Retailers face a pivotal moment in 2025. The challenges of shifting consumer behaviors and demands, economic volatility, regulatory changes, and trade complexities persist, reshaping the retail game. Successful businesses will go beyond the familiar, tapping into cutting-edge technologies, reimagining loyalty programs, and fortifying supply chains against an unpredictable global backdrop. While headwinds remain, opportunities such as potential interest rate cuts, tax incentives, and momentum from a strong 2024 holiday season suggest 2025 may be a year in which innovative moves can set the stage for lasting success.

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2024 Holiday Shopping: Inside the Latest Retail Sales

US holiday sales growth surpassed expectations at 4.2%, despite macroeconomic headwinds.

Barring major macroeconomic or geopolitical shocks, Bain projects nominal US retail sales will rise 4.0% year over year (YoY) in 2025, roughly in line with actual growth in 2023 and 2024 (see Figure 1). That equates to around $5.2 trillion in estimated total sales in 2025. It’s a strong outlook, given a stagnant consumer outlook, tempering inflation, negative YoY employment trends, diminishing consumer savings, rising credit card delinquencies, elevated nondiscretionary costs, and potential trade disruptions. We expect growth will be fueled by a 10% YoY increase in nonstore sales, while in-store sales will see modest 2% gains, led by general merchandise, apparel, and health and personal care stores.

Figure 1

The retailers that win a disproportionate share of this growth will proactively seize opportunities rather than simply react to challenges. Artificial intelligence can help, but adopting it simply to check a box won’t be enough. The real power lies in harnessing AI for the strategies that matter most.

Here are the top five resolutions that successful retailers will focus on in 2025 and beyond.

Top 5 for 2025

1. Earn your spot atop consumers’ shopping lists

2. Win hearts to win wallets

3. Modernize your supply chain for resilience

4. Reimagine cost efficiency with tech and AI

5. Turbocharge beyond-trade profits

1. Earn your spot atop consumers’ shopping lists

Scale players like Walmart and Amazon, with their endless assortments, along with Costco, have become the go-to for many shoppers, accounting for 57% of retail growth over the last three quarters and 17% of total US retail sales in 2024—a 6-percentage-point increase from 2014. Competing directly with these giants is harder than ever. But by crafting a unique value proposition, retailers can carve out a winning position alongside them and capture significant rewards.

A clear and compelling value proposition starts with the fundamentals, be it fast shipping, consistent quality, or reliable digital experiences. Miss here, and irrelevance is almost inevitable. But to truly stand out, retailers must go further. Success hinges on being best in class in at least one (if not two or three) attributes that matter most to your target customers and are tailored to their specific need or occasion. Leaning into these priorities allows retailers to break through traditional trade-offs and expand the value frontier, delivering experiences that surprise, delight, and differentiate.

Consider how Costco earned its leading position by pairing two rare attributes—low prices and high quality—with an innovative system that limits assortment and optimizes efficiency. The retailer has created a value proposition that’s both differentiated and defensible.

With cost of living ranking as global consumers’ top concern, delivering on value has never been more urgent. Bain research shows that retailers with strong value perception consistently outperform peers on financial metrics (see Figure 2).

Figure 2

Product and pricing are at the core of the systems that make these value propositions tangible:

• Assortments. In our experience, balanced assortments that cater to customer preferences can boost sales by 2% to 5%. Private brands are becoming an especially powerful tool, adding value through exclusivity. Bain research shows high-performing private brands can boost grocer share of wallet by 12 percentage points.

• Pricing and promotions. Strong value perception doesn’t always mean chasing the lowest price. Retailers with a competitive advantage build structured pricing architectures that align with their customer and product strategies, balancing margin growth and market share. Personalized promotions tailored to individual preferences can further enhance value perception and influence buying behavior—ultimately improving ROI.

