The future of retail in 2025—DTC, e-commerce and in-store predictions

After a robust Black Friday holiday shopping weekend that exceeded expectations in 2024, retailers might log another solid year of spending in 2025. Or they might not. The next few months are dogged by uncertainty tied to potential tariff increases, consumer prices and how shoppers plan to organize their spending. Yet a look at past consumer behavior, and how brands have addressed challenges before, offers a glimpse of where the industry might be headed in 2025. Below, Ad Age outlines some of the biggest retail predictions for direct-to-consumer businesses, brick-and-mortar and e-commerce. Check out the latest Ad Age events and award programs Higher prices This past year, consumers were keen on promotions and discounts and this year promises to be no different, according to Polly Wong, president of digital marketing agency Belardi Wong, which counts 400 brands and retailers as clients. “We’re cautiously optimistic about 2025—this holiday season, we’ve seen that the consumer is very resilient in their spending,” she said. “But we will continue to see in 2025 a very promotionally-minded consumer.” Many affluent consumers are already trading down as shoppers of all financial categories look for value, she said. Yet with President-elect Donald Trump’s promised tariffs on imported goods from China, Canada and Mexico on the horizon, prices on many products are expected to rise later this year. Already, brands are combatting anticipated rises by switching up their loyalty programs. For example, American Eagle rolled out higher spending thresholds for its “Real Rewards” members in 2025. To reach Level 2 perks, customers have to spend $200 annually instead of $150; to reach Level 3, they will need to spend $500 instead of $350. View this post on Instagram A post shared by Cassey Ho (@blogilates) Other brands are catering to more cost-conscious shoppers with less expensive products. Popflex, a direct-to-consumer seller of clothing founded by social media fitness influencer Cassey Ho, began selling a more affordable version of its popular “pirouette skort” at Target late last month. The skort, which went viral last year after it was worn by Taylor Swift, typically costs $60. The new version, selling under Popflex’s Blogilates brand, is only $35. “Over the past four years, not one day has gone by without someone 1) commenting that my designs are too expensive or 2) demanding that my clothes be made available at Target,” wrote Ho in an email, adding that she’s meeting the demand for more widely available lower-priced apparel with her new Blogilates line. Experts expect food marketers in particular may try to mask price increases by downsizing portions. For example, a 10-oz. container of juice in 2025 may be the same price a 12-oz. bottle was in 2024. “That sort of thing is a likely strategy you’ll see more of—smaller portion sizes—both to make the purchase more affordable and to reflect that consumption has likely declined in a lot of food categories,” said Tom Sebok, managing partner and principal at the New England Consulting Group, noting how mass adoption of GLP-1 drugs has also helped pave the way for such portions with consumers. Read more: 5 GLP-1 marketing trends as brands jump in Read Ad Age’s 2025 predictions stories here More ‘Made in America’ marketing messaging The proposed tariffs have the potential to lead brands to move their manufacturing to other countries that are not impacted to avoid passing higher costs on to consumers. However, this could lead to temporary supply chain disruptions and quality issues, said Lauren Beitelspacher, a marketing professor at Babson College. “As consumers, we have a certain reference price we are willing to pay and if it goes over that price, customers might not understand that,” she said. Those brands that are already manufacturing in the U.S. could be well-positioned to receive more market share, experts said. “They do have an opportunity to really leverage that and highlight the fact that their prices aren’t increases, they’ve always been made in the U.S., etc.,” said Beitelspacher. Sebok expects U.S.-made marketers to promote their American production lines in their marketing messaging moving forward. “Certain companies can and will lean into ‘Made in America’ as a theme in this environment,” said Sebok, adding that “American pride has some cachet and some juice.” More pop-ups, fewer permanent DTC shops Despite the growth of e-commerce, a channel that consumers have come to depend on since the early days of COVID-19, experts agree that physical stores are here to stay. Younger shoppers especially want the touch and feel of experiencing products in person. “Even though we can ‘Doordash’ stuff, there’s something very powerful about the social experience of being in a store and actually touching, it engaging all of your senses,” said Beitelspacher. “Gen Z and Gen Alpha are such digital children they crave that in-person sensory experience.” In November, Lands’ End hosted a holiday pop-up shop in New York that included personalization options for its popular canvas tote bags. View this post on Instagram A post shared by Lands' End (@landsend) Matt Trainor, senior VP, brand creative at Lands’ End, said the positive customer response to the temporary shop “reinforced how invested and interested consumers are in the in-person experience, especially when it’s something as personal as customization.” Lands’ End will continue looking at ways to do more with physical activations in the future, he said. “We believe to stand out you need to do bold things and we intend to be bold,” Trainor added. However, while experts expect store counts to grow, the pace will be more modest, particularly for DTC brands. Gone are the days when such brands would open 20 or 30 stores a year; now, they are pursuing a more prudent approach following pandemic-era struggles. “They are continuing to increase store footprints, but in a much more conservative way,” said Wong, noting a “healthy approach” of five to seven store openings per year. More use of AI in customer experience As AI continues to gain ground across industries, retailers are looking at more ways to integrate the technology into their operations, specifically with customer service. For example, Swap, a technology platform that helps DTC brands such as womenswear brand Odd Muse and menswear Percival with e-commerce, last month announced it has a new AI-powered feature that will help with returns. Swap’s tech will use predictive AI to prevent returns and help brands plan better by offering customer insights around size and style preferences, the company stated. Indeed, experts predict more use of chatbots to handle basic customer service requests, a trend that already started to develop in 2024. Read more: How AI is upending customer service strategies “We’ll see retailers really evolve the way they use AI to help customers find what they need,” said Beitelspacher. AI will help retailers make more product recommendations for customers, Sebok predicted. “AI agents will be an important way for companies to drive greater intimacy and personalization recommendations,” he said, noting that store associates will also be armed with tablets or phones ready to make promotion and product suggestions. Fewer self-checkouts Retailers will also continue to focus on “shrink,” the persistent problem of stolen inventory. Several, including Walgreens, have cited losses due to shrink in recent years and experts expect it to be a continuing concern, especially as prices rise. To combat such theft, retailers may do away with self-checkout and hire more store associates instead. Lowe’s has touted more employees as a way of combating shrink, for example. Last spring, Dollar General announced it was rolling back self-checkout stands in 300 of its stores and shifting them to regular checkouts with cashiers in 9,000 other locations. “We’re going to start to see some distinction in strategies in dealing with the problem of inventory shrink in two different ways—those who become more aggressive cops and those that will invest in customer service improvements, and the latter is probably likelier to wind up winning,” said Sebok. Those retailers that lock up more merchandise may have an opportunity to compel customers to download their apps in order to unlock cases via smartphone, he added. A DTC focus on customer acquisition Many DTC brands are expected to continue to focus on attracting new customers. In the last two years, such brands have pulled back on their marketing spending, focusing instead on customer retention amid softer sales, according to Wong. She predicts that customer acquisition will be a marketing priority again for DTC brands in 2025—and said it’s the top priority for her clients this year. “More than half of our clients reported they will be increasing marketing budgets by more than 10%,” she said, as they seek to attract new consumers. Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here

The future of retail in 2025—DTC, e-commerce and in-store predictions

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