Deborah Weinswig, CEO and Founder of Coresight Research, reflects on the retail landscape, discussing key predictions for the upcoming year. She highlights the importance of retail media and alternative revenue streams, the impact of GLP-1 drugs on consumer demand, the rise of e-commerce marketplaces, and the role of technology (including GenAI) in enhancing customer experiences and retail operations. The discussion emphasizes the need for retailers to adapt to changing consumer behaviors and invest in planning and innovation to thrive in a competitive market.
Takeaways
Chapters
00:00 This Week in Research, Highlighting Retail 2025 Outlooks and Holiday Insights
02:18 Key Predictions for Retail in 2025
15:11 Deep Dive into Retail Predictions
23:46 Conclusion and Future Outlook
This week's episode of Retaili$tic offers highlights from Coresight Research's Retail 2025 report detailing our predictions for US retail. Premium subscribers can read that report in full here.
Welcome to Retaili$tic, the official podcast of Coresight Research for December 24th, 2024. Merry Christmas! Georgina Smith, our head of editorial, is back with a rundown of the research we're publishing this week. Then we'll visit with CEO Deborah Winesweg to hear about the major trends in U.S. retail. And in our Analyst Corner, Steven Deemer will give us a deep dive on the six big predictions for US retail strategies in 2025.
First, let's check in with Georgina in London. Dive into our predictions for the retail markets in the UK, China and India with our new reports on Coresight.com. This podcast episode is the first of two that will offer highlights from our expert analysts on those predictions. Across our Retail 2025 reports, we spotlight topics such as generative AI, macroeconomic challenges, quick commerce, retail media, unified commerce and much more.
We present our expectations for how technology and shifting consumer behavior will impact retailing in 2025 and beyond. And through our research next year, we will revisit our projections and explore how these trends are playing out. Also this week, we have published our earnings season wrap-up, diving into key trends and management commentary on the performance of major U.S. retailers in the third quarter of 2024.
As we are now at the peak of the holiday season, I'd like to take this opportunity to wish everyone happy holidays. Merry Christmas to those who celebrate. You can catch up on our data-driven analysis of retail demand in the US during the holiday season in our new Holiday Home Stretch Report. We assess proprietary consumer survey data, company reports, shopper traffic data, and sector-level retail sales figures to bring you a clear picture of what we've learned through the season so far. We point to consumer resilience and willingness to spend, albeit still selectively, and a selection of metrics suggests that the holiday season is likely to be stronger than we originally expected at a total retail level.
In January, we'll wrap up our holiday coverage with sales and survey data on retail performance through the end of December. A robust holiday performance may serve as a springboard for a strong retail year in 2025.
Thanks Georgina. Now let's head up to the boardroom for our visit with Deborah.
Deborah Weinswig (02:18.722)
I always love this time of year where we can look back at our predictions for the current year and see where things turned out exactly as expected and where things turned out a bit differently. And so as we start to think about the year ahead, much of these predictions and trends that we're thinking about are truly either exponential in terms of change from this year or building on a trend.
And if we start, we have this wonderful infographic and it shows R-E-T-A-I-L spells retail, yay. And really kind of going through the different areas of what's going to define retail in 25. As we look back at this year, some of the biggest differences were, and this is also quite recent, was we saw a lot more store closings than we had expected. And I think really starting to think about what drove that, what changed, is actually leading a lot of our 25 predictions in terms of best in class retail, what will they do.
So let's start at the top. So the letter R, retail media, data monetization, retail as a service, which are truly alternative revenue streams. The idea here is that retailers will be able to fund their innovation through monetization of what they either already have in place, right, they already have data, they already have services that they can sell to other retailers, either in their own geography or others.
And then from a retail media perspective, they either have a digital storefront or physical or both, and it's truly monetizing that. What I really like about this is that we're not talking about a significant amount of extra effort and a significant opportunity to drive revenues, which would allow them to invest in other areas of business that, you know, I think supply chain is one where we have seen continuous under investment or misinvestment. And so that could be pretty exciting and interesting.
And we've got some data around how big we think retail media can be and some of what the different retailers have talked about. I think it's really quite interesting as we go through it and dig into some of the data.
Secondly, on what we're seeing as retail as a service, Walmart through GoLocal is doing last mile for folks. Shein is also helping with marketplaces and there are many more examples. And we've often seen retail as a service in other markets. So, there was an Australian retailer we were working with and they were helping retailers in the US market. And that makes a lot of sense to me.