Winning retailers like Trader Joe’s use these merchandising elements to show a deep understanding of what customers value most. The grocer’s curated assortments, innovative private brand products, and resonant brand identity inspire exceptional loyalty. Trader Joe’s proves that value creation is about more than just price; it’s about building a differentiated proposition that keeps customers coming back.

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The Most Loved Private-Label Brands in Fresh and Perishable Food

Texas grocer H-E-B tops our second ranking of US own-label brands.

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The Most Loved Private-Label Brands in Shelf-Stable and Frozen Food

Trader Joe’s tops our first ranking of loyalty-boosting own-label brands in US grocery.

2. Win hearts to win wallets

Loyalty isn’t bought, it’s earned. The best programs have evolved from nice-to-have perks into strategic assets. The payoff? Loyalty program members purchase more frequently, spend more, and have a higher share of wallet than others (see Figure 3).

Figure 3

But simply having a loyalty program isn’t enough. Over one-third of US online adults don’t regularly participate in most of the loyalty programs they join and frequently forget to use the programs they belong to.

The most effective programs move beyond mere discounts and bonus points to earn genuine, lasting loyalty. It isn’t just about financial incentives. It’s about creating an emotional connection through tailored experiences, exclusive benefits, and a sense of belonging that consumers can’t find elsewhere. By leveraging rich customer data and cutting-edge tools, including AI, retailers can design relevant, personalized journeys that transform one-time buyers into passionate lifetime advocates.  

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Personalization: AI for Retail Marketing Magic

Leading retailers are adopting AI-powered personalized marketing to better resonate with and win over shoppers.

Sephora’s Beauty Insider program exemplifies emotion-driven loyalty. Combining transaction data with information such as details about a shopper’s unique complexion and brand preferences from tools like Shade Finder and the AR-powered Virtual Artist, Sephora personalizes recommendations and homepages for loyalty members. Sephora also uses these insights to elevate in-store experiences, including offering access to early sales and exclusive events. As a result, Beauty Insiders report making 58% more purchases annually and spending more than twice as much as non-members. They also command a 63% higher share of wallet, per our annual study with ROI Rocket.

コンサルティングサービス: NPS Prism®

3. Modernize your supply chain for resilience

In the heyday of globalization, retailers learned to maximize cost efficiency in their supply chains. This meant chasing the lowest-cost sources and funneling as much volume as possible through them. Diversification and redundancies to hedge against disruption felt unnecessary—wasteful, even. But that era is over.

Natural disasters, geopolitical shifts, and the pandemic’s lasting effects have redefined supply chain resilience and adaptability as critical competitive advantages. In a recent Bain survey, 70% of retailers identified these macro factors as their greatest operational challenges. Add recent inflation, labor shortages, and potential tariffs to the mix, and the need for flexibility and agility has never been greater.

Percentage of retail operations leaders who say they want to prioritize: 

Increasing flexibility and agility

%

in 2022

%

in 2024

x

growth

Increasing resilience

%

in 2022

%

in 2024

x

growth

Sources: Bain's Operations Reinvention COO Survey 2022 (retail n=61); Bain's Operations Reinvention COO Survey Q3 2024 (retail n=30)

Leading organizations are using new technologies to build dynamic supply chains that meet traditional goals of availability, speed, and efficiency, while also embedding the flexibility and resilience to withstand disruption. Here’s how they’re doing it:

