The State of Retail 2025

This ‘State of Retail 2025’ article will explore the key emerging trends in the retail landscape, the influences, challenges and opportunities that exist, hopefully providing insight that allows logistics and retail companies to adapt their services to meet the evolving needs of their customers.

 

Key Trends in Retail Omnichannel

One of the most prevalent trends since the pandemic has been the increase in omnichannel shopping – the ability to combine online, offline and mobile shopping into one seamless customer experience. A single retailer can engage with their customers via a high-street shop, a website, an online marketplace (i.e. Amazon), social media, or promotional emails. Regardless of the method of engagement, consumers expect a frictionless, high-quality service. Omni-channel shopping provides customers with exceptional convenience and flexibility without compromising the quality of their retail experience.

While easier for the consumer, the move to omnichannel presents multiple challenges to the retailer:

Consumer Privacy. Many consumers, especially older shoppers, are nervous about online data protection. According to research by DHL, being scammed is the main worry, with 49% rating this as their primary concern. Payment Flexibility. Consumers expect flexible payment methods like buy-now-pay-later (BNPL) offerings and digital wallets. A survey of 12,000 shoppers found that 61% would abandon their basket if their preferred payment option wasn’t available. 24/7 Customer Service. The opportunity to shop anytime creates the expectation of 24/7 customer service. AI-powered chatbots are increasingly being used to address this challenge. Shipping Flexibility and Transparency. Customers now expect delivery to a location of their choosing at a time of their choosing, with accurate and transparent shipment information and delivery times. Where they want these goods delivered depends on the country: home delivery is the most popular in the UK (83%), whereas, in Eastern Europe, deliveries to convenience stores and parcel lockers are preferred.   Sustainable Retail

Sustainability remains increasingly important, with over four-fifths (80%) of consumers surveyed in PwC’s 2024 Voice of the Consumer survey claiming that they would pay on average 9.7% more for goods that meet environmental criteria, such as sustainable production methods and recycling (40%), eco-friendly packaging (38%), and nature and water conservation (34%). The push for more eco-friendly products is driving manufacturers to implement product carbon footprint tracking and displaying climate-impact scores alongside nutritional information.

There are also several circular economy shopping trends emerging, such as:

Unwanted garment collection initiatives in stores like H&M Second-hand luxury and vintage items from resale marketplaces such as Vinted, DeBop, and eBay. Retailer resale marketplaces (e.g. Zara, Ikea and Levis).

 

Emerging Technologies Social Commerce

A host of technological trends are transforming retail and redefining customer journeys. Social commerce is one of the most popular. In 2024, 46% of consumers purchased products directly through social media - up from 21% in 2019.  Shopping is now and integral part of platforms such as Instagram, TikTok and Facebook, allowing customers to place orders in minutes without leaving the app. It’s especially popular with Gen Z shoppers, who increasingly trust a review from an influencer over a traditional advertisement. Platforms like TikTok have spotted the opportunity, transforming their shopping options from a marketplace to an in-app “Trendy Beat” shopping section where it will offer viral products shipped and sold by a subsidiary of its parent company, ByteDance.

  AI Commerce

AI assistants have the potential to overtake human influencers as the primary decider of purchase decisions. AI tools such as Perplexity Shopping create a single platform that develops an enhanced understanding of a user’s needs, then using this knowledge to research potential vendors, locate the best product, procure and pay for it. All automatically

From a retailer perspective, AI also empowers their ability to offer a tailored experience that includes personalised promotions, product recommendations and pricing across e-commerce sites, social media, apps, and marketing channels. GenAI also enables retailers to create unique experiences via intelligent virtual shopping assistants that engage in natural conversations and offer consumers customised guidance.

  Subconscious Commerce

The combination of social and AI commerce is leading to a new trend called Subconscious Commerce, where retailers use data analytics and AI – including purchase history information, browsing behaviour and social media activity – to predict customers’ needs before they realise those needs for themselves, and then place them strategically on whatever platform or website they use.

  E-commerce Saturation and Innovation

Despite the advancement of digital shopping options, consumers aren’t about to walk away from shopping in-store. To keep them there, brands are reinventing the in-store experience through experiential retail. These experiences include product demonstrations, free samples, loyalty programmes, points and gifts, and enhanced customer service.

Simplicity, speed, and flexibility are all essential to enticing shoppers and winning brand loyalty in an increasingly competitive retail landscape. AI will increasingly become embedded in everything from campaign design to customer service, optimising internal processes and delivering real-time insights into inventory, foot traffic and customer behaviour. This data allows retailers to streamline logistics, ensure product availability, and tailor the in-store journey. The aim is for retail to become frictionless, regardless of the channel or platform.

Zara’s AI robots represent an excellent example of technology can enhance the consumer experience. The launch of Zara’s Buy Online, Pick-Up in Store concept caused long queues and wait times, and to address this, Zara has introduced AI robots that fetch the products from the back of the automated retail stores to accelerate the collection process.

Innovative new technologies such as smart mirrors and augmented reality (AR) will also elevate the in-person shopping experience. These technologies will help not only solve the problem of size and fit but will also lead to fewer returns and decreased CO₂ emissions.

