Tony D'Onofrio
Retail
"2025 will be the year where science fiction becomes a shopping reality. From AI-enabled hyper-personalized experiences to the rise of responsive ads via retail media networks to next-gen supply chain automation, the retail industry is transforming on all fronts." - Capgemini
What an exhausting, exciting, inspiring, highly motivating week in New York on the annual pilgrimage to the National Retail Federation retail Big Show to experience the future of retail. For the week, logged nearly 100,000 steps or 42 miles (67.5 Km) in visiting stores, engaging retailers, walking the show floor, meeting analysts, and showcasing new innovations for Sensormatic.
On stage in a Sensormatic sponsored event with the retailer PVH, in my opening comments, I congratulated the audience for working in one of the most vibrant industries in the world. In 2025, the global industry will grow to nearly $33 trillion, growing at roughly 4% per year through 2026.
By 2026, 76% of total global retail sales will still be physical stores. The growth gap for online sales and stores is narrowing. Growing middle classes in large economies and emerging countries will keep the industry thriving for many years to the come.
This article summarizes my top 5 data supported takeaways from the 2025 edition of the Retail Big Show. One of these trends offers a counter view that needs to be addressed to keep the retail industry positively moving forward. Multiple of the quotes cited in this article are directly from attendees or from articles published the same week.
Where Tech and Tears Meet
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In a year where consumers still fretted about inflation, Santa Claus delivered a solid holiday shopping season. According to a Mastercard Spending Pulse report, total spending this holiday season increased 3.8% over 2023, surpassing the previously forecasted rise of 3.2% and beating last year's increase of 3.1%. For the shopping period between November 1 to December 24, online grew 6.7% while in-store sales grew 2.9%.
On some levels, 2024 was a challenging year for the USA retail industry. According to Coresight, through November 2024, retailers were projected to close over 7,100 stores, a 69% increase over the same period in 2023. Somewhat surprisingly, the top 5 retail chains with the highest number of physical stores closures were Family Dollar, CVS Health, Big Lots, Conn's, and Rue21.
The mixed results fulfill the prophecy by the Economic Intelligence Unit which in 2024 forecast offline retail as cloudy, online retail as stormy, food as cloudy, and non-food also stormy. In December 2024, three other major chains announced either bankruptcy proceedings or liquidation sales: The Container Store, Big Lots, and Party City.
Is another retail apocalypse for physical stores in the 2025 retail horizon? What are the latest growth forecasts for global retail in 2025? What are the top 5 disruptive retail predictions for 2025?
The 2025 Global Retail Forecasts
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Today's world is media noisy, but much of the messaging is broadly delivered with minimal impact. Television and newspapers were primary historical mediums for delivering product knowledge, differentiation, and building consumer loyalty.
The average human attention span has dropped from 12 seconds in 2000 to a just 8 seconds in 2020. A goldfish now has a higher span that a human at 9 seconds.
The internet has intensified the media noise. Globally, individuals between the age of 16 to 64 now spend an average six hours, 40 minutes online (for the United States is 7 hours and 3 minutes). This equates to 47 hours per week and 101 days per year. By this estimation, beginning at age 18, a person who lives to 80 will have spent 17 years of their adult life using the internet.
The increased online digital noise is changing viewer habits of traditional media such as television. Note the decline in daily viewing time with digital surpassing traditional television in 2022.
Younger generations are accelerating the shift to digital. About 1 out of 6 Millennials said they did not watch any original TV series from traditional TV sets within the past 30 days, a significant trend highlighting the potential for linear TV viewing to erode over time. If young people do watch television, it is on other digital devices, often skipping the commercials.
In the 1970's, the average person was exposed to 500 to 1,600 ads per day. The changes in media consumption including the proliferation of digital devices, growth of social media, programmatic advertising, and content distribution have dramatically elevated the ad numbers 4,000 to 10,000 per day.
Focusing on the retail industry, how does one break through all this digital noise and deliver effective content? Where is the best place to increase attention spans for targeted ads for the consumer? What is the profitable future of retail media networks?
The Retail Media Networks Opportunity
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It is beginning to look a lot like Christmas, everywhere you go. With decorations now appearing in stores as early as August, reminders are everywhere on the continued importance of each holiday shopping season.
