we release new analysis of proposed tariffs for 2025 which continued to be a topic of keen discussion and potential concern in global retail. During his presidential campaign, Trump proposed a 60% tariff on Chinese imports and a 10 to 20% tariff on all products imported from other US trading partners. Following his campaign in November 2024, he announced an additional 10% tariff above any additional tariffs on imports from China, as well as a 25% tariff on imports from Canada and Mexico.
In response last month, Mexico announced it would restrict textile imports through its import duty deferral program. We dive into the implications of these tariffs by sector, including higher costs through the supply chain, and explore what measures companies can take to lessen their impact, namely front-loading and sourcing diversification.
In related research, the context of a new administration entering the White House, Coresight Research will present our US macro consumer and retail outlook for 2025. We will discuss tailwinds, headwinds and our projections covering inflation, interest rates and the housing market, in addition to intensifying retail competition from the likes of Shein and Temu.
Elsewhere in research as we look ahead through 2025, our annual deep dive on store developments in the US will reveal our projections for store openings and closures this year, along with estimated square footage impacts, location types and openings and closures as a proportion of retailers' store bases. We will also review total store counts and changes in calendar 2024, breaking down figures by sector. Our weekly Store Tracker reports publish every Friday, bringing you essential information on the latest store closures, store openings and bankruptcies each week. And remember, premium subscribers have full access to our comprehensive and regularly updated US and UK Store Tracker Data Bank.
Finally, we also conclude our coverage of retail developments and spending metrics in 2024 with two new reports on performance during the 2024 holiday season covering the US and the UK markets. Our holiday retail analysis leverages the latest retail sales data, proprietary consumer survey findings and retailers trading updates.
Thanks Georgina. Now let's hear from John Mercer, head of global research on what we expect to see this year in the UK.
We recently published our UK 2025 retail predictions report. Among the trends on which we offer predictions are unified commerce, how more retailers will monetize their intellectual property and why UK consumers will remain cautious in 2025. Plus, here are three further predictions. First, retail media will support the adoption of installed technology such as digital screens, smart cards and sensors. Digital channels will continue to dominate retail media, but stores will become more of focus given the dominance of physical retail as a sales channel.
However, stores have traditionally been a black hole of shopper data and this limits targeting and personalization as well as measurement. We expect retailers to explore solutions that can provide at least some of these options such as smart carts. Smart carts provide greater opportunities for targeting than general in-store screens do and the UK lacks their adoption versus some of the markets such as the US.
Second, what we call the friction gap between stores and e-commerce will close further physical stores are adding in more obstacles and hurdles for shoppers as they try to cut costs and reduce theft. Stores are asking more consumers to scan their own shopping. They're locking up more products, they're installing exit barriers and they're shutting entrances and exits. We think the more obstacles they add, the more they will drive consumers to digital channels. At the same time, AI agents, greater personalization, expanding delivery choices and the growth in online retail options are removing barriers to purchasing online. That will close the so-called friction gap that exists between stores and e-commerce. We expect these push and pull factors to migrate more purchases toward digital channels, and that will benefit cross-border platforms, social commerce, live streaming, and video commerce, which are led by names such as Temu, Shein, TikTok, and Instagram.
Our third prediction is to call out that GLP-1 adoption will democratize healthier living. As adoption of GLP-1 drugs for weight loss ramps up, we'll see visible signs of retailers serving users with a focus on health convenience, active lifestyles and wellness supplements. Widening access to GLP-1 drugs will help democratize weight loss and healthier lifestyles. And the evidence is that GLP-1 users cut their purchases of less healthy grocery categories. A recent study found GLP-1 users cut their grocery spend by an estimated 5.5% in the six months following their adoption of the drug. So as usage widens, grocery and CPG companies will need to prepare for a drag on their total markets, weighted toward the unhealthiest foods.
At the same time, we expect the widening of access to spur increased demand for smaller portion sizes, fresh foods, healthier snacks, smaller size clothing, wardrobe renewal and athletic apparel. Those are a few of our insights from our UK retail predictions report. And you can find that report on coresight.com.
Thank you, John. Now let's hear from Sujeet Naik about 2025 in the world's most populous country.
We have released six predictions for India retail in 2025. Prediction one: Quick commerce companies will expand their reach beyond major urban cities to tier 2 and tier 3 cities, opening up new markets and customer bases. Next year, quick commerce will be a major force shaping India's retail industry. India's rapid urbanization and fragmented retail markets have created a fertile ground for the quick commerce sector.
The format's ability to cut out intermediaries and streamline the supply chain has positioned it as a viable alternative to local kiranas or small convenience stores, which often struggle with limited selection and pricing transparency. After successfully launching in major metro cities, quick-commerce companies such as Swiggy's Instamart, Zomato's Blink-It, and Zepto are now targeting tier 2 and tier 3 cities, where digital penetration is on the rise and consumers are becoming more receptive to online shopping.