 

Influences Shaping Retail Inflationary pressure

The economy naturally has a significant impact on consumer spending. The recent period of high inflation kept confidence low, costs high, and consumers price-sensitive. To adapt, retailers have localised their go-to-market models, introduced own-label value ranges, and sharpened brand positioning. Any brands that keep prices high must now demonstrate why their products are worth the premium price.

However, this trend appears to be reversing, with retail sales returning to pre-pandemic levels. Eastern European markets are doing especially well, led by Hungary (6% growth), Romania (4%), Czech Republic (4%) and Poland (4%).  

Source: Savills.

This increase in confidence should lead retailers to become bolder in their investments, specifically in new technology, new stores, and new logistics capabilities.

  Geopolitical dynamics

The threat of the Ukrainian / Russian conflict spreading out of control looms large, as the stakes have escalated in the last few months. Over in the US, President Trump’s electoral victory is likely to lead to trade tariffs that will probably be reciprocated, increasing product costs that will likely be passed on to the consumer. It may also create inventory shortages and delays, forcing retailers to reassess and restructure their supply chains.  

For retail real estate investors, these geopolitical issues increase risk and uncertainty, lowering returns and leading to an unwillingness to make long-term investments. Expect an increased focus on retailers’ ability to adapt to these geopolitical challenges and a preference for those with clear e-commerce and digital retail strategies.

  Demographic shifts

Demographic shifts in Europe will continue to disrupt the retail industry, with the two primary changes being the rise of the silver shopper and urbanisation.

Silver Shoppers

21.3% of the EU population is now 65 years and over, and in the UK, one-third is over 55. This group also holds nearly 80% of the wealth, representing the highest retail share of private consumption. This is changing the shopper dynamic, and retailers must understand its impact on them. For example, retired online shoppers are more likely to request at-home delivery, and that home is more likely to be rural than urban.

Over 55s are also the most cautious about online shopping and data privacy.

60% would avoid sharing personal details because of concerns about data privacy 54% would wait longer for human support. Interestingly, Gen X (born between 1965 and 1980) are the most comfortable with sharing data with AI technologies (54%) or using digital assistants (46%).

Baby boomers are the only group where a majority (58%) prefers in-store shopping, compared to about 50% of those under 55. However, they shop less often, with shoppers between 19-24 making approximately 34.3% more grocery trips than those over 75.  With seniors making fewer trips, retailers will need to prioritise maximising basket sizes and enhancing the shopping experience, especially for those with disabilities. In the UK, it is estimated that limited access for disabled people costs retailers £267m each month, highlighting the need for improved accessibility.

However, it is important to recognise that 40% of Gen Z respondents stated that they also prefer in-person shopping, a reminder that the physical store experience still holds value for both older and younger shoppers.

  Urbanisation

As mass migration continues across Western Europe, most of these new entrants are under 25 and flock towards urban areas. Like most younger workers, they have lower incomes and are time poor, meaning that cost and convenience are their two primary drivers. As a result, they are more likely to shop online and favour on-demand services in grocery and impulse purchases such as fast food.

Serving the needs of these urban occupants is transforming cities into retail innovation hubs, leading to retailers experimenting with pop-up outlets, experiential retail, dark stores, and omnichannel shopping. To satisfy this ‘on-demand’ retail expectation, a rise development of urban logistics hubs is expected, often located in the premises of existing retail stores.

 

Challenges in the Retail Sector Rising Costs

The compounding effect of inflation means that falling rates do not result in more money in people’s pockets. Prices are still 17% higher than in 2019, with wage growth only beginning to outstrip inflation in 2023. One-third (31%) of consumers cite inflation as the primary risk to their country or territory, with 62% expecting groceries to represent their most significant expenditure increase.  The rising cost of energy, labour, and materials will continue to keep prices high, especially if tariffs and trade sanctions materialise.

Source: NeilsenIQ Mid-Year Consumer Outlook: Guide to 2025 

This reduction in disposable cash has led to a new retail phenomenon called Dupes. Cheap imitation purses, beauty products and other items have become all the rage with Gen Z and younger millennials, becoming a signal of savvy rather than a source of shame. These cheaper alternatives provide an interesting insight into the psyche of the Gen Z consumer, for while throwaway fashion runs contrary to conscious consumption, the ownership of dupes is seen as shunning extravagant consumption in favour of more careful spending.

  Supply Chain Disruptions

Supply chains are complex systems with many interdependencies and are vulnerable to systemic shocks. To minimise their vulnerability to these global disruptions, retailers are increasingly reshoring / nearshoring their distribution channels and investing in a more localised and interconnected supply network. This proximity allows for greater oversight of manufacturing processes while reducing transport costs and lead times, enabling companies to increase agility by responding more quickly to supply issues or demand fluctuations.

  Consumer behaviour volatility

Predicting consumer behaviour will continue to be tricky in 2025. The rise in dupes and influence of social media and AI-powered purchasing platforms is unknown, causing investment hesitancy. It is likely that the cost of living will continue to drive behaviour, especially around ‘luxury beliefs’ such as sustainability. Consumers can be contrary, saying one thing and doing another, so while they may declare good intentions, they will only make eco-friendly choices if they can afford to. For example, the number of consumers who say locally sourced food or sustainable/eco-friendly products are important has plummeted by 13% & 21%, respectively, since Q1 2023.