It is fascinating when we think about the competitive landscape of retailers, now, selling their services to other retailers in their own market. And that I think has been one of the bigger surprises for us at Coresight is how prevalent that is and also the opportunity to grow that. So that is number one, I think most important in my mind for the year ahead. How big is big is truly a question and just tracking a lot of the data around this, we will continue to do so.
Secondly, is a prediction for e-commerce marketplaces to gain share of the physical landscape. And I really do believe once again, with the Party City and BigLots news that a lot of folks were looking in the wrong places in terms of what drove that. And ultimately, I think that we have two significant new entrants between Shian and Temu who are doing an unbelievable amount of marketing and advertising, very clear messages.
The shopping experience is also frictionless for the most part. The reverse logistics, the returns are also quite easy. And the feeling that you're being rewarded for your purchase as well, so that you're being rewarded for loyalty and the high engagement due to personalization. If you look at the data around the engagement from consumers on Shein and Temu, it's significantly higher than consumers on other marketplaces and also with other physical retailers. And so we believe this is still in its early days and that there will be many more entrants here.
We continue to believe in the power of physical retail, especially for Gen Z, but this will augment and also change how people are thinking about number of stores to visit, time spent shopping, time spent for inspiration. And hopefully what comes out of this is much lower returns.
So we're hearing, and the data suggests, about 43% of apparel, footwear, and accessories is returned. That is really high. And we have all of these pundits running around talking about sustainability. To me, if we could just get returns into the single digits, it would be a game changer. And so, of course, we've done a lot of work on global cross-border. And when we brought Western retailers into China, they're always surprised at the amount of photos that they need and having embedded videos and everything.
And so, just this idea of giving the consumer more access. mean, hey, half the time I'm trying to buy something on, it's usually Amazon, I can't, I have a significant food allergy. I can't even read the ingredients on the box. So I've absolutely bought things that I couldn't eat and this could be really solved by, number one, a better picture and number two, more pictures. So, I mean, there are all kinds of photos, we'll call them, more photos, but there are also ways to have a better, let's say, agent where I could ask, right? You know, I'm looking for gluten-free graham crackers. And I would say if you do that search half the time, right, it's just picking up the word graham crackers. And so they're not gluten-free. So these are some of the, my opinion, easy to solve that we should see in the future.
All right, for T, technology in stores to drive productivity and engaging experiences. There are unbelievable solutions in this space. And the ability to engage with the customer and let them know if the merchandise is in store, if it's in the back, they can get it shipped, helping them with sizing, helping them with a great experience. And some of that can be price matching around this time of year, that's really important.
But giving the sales associate as well, the empowerment to create a better experience for that customer, ultimately giving them more satisfaction in their job. The data suggests also decreases turnover as well. And so I think that as we're seeing more engagement with a broader range of marketplaces, consumers' expectations of their shopping experiences continue to grow.
And to be able to meet them in the physical realm, help them understand inventory, fabrication, et cetera, and truly give them a personalized experience all in the palm of one's hand, that to me is what makes the world go round. People work in retail because they love to help consumers find products that they love. And if we can help them do that better, that's revolutionary.
All right, for A, generative AI to revolutionize retail. Well, at Coresight, we built our AI council in August of '23. We've continued to have a significant number of meetings and spending time not only with retailers, but also brands, technology providers. And the number one area, I believe, is to have more data available to make better decisions. And I really do think that that's at the planning level, so we can call that operations.
But done right, you being able to bring in, let's say, data sets you're already paying for, but in a way that you can augment that with your data, really can, I mean, I think for demand forecasting, inventory allocation, pricing and promotions, maybe we want to call that supply chain. It's part of supply chain, but that I feel is a game changer, just going back to less waste, more of the right product being purchased and getting it to the right stores, right warehouses, I just think is exponential.
And also for employees to take a lot of the work they don't enjoy doing. I look at websites, I copy down information, Excel spreadsheets. I mean, there are times where I look up the clock and I can't believe it's been like three hours has gone by. I mean, now if you upload the photo into any of these GenAI systems, right, you can get this done in like a matter of minutes. And so there are times where I feel that if I'm planning what I'm doing in advance so I can have everything at my fingertips, when I can engage one of the large language models, I can save a significant amount of time.