Zomato, for instance, is currently present in 26 cities and is looking to expand its quick commerce business to smaller cities. The company has also reported plans to set up 2,000 dark stores by the end of 2026. That being said, scaling in smaller cities comes with challenges like lower population density, smaller order sizes, and supply chain hurdles. Additionally, many non-digital native consumers prefer the in-person shopping experience, making local grocery stores their preferred option over online platforms.
Prediction 2: With traditional e-commerce players and industry conglomerates entering quick commerce, established players will face tough competition for customer acquisition and retention that will potentially trigger price wars. Major retailers and e-commerce companies are launching their own quick commerce services to gain a foothold in the fast-growing market, including Flipkart, Amazon, Tata Group, and Reliance Retail. This will pose a significant challenge to established players Blink-It, Instamart, and Zepto. While these players benefit from a first-mover advantage, they must now contend with deep-pocketed competitors with extensive resources and strong brand recognition.
The intense competition will likely lead to price wars as companies try to attract and retain customers through aggressive discounts, deals, and promotional offers. This price competition could erode the margins of established players as they try to match the aggressive pricing strategies of new entrants.
Prediction 3. Kirana stores will accelerate digital adoption and strategic collaborations to stay competitive amid the quick commerce surge. Kirana stores have long been a cornerstone of India's retail scene, but are now increasingly filling the heat from the rise of quick commerce, which is successfully replicating the ease and convenience of shopping at these stores. The impact is already apparent. Approximately 200,000 Kirana stores reportedly closed in the 12 months and at October 2024, primarily in metro cities.
Even large shipping companies are also noting the rapid growth of quick commerce. Nestle India, for instance, recently reported that it is observing some channel shift in metros and mecca cities towards quick commerce. As a result, it will be crucial for Kirana stores to innovate to stay competitive. Some have begun digitizing their operations and partnering with delivery platforms, but we expect many small owners may face challenges in securing the necessary investments in technology and logistics to adapt successfully.
Predition 4. Retailers and mall developers will look beyond the metros to tap the burgeoning consumer market in India's tier 2 and 3 cities. Tier 2 and 3 cities are propelling the next phase of growth in India's retail sector, offering retailers access to a young and aspirational demographic that is eager to embrace new trends and brands.
Due to rapid economic growth and urbanization in these cities, disposable incomes are on the rise and that is translating to increased spending power and a growing appetite for branded goods and modern retail experiences. The shift has also been supported by the pandemic-era trend of reverse migration where some urban households moved to lower tier cities, bringing their urban shopping habits and spending levels with them. Recent data from JLL suggest that tier 2 and tier 3 cities will see 25 million square feet of retail developments open in the next five years, primarily in North India.
Prediction 5: Generative AI adoption will accelerate in India's e-commerce market, with use cases focused on enhancing personalization, automation of content creation, improving customer service through chatbots. Coresight Research estimates that India's e-commerce market will see impressive growth of 21% in 2025.
This market characterized by its diversity and rapid growth is uniquely positioned to benefit from Gen.AI's capabilities. E-commerce marketplaces such as Amazon, Flipkart, and Meesho have already leveraged Gen.AI for product descriptions and virtual assistants. We expect more retailers to implement and customize Gen.AI models to serve India's unique e-commerce landscape such as supporting regional languages and cultural nuances to make these tools more accessible and impactful.
Prediction 6: Growing consumer demand for luxury goods will drive both the expansion of domestic luxury brands and the sales of prominent international players looking to establish a presence in the country. So the Indian luxury market is set to experience significant growth as the country moves towards becoming a high income nation over the next two decades. Various factors in India, including the rise of high net worth individuals and expanding aspirational middle class, the rise of e-commerce and strong demand from non-metro cities are contributing to increased luxury consumption in the country.
Exciting. Now let's head over to the Hong Kong office and hear about the outlook for China from Charlie Poon.
Hello everyone. With retail sales projected to hit 45 trillion yuan or about 6.2 trillion dollars, the China retail market is a major opportunity for retailers. As such, we have identified six predictions for the market in 2005, reflecting current shifts in consumer behavior, technology adoption, and market dynamics.
The first prediction I want to talk about is a revival from fragility via stimulus packages. The Chinese economy faced turbulence in 2023 and 2024, driven by a downturn in the housing market and deflationary pressures. However, 2025 brings optimism, largely thanks to government stimulus policies aimed at boosting domestic demand. In late 2024, the Chinese government announced measures to rebuild consumer confidence, including interest-rate cuts, consumption vouchers, and trading programs for specific categories such as home appliances.