  Pressure to innovate

Rising wages will also force retailers – especially in the grocery sector - to expand their investments into cashier-less stores, automated warehouses, and self-driving delivery vehicles. As one company experiences the benefits of a labour force that operates 24/7 for the cost of electricity, so other retailers will be forced to invest in similar technologies just to stay competitive.

 

Opportunities for Retailers and Logistics Real Estate

These combinations of trends, influences and challenges provide an array of opportunities for retail and logistics real estate. Rental growth is expected to retain positive momentum in most UK and European logistics hotspots, and omni-channel support, onshoring, supply chain reconfiguration and modernisation should remain areas of focus. The ability of the asset to provide quality support in the following areas will become increasingly important:

 

Sustainability

Environmental considerations are becoming central to logistics real estate, with 69% of occupiers citing “More stringent ESG targets/regulations” as a potential portfolio game-changer. Meanwhile, tighter regulations such as the EU’s new Energy Performance of Buildings Directive is encouraging investors to improve the energy efficiency of their real estate stock.

Logistics providers should be looking to reduce their scope 1 and 2 emissions through renewable energy, green warehousing, and battery storage. New technologies such as solar/solar thermal on warehouse roofs present an opportunity to win sustainability-focused clients while cutting costs and potentially turning excess energy into a positive revenue stream. Increasing efficiency while reducing waste could provide real-estate providers with relatively low-hanging fruit with measurable ESG and cost benefits.

Investment in greener vehicles, such as hydrogen trucks and battery-powered last-mile vehicles ranging from e-bikes to autonomous delivery robots, will also reduce scope 3 emissions significantly. However, investment in power-hungry technologies like warehouse robotics/ automation and predictive analytics will increase focus on power requirements, creating a game-changing opportunity to develop a circular logistics solution.

  Technology 

Rising labour costs have accelerated the move toward autonomous retail operations. 2025 will see significant investment in AI-powered autonomous self-optimising logistics, automated stores and predictive demand forecasting capabilities that manage everything from inventory levels to transportation routes. Automation will also enable retail real estate investments into locations that previously didn’t make financial sense. As consumer demands for faster, more sustainable deliveries continue to grow, expect further innovations in logistics real estate, transportation methods, and supply chain automation.

  Flexibility and customer-centricity

The uncertainty in supply chains and consumer behaviour has driven a need to go beyond resilience and towards anti-fragility. Real estate capabilities that enable retailers to rapidly adapt to changing needs will be desired, minimising the desire to invest in assets that cannot be easily altered or exited.

As customers embrace omni-channel shopping, ensuring the right products are available at the right locations is critical for a smooth consumer experience. Online shoppers also increasingly expect options in how, when, and where they receive their goods. Delivery costs are a significant barrier, with 41% of shoppers abandoning their purchases due to expensive delivery fees.

2025 will provide great opportunities for real estate providers who can adapt their retail and logistics properties to meet these demands. Pop-up shops, urban warehouses, and hybrid spaces that support in-store, online and click-and-collect retail options will become increasingly desired. Flexibility in last-mile delivery will also enable retailers to cater to consumer expectations regarding where, when and how they receive their purchases while effectively managing costs.

  Localised Manufacturing and Warehousing

Reshoring / nearshoring is influencing logistics real estate requirements, as 45% of occupiers see this movement as game-changing for their networks. A 2024 Supply Chain Leader survey from McKinsey highlighted that 73% of respondents were currently developing dual-sourcing strategies, while 60% were regionalising their supply chains.  

The continued growth of eCommerce and rising space costs will result in companies wanting to maximise warehouse density, using dynamic storage solutions and automation to accommodate more products within a smaller footprint. Strategically positioned distribution centres and city hubs will be required to enable rapid and efficient delivery of goods to urban customers. Larger-scale retail locations can be repurposed as last-mile hubs, leveraging their accessibility to customers and freight traffic. As a result, rental prices for logistics locations will increase in proportion to the number of consumers that can be reached within a restricted time window, highlighting the value of strategic urban positions

  Case Study

There are many examples of retailers adapting both their offerings and logistics network. For example, the UK department store John Lewis comprehensively enhanced its online offering, leading to significant growth in sales, with 45% of these sales using click-and-collect. To support this omnichannel approach, it consolidated e-commerce and in-store purchases into a single distribution centre and allowed shoppers to order items in-store for home delivery.

 

Conclusion

A perfect storm of technological innovation is transforming the retail landscape of 2025, changing consumer values and evolving business models. Retailers who embrace these trends aren’t just adapting to change – they’re driving it. The future of retail isn’t just about selling products; it’s about creating experiences, building trust, and meeting customers wherever they are, whether instore or on TikTok.

These changes present excellent opportunities for the logistics real estate industry. Any company that can provide high-quality, strategically located, automated and green solutions that are adaptable enough to handle the rapidly changing demands of today’s tech-savvy, cost-sensitive, eco-conscious consumer will find a willing market.