• Diversifying supplier sourcing. Winning retailers are right-shoring to align operations with locations that balance cost, resilience, and speed. It’s not about a blanket shift to one region but instead creating a system that can deliver on key priorities, like enhanced response times, proximity to key markets, or access to essential resources amid volatility. Roughly 70% of retailers plan to increase onshoring or nearshoring over the next three years. Many US-based players are already reducing reliance on China in favor lower-cost hubs like India or, increasingly, North America. For instance, Steve Madden recently announced plans to reduce imports from China by 40% to 45% over the next year, by developing alternative factory bases and sourcing capabilities in other countries.
• Optimizing networks with digital twins. Retailers are implementing advanced digital twin platforms to simulate disruptive scenarios, such as weather events or labor shortages. These tools enable quick network reconfigurations to address immediate challenges, while also providing valuable insights to inform long-term investments. When paired with real-time tracking and end-to-end visibility, digital twins provide a 360-degree view of operations. They help identify vulnerabilities, optimize processes, and build more robust supply chains.
• Using predictive analytics for smarter inventory management. Amid fast-changing consumer preferences and frequent disruptions, precise forecasting is crucial. AI-powered tools can help analyze demand in real time, allowing retailers to dynamically adjust inventory placement to reduce transit times, lower costs, and prevent costly stockouts or excess inventory. Bain’s experience shows custom AI forecasting models can cut excess inventory by 40% and boost accuracy by nearly 50% compared to manual planning.

How we can helpRetail Supply Chain Strategy

The supply chain is a powerful tool for retailers’ many challenges, including delivering the customer value proposition. Our comprehensive approach helps you transform it to not only navigate uncertainty but also boost your bottom line.

4. Reimagine cost efficiency with tech and AI

Cost efficiency remains essential for retailers, freeing resources to invest in resilience, customer experience, and competitive pricing. But while many retailers have embarked on cost transformation journeys in recent years, these efforts often fall short. Bain experience shows that siloed approaches—focusing on individual functions or lacking alignment with broader business goals—often result in tools and processes that fail to deliver lasting savings.

Opportunities to uncover cost efficiencies, such as optimizing workflows, redesigning operating models, or improving inventory management, remain abundant. What’s changed is the emergence of powerful new technologies that didn’t exist 18 months ago. Advancements like generative AI create new ways to reduce costs, but only for retailers that are willing to reimagine end-to-end operations and follow through with robust change management. The technology alone is not a magic solution. 

How can retailers balance big change and the desire for quick results?

• Turbocharge for today. Start with tried-and-tested efficiency initiatives (if not yet deployed) and proven technologies for immediate, sustainable results. Machine learning and robotics, for example, can optimize promotions, reduce product line complexity, automate distribution centers, and streamline labor scheduling.
• Transform for tomorrow. Leverage generative AI and new tech solutions to tap into cost-saving opportunities, such as real-time supply chain visibility and generative AI-powered copilots for buyers and store associates. At the same time, lay the groundwork for one or two breakthrough bets, such as real-time online assortment optimization or autonomous inventory management, that can redefine long-term performance.

Achieving long-term cost savings often requires upfront investments. Leading retailers thoughtfully sequence initiatives to balance bold bets and quick wins. They weigh the potential gains and strategic priorities against feasibility factors such as capital needs, time to value, and organizational technology maturity to prioritize initiatives with the greatest value potential.

A tech-enabled approach isn’t about immediate fixes. It’s a strategic commitment to deliver ongoing savings, improve customer experience, boost productivity, and enhance employee satisfaction—setting the stage for sustained success.

5. Turbocharge beyond-trade profits

As growth slows, consumer expectations evolve, and margin pressures intensify, traditional retailers are reimagining how they create value. Beyond-trade ventures—those that leverage existing assets to extend beyond the standard retail model of buying and reselling goods—are a powerful way to tap into new profit pools while strengthening the core. These ventures aim to diversify revenue streams and generate attractive margins by monetizing customer bases, data, infrastructure, and intellectual property.

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How Engine 2 Expansion Can Power the Future of Retail

With limited growth in traditional buying and selling, retailers need new revenue and profit streams.

Bain estimates that in the next decade, beyond-trade ventures could contribute one-third of revenues and up to half of retail profits, making them critical engines of long-term growth. However, success requires aligning the right opportunities with the right capabilities in areas where retailers have the right to play and resources to win (see Figure 4).