While the housing market remains a key factor, these stimulus efforts are expected to support better consumption rates in 2025. Businesses will need to watch these programs closely and adjust their strategy accordingly. Categories supported by these policies such as electronics and home goods may see significant growth as a result.
The second prediction we want to talk about is the growth of experiential shopping and consumers' focus on story-first purchases. Chinese consumers are no longer just buying products, they're buying stories. This shift towards story-first purchasing is filled by the widespread use of social media platforms like Douyin.
Today's shoppers are heavily influenced by key opinion consumers and viral trends. They increasingly seek products that connect with their cultural values or offer shareable experiences. For example, a Douyin video in early 2024 featuring Tian Shui Ma La Tong, a local hot pot dish, sparked a nationwide craze drawing tourists to Tian Shui and generating over 1.8 billion views on related content.
Similarly, brands like Nike have embraced localized marketing by incorporating Chinese cultural elements into their campaigns, such as its Dragon Year collection for the Spring Festival. This approach helped Nike achieve 6% year-over-year growth in China during that quarter. To succeed in this environment, brands must localize their products and campaigns. Success often comes from tapping into cultural narratives that resonate with Chinese consumers whether through partnerships with KOCs, localized designs, or culturally themed collections.
The third prediction we have is that retail in China will see AI move from a largely backend feature to a prominent feature of consumer-facing applications. One of the most transformative developments is the use of AI-powered virtual hosts for shoppable live streams. AI hosts live-like avatars capable of conducting live streams 24x7 are revolutionizing how brands engage with consumers. JD.com's ChartRingno platform exemplifies this shift, having supported over 5,000 brands and generated 10 billion yuan, or $140 million in gross merchandise value.
Virtual hosts are particularly useful during off-peak hours, offering consistent and scalable customer interactions. However, there is room for growth. While these AI avatars can't yet match human hosts in terms of interactivity, advancement in Gen.AI may soon enable real-time engagement, making AI live streaming even more powerful. Brands that embrace this technology will have the opportunity to reach consumers at any time, extending their market presence.
Our fourth prediction is that the shopping journey in China will evolve, moving away from festivalisation and toward diversification. Singles Day, China's iconic e-commerce festival, once defined the country's retail calendar. But participation in these large-scale shopping festivals is declining. In 2024, only 67.4% of Chinese consumers participated in singles day, down from 77.3% the previous year, according to proprietary Coresight Research data.
Why? Shoppers now have access to year-round discounts through live streams, social commerce platforms, and loyalty programs. Brands must look to adopt an omni-channel approach and maintain consistent engagement throughout the year, whether through personalized promotions, loyalty programs or partnerships with popular live stream hosts. Meeting consumers where they are every day is key.
For our fifth prediction, we expect the PingTee trend to gain even more prominence. One of the most disruptive trends of 2025, PingTee or high-quality dupes offer a comparable quality to luxury brands at a fraction of the price. For example, Cheat Joke, a popular fashion label selling coats made from the same Italian fabrics used by Prada but at a price tag of 3200 yuan or $437, far below Prada's 5000 plus cost. This trend has already impacted international brands with several mid-market retailers like Urban Re-Outfitters and Pool & Bear, exceeding China.
Meanwhile, domestic brands like Urban Revolvo, which positions themselves as a pinyin tea alternative to Sawa, are firing. For foreign brands, the message is clear. Understanding the very different mindset of younger Chinese consumers is critical to stay competitive.
Last but not least, we expect to see immense opportunities for new experiences in physical retail. In 2025, stores will longer just be places to shop, they will become immersive destinations. For example, department store SKPS Beijing has already embraced this trend by creating a mass-themed shopping experience, complete with simulating ship farms and futuristic retail spaces.
Snack Train Busy For You offers another example of innovation. Plans to operate over 10,000 stores by 2025, BC4U combines high-quality products, stringent quality control, and experiential branding. Their stores are designed to create memorable moments, often drawing long lines of eager customers.
Technology is also playing a crucial role in enhancing in-store experiences. From WeChat mini programs to AI-powered robotics, physical retailers are integrating digital tools to keep pace with consumer expectations. The future of brick-and-mortar retail lies in blending convenience, storytelling, and cutting-edge tech.
In conclusion, Corsight Research believes that the China retail market has entered a new era, one driven by a slower economy, new consumer behaviors, and rapid technological advances. There is no question, China's retail landscape is filled with opportunity, but it's also complex. Success requires more than simply entering the markets. Brands must adapt to evolving consumer demands, embrace emerging technologies, and align with the country's numerous cultural trends, from AI-powered live streams to the rise of PingTee and immersive retail experiences. The opportunities are immense for those willing to innovate.
Thanks, Charlie. Next week, our focus shifts to the cutting edge technologies revealed at CES this year and the implications of these new technologies for the U.S. retail market. 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.