Some statistics on the importance of retail, the holiday season,and the impact on the overall USA economy:
Roughly 70% of U.S. gross domestic product (GDP) is generated by consumer spending. Holiday sales in the months of November and December have averaged 19% of total annual retail sales over the last five years. In 2023, USA retailers hired between 345,000 to 450,000 holiday seasonal workers. 75% of retail small businesses rely heavily on holiday sales to meet their annual revenue goals.It is time to summarize multiple of my favorite retail holiday forecasts For 2024, most of these project lower historical retail sales growth, even as the September's job report continued to deliver positive economic surprises.
Global Consumers Are Feeling the Pinch
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In the latest USA National Retail Federation Security Survey published in September 2023, retail shrink increased from 1.6% of sales from 1.4% in the previous year. This equates to $112.1 billion in losses, up from $93.9 in the previous year. The top 3 retailer priorities in the new NRF survey versus the previous year were organized retail crime (78.1%), violence during a criminal act (72.3%), and homelessness concerns (72.3%).
What's changed since the 2023 NRF security survey was published? How does theft impact inventory distortion? What are the latest shoplifting trends? How do consumers respond to retail theft? Why is retail crime at a crisis point? How does USA compare to other countries with this problem? How do we solve the problem of retail shrink?
The $1.7 Trillion Dollar Global Retail Problem
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Digital retail transformation continues to be on my mind. This follows increased engagement with retailers on multiple continents and observing how they are embracing technology to create immersive experiences that drive more profitable operational efficiencies. From their lessons, the questions that I continue to contemplate include:
Will the future of retail be phygital or omnichannel? How will current trends from next generation shoppers such as Gen Z change retail in the next 10 years? What emerging technologies must make progress to deliver a more profitable future of retail?The Retail Boss nicely summarized the key differences between phygital and omnichannel retail strategies. "Phygital and omnichannel strategies both aim to enhance customer experiences but differ in their approaches. Phygital focuses on merging physical and digital worlds to create immersive, personalized experiences, often leveraging technologies like QR codes and augmented reality. On the other hand, omnichannel integrates various communication channels to provide a seamless and consistent brand experience across all touchpoints, such as physical stores, websites, and mobile apps. While phygital emphasizes the fusion of online and offline interactions, omnichannel prioritizes a unified customer journey across multiple platforms."
As Morningstar reported, "Generation Z, the first truly digital-native cohort, is rewriting the rules of engagement in the retail sector with their preferences and behaviors. Born into a world where the internet, smartphones, and social media are ubiquitous, zoomers' influence is shifting the retail paradigm from predominantly in-store interactions to a complex, integrated model that blends online and offline experiences seamlessly. Their comfort with technology and demand for instant, on-demand access to products and services are driving retailers to reimagine how they connect with consumers."
Technology will continue to disrupt retail business models. The industry's future requires increased digital strategies to turn consumers into brand ambassadors. Concurrently, the entire retail ecosystem and especially the physical store, must increase its digital stickiness through tech empowered store associates as equal brand ambassadors.
Future Consumers Technology Preferences
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A favorite retail industry report which I hope Chain Store Age continues post their acquisition of RIS News was the annual Store Experience Study. The research highlighted the yearly technology priorities for retailers and its summary continues to be a mainstay as one of the charts in my 'Disruptive Future of Retail' keynote presentation.
According to the latest Store Experience Study, the top five technology priorities for retailers in 2024 are personalizing customer experiences, upgrading CRM / loyalty programs, empowering store associates, inventory visibility, and refreshing the point-of-sale infrastructure.
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“(Self-Checkout) It’s facilitating errors, and in some cases, the steal.” – Santiago Gallino, Associate Professor at the Wharton School
According to the latest NRF Security Survey, retail shrink represents $112.1 billion in losses, up nearly 20% from the previous year. Similar high shrink growth rates can be seen in other countries such as the UK where in the latest British Retail Consortium research, customer theft, doubled to just shy of £2 billion ($2.5 billion).
As I predicted many years ago, the problem of retail shrink is on a collision course with frictionless commerce consumer trends. This growing challenge actually bring new positive opportunities for to both retail and the loss prevention function.