Figure 4

Two key factors help retailers make that decision:

• Scale: Retailers with significant scale—namely, broad reach, substantial resources, financial strength, and operational adaptability—can establish expansive ecosystems that offer diverse products and services. Conversely, niche retailers succeed by leveraging their relative scale. They excel in delivering complementary products, targeting specific audiences, or addressing unmet needs.
• Advantageous assets: Some assets, such as proprietary consumer data and insights, strong supplier networks, brand reputation, and specialized operational capabilities, aren’t central to a retailer’s core operations but often become defining strengths. Successfully monetizing these assets can unlock new growth opportunities and significant expansion.

Two of the most promising beyond-trade ventures, retail media and marketplaces, show how retailers might pursue opportunities in different ways.

• Retail media enables precise targeting at customers’ point of consideration based on their behavior and preferences, making it a natural opportunity to monetize first-party data. For instance, Best Buy pairs its category scale and expertise with consumer data in an ad platform that is uniquely suited to high-intent electronics buyers. Meanwhile, Amazon Ads combines its massive customer base with advanced analytics to deliver broad reach and precision simultaneously, generating strong returns on ad spend.
• Marketplaces extend retailers’ ecosystems and create essential hubs for buyers and sellers. Scale players like Walmart use their vast customer bases, seller networks, and logistics capabilities. In contrast, focused players like Zalando curate marketplaces for specific audiences and offer distinct experiences that broader platforms can’t match. Either way, success depends on aligning capabilities with market demands and delivering strong merchandising and assortments.

Winners excel by ensuring beyond-trade adjacencies add to their portfolio in ways that preserve and build on core strengths. These ventures can only truly succeed when they are anchored by a strong core trading business that consistently delivers value and exceptional customer experiences.

Related

Holiday Recap: Why Retailers Need an Ecosystem Strategy in an Amazon World

Not every retailer can build an Amazon-style ecosystem. But every retailer needs its own effective approach in the new year.

The common thread: Data

A common thread ties these five resolutions together. Having quality data—and the ability to harness it effectively—is the only way to succeed at these strategic imperatives. It’s well worth the investment: Retailers with strong data strategies have outpaced their peers, achieving twice the revenue growth and four times the profitability growth from 2020 to 2023.

By unlocking the ability to reshape loyalty, refine supply chains, advance technology, and fuel beyond-trade growth, proactive, data-savvy retailers will not just survive in these changing times. They will thrive.

• Selected references

  Bain & Company has included in this document information and analyses based on the sources referenced below as well as our own research and experience. Bain has not independently verified this information and makes no representation or warranty, express or implied, that such information is accurate or complete. Projected market and financial information, analyses, and conclusions contained here are based (unless sourced otherwise) on the information described above, and Bain’s judgments should not be construed as definitive forecasts or guarantees of future performance or results. Neither Bain & Company nor any of its subsidiaries or their respective officers, directors, shareholders, employees, or agents accept any responsibility or liability with respect to this document.

  Cassick, Callie. “Sephora's Beauty Insider Program: How To Maximize Your Benefits.” Fox Business, March 8, 2024.

  Crumley, Bruce. “The Biggest US Retailers Increased Their Dominance In 2024.” Inc., January 3, 2025.

  Lee, Jinjoo. “Big Retail Gets Bigger As Smaller Players Struggle.” The Wall Street Journal, January 2, 2025.

  Neuffer, Philip. “Steve Madden To Slash China Sourcing As Tariff Concerns Escalate.” Supply Chain Dive, November 12, 2024.

  Parsani, Puran. “Beauty and the Bot: How Sephora Reimagined Customer Experience with AI.” Cut the Saas, February 23, 2024.

  Patov, Aslan. “How Sephora Enhances Customer Experience (CX) Through Personalization and Digital Innovation.” Renascence, September 4, 2024.

  "The State Of Retail Loyalty In 2024", Forrester, August, 2024.

Until Next Year

Thank you for following this holiday season with us. Revisit the full series here

The authors would like to acknowledge Sasha Foo, Maddy Crisera, and Diya Chadha for their contributions.