Retail in Review: 2025 Begins with Continued AI Momentum and a Positive Outlook

2024 has already become a distant memory with the retail industry quickly setting the tone for a transformative 2025. From AI-driven shopping experiences to evolving challenges and retail outlook, the first two months of 2025 have already revealed key trends that are having a significant impact on the industry.

In this blog, we break down the key developments from January and February 2025, highlighting what’s driving innovation, where challenges lie, and what retailers must focus on to thrive… 

AI Adoption Continues 

2025 began with a number of AI companies bagging funding, reflecting investors’ confidence in AI’s ability to revolutionize the retail industry. PACKAGE.AI raised $14 million in Series A funding while Daash Intelligence, an AI-powered predictive commerce intelligence platform for retail brands, secured $5.5 million in a second seed funding round, bringing its total funding to date to $8.25 million.

In addition to investors’ confidence in AI, shoppers’ willingness to embrace the technology has also developed in the last couple of months. According to a recent report by Cognizant, 47% of consumers across all age groups feel comfortable using AI to help choose products and services. However, it is also evident that shoppers are conscious of how and where they want to use AI. According to the same report, 28% are fine with AI reordering low-cost items, whereas 75% won’t trust it to automatically reorder or pay for high-value purchases without approval. This shows that most shoppers prefer a balanced approach, automating reorders using AI for low-value items while reserving more thoughtful decision-making for high-value purchases. This shows that the majority of shoppers want to take a balanced approach where they can automate their reorders for products that they do not necessarily ‘feel’ the impact of compared to more valuable ones that require more consideration.

To cater to the growing demand for AI-driven shopping experiences, many retailers have started to use the technology. Hugo Boss, for example, launched AI-powered product content live across its e-commerce platforms globally. Marks and Spencer launched an AI-driven tool to help shoppers find the perfect bottle of wine. Meanwhile, Alibaba has announced its biggest investment in AI, with plans to invest $53 billion over the next three years in AI and the cloud. This rising adoption of AI highlights a paradigm shift in the industry that is now being dominated by innovative technologies like AI. 

Retail Theft Remains a Challenge

Shoplifting and retail crime continue to pose significant challenges for retailers. According to Coresight Research, a 27% increase in cargo theft was recorded across the US and Canada while there was a 24% year-over-year rise in retail crime costs in the UK.

However, significant steps are being taken to combat the challenge. As of 2025, 28 US states have established criminal laws focusing on either those engaged in organized retail crime (ORC) or enhanced penalties for those who steal repeatedly to resell stolen goods. Retailers are also turning to advanced technologies such as RFID and AI to minimize shoplifting. By incorporating RFID technology, retailers can gain real-time visibility of their inventory. This allows brands to track products at item-level, significantly reducing the risk of theft. 

The technology can also trigger alarms in case tagged items are taken through in-store RFID barriers without being paid for. Since these tags are invisible and woven in, it makes it difficult for shoplifters to remove them, significantly enhancing in-store security. From self-checkout to modern point-of-sale (POS) terminals, RFID is being used to ensure no items are removed from stores without being paid for. At the same time, the technology significantly increases inventory accuracy and enables retailers to enhance operational efficiency and elevate customer experiences. 

In addition, retailers are also leveraging body cameras to empower staff. Go Outdoors, for example, has been providing staff with body-worn cameras as part of a trial to “deter theft” and “keep colleagues safe”. All this points towards retailers’ resilience to shoplifting, reflecting that proactive steps are being taken to address the challenge.

Positive Signs of Consumer Confidence

January and February have indicated strong signs of rising consumer confidence in the industry. Solid sales in the US during the holiday season indicated significant consumer resilience despite ongoing economic situations. This momentum was followed by a rise in consumer confidence in the new year. The UK retail sales rose in January for the first time since August, reflecting a potential increase in consumer confidence. 

While retail sales in the US slipped 0.9% in January according to CNBC, the overall picture was positive. According to Forbes, retail sales surged 4.8% year-over-year in January, rising to $668 billion and setting the stage for unexpectedly strong retail growth in the US. 

Similarly, Retail Week revealed consumer confidence to have risen two points in February, with the public being more optimistic about their personal finances in the year ahead. All this demonstrates that while economic circumstances may not be in their favour, shoppers are confident and willing to spend.

Retailers must be able to capitalize on this rising consumer confidence by delivering top-tier customer service, seamless shopping experiences, and personalized loyalty programs. As a result, brands can ensure they can earn consumer loyalty when shoppers are willing to spend. Those who can continue to earn consumer loyalty can solidify their position in the market.

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