Retail Outlook Positive For 2025, With Spending Expected To Top 3%

This could be a breakthrough year for retailers who leverage the right AI-enabled tools to create efficiencies and drive sales, Deloitte reports in its 2025 U.S. retail industry outlook, released today.

The Deloitte forecast echoes what economists and analysts were saying when the retail industry gathered last week in New York for the National Retail Federation’s annual trade show and convention. The fundamentals look good for continued growth in consumer spending om 2025, convention speakers and attendees said, unless price hikes due to tariffs trigger a slowdown.

Deloitte’s outlook anticipates consumer spending will grow by 3.1% this year, and spending on durable goods will grow by 4.7%. Deloitte also is predicting that 2025 could be a “springboard into a digitized future” if retailers employ tools such as GenAI effectively.

Seven out of 10 retail executives surveyed by Deloitte said they expect to have AI capabilities in place within the year to offer a more personalized shopping experience.

AI chatbots boosted conversion by 15%

Deloitte noted in the report that, according to data from Salesforce, retailers that offered GenAI tools such as chatbots during the Black Friday weekend had a 15% better conversion rate.

The acceleration in AI adoption for nearly all facets of the industry, from marketing and merchandising to supply chain management and employee scheduling, combined with a strong holiday season, have made retail economists cautiously optimistic about the coming year.

Retail sales grew by 4% in November and December, outpacing the forecast for holiday growth of between 2.5 and 3.5%.

“The spending pace was back to pre-pandemic growth and indicates a good start for the year ahead,” NRF Chief Economist Jack Kleinhenz said in reviewing the results from the U.S. Census Bureau spending data released last week.

Kleinhenz noted, however, that “even though consumers are still relatively healthy and there was a notable increase in spending, they remain budget conscious.”

The budget-conscious American consumer was a recurring theme at the three-day NRF gathering, which drew 40,000 attendees from around the world.

Picking deals over brand loyalty

One impact of this price sensitivity is that consumers are abandoning the brands they typically purchase in favor of promotions. “There’s been a shift in the way consumers are buying items on promotion,” with the basket mix shifting more heavily to discounted items. Parm Singh, head of retail analytics at NielsenIQ, said during a session on pricing at the NRF show.

Close to six out of 10 retail executives surveyed by Deloitte said they expect consumers will value price over brand loyalty in 2025. Retailers plan to attract value-seeking customers with loyalty programs, discounts, promotions, and by offering engaging experiences and convenience, Deloitte reported.

Forty percent of retail executives said they plan to use AI and machine learning to offer improved shopping experiences, such as an interactive voice questionnaire than helps shoppers select the right pair of jeans, or interactive store displays that offer personalized recommendations and product information.

Among the other findings in the Deloitte report were:

• Shoppable media and social commerce are expected to play a greater role in 2025, and are seen as crucial ways to reach the important Gen Z demographic. Shoppable content is moving beyond social media platforms and into new entertainment collaborations such as a partnership between Netflix and Google Lens to enable viewers to shop for items seen on the Emily in Paris series.
• More than one-third of retail executives see enhancing the store experience as a top growth opportunity. Retailers are moving to add immersive experiences and digital technoligies such as touchscreens, virtual reality stations, and augmented reality. Nearly half of the executives surveyed said they plan to make moderate to significant investments in physical store remodels or new locations in 2025.
• Two-thirds of executives said they plan to make moderate to major investments in workforce hiring, retention, and readiness in 2025, as a way to deal with labor costs and high turnover rates. AI tools that guide employees through tasks or provide quick answers to their questions are being implemented as a way to boost employee efficiency.