And a lot of this is on building my schedule to go to a conference, understanding better certain data sets, augmenting, let's say I went to a conference a year ago. So uploading that schedule, combining it with the current schedule and really understanding what the differences are. These are things that we, of course, I used to spend a lot of time in and on, and it really is pretty significant in terms of what we can do, and we can all plan our calendars better, we can follow up better, and I also think there is an expectation that all that's happening.
All right, I, impact of GLP-1 drugs to demand retail reinvention.
We are hearing from various apparel and footwear manufacturers that they are seeing a difference in sizes that are being demanded and requested and ultimate sell through at full price. In the grocery aisle, there are products that used to sit closer to the pharmacy where they were helpful for people who are taking GLP-1 and they've now moved into, let's say, the mainstream of the grocery store because of the significant prevalence of consumers who are not only taking these drugs, but those that are also compounded.
Ultimately this idea that people feel like they have control over something that they've never had control over. And I think that that is a game changer. And we've spoken to a lot of supplements companies and they are spending a lot of time, money, effort and seeing a good return on different supplements, herbal, et cetera, that they have really tailored, promoted, discussed for this kind of GLP-1 community.
There's a lot that's still unknown, but that which is known, there is a huge market. And that isn't just for the changing size of the consumer. It's also that they feel well and feel good about how they look. And so there's an entire market out there that's just beginning to be tapped.
And then lastly, and this is something that we do at Coresight, leading with data and unified commerce. And I do believe going back to the letter A, the ability to understand the consumer from a unified commerce perspective. And then this means, you know, mobile, stores, online, offline, social media, right? Like how is the consumer behaving? Who is the consumer? How are they changing? And so what kind of experience is unified commerce? What do they expect and how to deliver it to them? And then from a data perspective, just making sure that the data is accessible to the right people in the organization at the right time so people can make better decisions.
And that if they don't have to ask for it, if it's constantly kind of being served up to them, the expectation level will be there. But also, in my opinion, the idea that they can really affect much greater change than in the past. And I think that's really interesting.
And so as we look at the year ahead, I do think that retailers will have greater control over the outcome, whether or not they have proper planning processes in place or they are spending time on the right topics, I think will come to greater light. I do feel like the most recent earnings in third quarter, we did see some very interesting variances. And then once again, with the recent news around BigLots and Party City, I do think that the market will not tolerate retailers who don't put the customer in the center and think about product availability, merchandising and merchandise, right?
So having you really taking a different take on product for the consumer. So I think there's a significant amount of opportunity in your head. There's so many great partners to work with, but a caution's tale to those who don't invest the time and planning upfront, there could be a significant change in terms of how consumers engage and think about you because there is so much frictionless retail out there and that will only grow.
Thanks so much and I hope you enjoy reading through all of these detailed reports as well as better understanding the sector predictions that we have published as well. Thanks a lot.
Thank you, Deborah. Now let's bring in Stephen to give us more detail about the 2025 predictions for U.S. retail.
CoreSight Research has made six predictions for the U.S. retail market in 2025, a year that we expect to be transformative for consumers and retailers alike. Let's dive right in.
Prediction number one, retail media, data monetization, and retail as a service as alternative revenue streams. By 2028, retail media could represent as much as 27% of total digital advertising in the US, up from around 17% in 2023, according to our estimates.
This growth will largely be due to more brands viewing retail media as a key channel for performance-driven advertising, ranking alongside traditional formats such as social media ads. Furthermore, as retailers monetize their intellectual property, Retail as a Service will result in more retailer-to-retailer and retailer-to-brand relationships across a wide variety of areas that we believe U.S. retail is currently under-penetrated in, including fulfillment technologies and services, supply chain expertise, marketplace integration, and end-to-end e-commerce platforms.
Going forward, we think that Amazon, Kroger, Target, and Walmart, with their growing retail media businesses, could likely witness an increase in revenues and margins. These retailers should partner with tech firms to better track data across platforms, which can enhance return on investment for advertisers. Likewise, companies that plan to sell or license proprietary technologies or software solutions to other businesses will generate additional revenue streams. For instance, Shein currently offers supply chain as a service for third-party brands and retailers.
Prediction number two, e-commerce marketplaces will gain share of the retail landscape. In 2025, Corsight Research believes that online marketplaces will capture an even larger share of retail sales as consumers continue to favor the convenience and competitive prices that these platforms offer.
Furthermore, we expect marketplace growth to outpace that of traditional retailers given the rapid growth and success of newer platforms such as Shein and Temu, as well as the growing adoption and expansion of marketplace models by major retailers such as Kroger, Macy's, Target, and Walmart. We suggest that retailers adopt the marketplace model to build a scalable backend that can manage multiple sellers, product listings, and fulfillment systems. Offering robust seller support in the form of advertising opportunities, analytics dashboards, and fulfillment assistance could also attract quality third-party sellers.
Prediction number three. In-store technologies will drive productivity and engaging experiences. We expect to see an acceleration of in-store technologies in 2025, driven by technological advancements and growing consumer demand for seamless retail experiences. For instance, in-store technologies such as electronic shelf labels are poised to uplift revenues, while smart shopping carts equipped with AI-driven recommendations could increase basket sizes by delivering personalized suggestions to customers in real time.
Additionally, according to proprietary Coresight Research survey data, the availability of multiple shopping channels increases the likelihood of returning to a retailer as a repeat customer for more than one third of U.S. consumers. The demand for vendors specializing in personalized suggestions and elevating in-store experiences is likely to grow in the years to come.
Solutions that help brands and retailers fine tune their operations, manage inventory efficiently, and harmonize their online and offline services, including offering scalable and integrated solutions for a seamless e-commerce experience, will play a pivotal role in the retail space moving forward. For in-store digitalization, brands and retailers should ensure that digital technologies are mobile friendly by integrating mobile apps with in-store experiences. It is also important to invest in in-store staff training so that employees can operate associate enablement tools efficiently.
Real estate firms can also help retailers digitalize their stores by creating flexible, tech-enabled infrastructure that caters to retailers' evolving needs, including offering reliable Wi-Fi and 5G capabilities to support digital tools, such as customer data platforms and RFID tags. Real estate companies can also look to offer flexible retail spaces that can be quickly reconfigured to accommodate both traditional shopping and technology enhanced experiences.
Prediction number four, Generative AI will revolutionize retail. Coresight Research expects the Generative AI use in the retail space will expand rapidly next year as more than 50% of retail companies are ramping up their GenAI investments in 2025 and beyond, according to our estimates.
This will drive radical transformations across the US retail market. For instance, we expect using GenAI for optimal production to become the norm, while companies dynamic pricing strategies will be sharpened by GenAI's ability to accurately track competitor pricing in real time. We think that brands and retailers that do not adapt to rapidly changing consumer behavior and market trends risk falling behind in U.S. retail. Perhaps most importantly, those slow to embrace emerging technologies, digital platforms and innovative e-commerce strategies such as GenAI, will find it difficult to engage with modern consumers effectively.
Prediction number five, the impact of GLP-1 drugs will demand retail reinvention. We expect the widespread adoption of GLP-1 medications, such as Ozempic, to have a significant impact on consumer behavior and the U.S. retail landscape overall in the short and medium terms.
Coresight Research projects that 12 million Americans will use GLP-1 medications by 2030. These medications promote weight loss and healthier lifestyle, meaning there will likely be a decline in the demand for high calorie food, as well as an increased demand for health conscious products.
Organic and specialty focused grocers, such as Whole Foods Market and Sprouts Farmers Market could benefit from the shift toward healthier eating seen among many GLP-1 users. Additionally, in the wake of the Ozempic economy, there will likely be increased demand for athleisure wear and wellness services, as well as a decline in the demand for plus-size apparel. This shift will benefit sports and athletics apparel retailers, such as Lululemon Athletica and Urban Outfitters, as well as sports and fitness equipment vendors.
Prediction number six. Leading with data and unified commerce.
In 2025, we anticipate that a substantial proportion of retailers will move toward a unified strategy that supports seamless transitions between touch points, shifting away from siloed channels. This integration of additional channels will create more impulse buy and upselling opportunities.
According to a proprietary Coresight research survey, almost one quarter of U.S. consumers stated that their overall spending has either increased slightly or significantly as a result of engaging with retailers across multiple channels. Going forward, retailers that have invested in unified commerce platforms such as Kraft Heinz and Ulta Beauty will likely benefit from the seamless integration of backend operations and consumer touchpoints.
Overall, we suggest that brands and retailers ensure close collaboration between their marketing, IT, operations, and customer service departments to enable the efficient implementation of unified commerce platforms, GenAI tools, and digital store technologies.
So a transformative year ahead, and we'll look beyond the US in an upcoming episode to cover our predictions for the UK, India, and China. We appreciate you making Retaili$tic a part of your playlist, and wish you a very Merry Christmas.
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. Have a Merry Christmas! We'll see you next week.