The shrink challenging counter revolution taking place in the retail industry, led by younger generations, is frictionless commerce. “Over 50% of consumers will switch to a merchant with less friction in the shopping experience. And, 41% of all consumers will pay more for simple, fast and efficient shopping experiences.”
Specifically to self-checkout, the 2024 Digital Commerce Index found that 43% of consumers favor self-checkout when shopping in a grocery store. By age range, that preference is even more interesting with 55% of 18-29 years old favoring it, 30-44 at 51%, 45-60 at 40%, and those aged 60+ at only 26%.
The genie is out of the bottle in terms of increased frictionless commerce in all retail sectors. To understand its impact in the apparel industry, read one of my previous article titled “Let’s Get Phygital and Get the Future of Retail Party On.” This article explores deeper the challenges at retail shrink at self-checkout and the accelerated adoption trends of frictionless commerce.
Stealing at Your Local Self-Checkout
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Once again, the ritual that is the January National Retail Federation Big Show is upon us. Over 40,000 people, 6200+ brands, 1000+ exhibitors, from 100+ countries participated in the NRF 2024 edition. My retail innovation leadership activities stretched out over five days logging over 75,000 steps or to be more exact 32.62 walking miles.
The greatest pleasure at this event is reconnecting with retail and technology leaders from around the world in one single location. This year was a reminder that we are well past the pandemic. Refreshingly, the hearty handshakes and hugs were back with both friends and business colleagues.
Personally, NRF 2024 was even more special as I returned as President of Sensormatic, the leading retail portfolio business of Johnson Controls. My agenda was super packed with retailers, press, and analyst’s meetings. Being a true retail technology industry ‘geek’, I did squeeze in my traditional trend spotting walk.
This article summarizes some of my favorite events and themes of NRF 2024. It highlights both the ‘hits’ that made NRF 2024 memorable and the one ‘miss’ that could have improved it.
Best Way to Start Each NRF: Retail ROI Super Saturday
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Are we becoming more physical stores or online digital shopper consumers? Prior to the pandemic, a topic that was popular in general media was the “retail apocalypse”. This Armageddon industry ending realization was being driven by rising retail bankruptcies and store closures.
The opposite force was the rise of digital commerce. Back in the year 2000, less than 1% of USA retail sales came from ecommerce. Fast forward to 2018 and it reached nearly 10% and by 2027 it is projected to reach 20.4% of total retail sales.
The digital revolution of the retail industry is here to stay. For the first half of 2023, according to Morning Consult, these are the reasons for shopping online versus instore.
Above chart is important as it points to the drivers of the digital versus physical instore model. This is a general view across the shopping population. As I pointed out in a previous article, leading retailers have realized the digital and physical are blending into phygital strategies. It’s no longer one versus the other, but the growing intentional strategy to combine the business models to drive higher consumer engagement across channels.
Just as interesting, if not more important, are technology adoption trends for the younger consumers and the innovation they would to see introduced into shopping journeys. As a new research study from Tata Consultancy Services pointed out, “consumers of all ages want new technologies, based on their preferences, to enhance their shopping experiences, instore and online, today and in the future.”
Privacy is Less of Concern for Younger Generations
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It is a Small World
Continuing our journey to learning something new, we go to my native land of Italy and the city of Rome. According to Roman legend, the city of Rome was named after its founder, Romulus, the first king of Rome.
Modern Rome has 280 fountains and more than 900 churches. Nearly $1 million worth of coins are tossed into Rome’s Trevi Fountain. The proceeds are donated to the charity Caritas to help those in need.
The first ever shopping mall was built in Rome between 107 and 110 AD by Emperor Trajan. It sold a wide variety of goods and grocery items. Rome’s first university, La Sapienza, established in 1303 AD, is the largest in Europe and the second largest in the world.
The Romans gave us our calendar. In 46 BC when Julius Caesar was in Alexandria, he marveled at their calendar which was based on the solar year. After Caesar’s trip he instated the new Julian calendar which would be 365 days with an extra day at the end of February every 4 years – the leap year! It wasn’t until after Caesars death that a month was named after him. Originally July was actually named Quintilius.
This picture is one of my favorites from 2024. It is from a villa in Rome where with Sensormatic we celebrated successes of our global business partner network.
It has been an amazing fulfilling year and I am looking forward even more to an even better 2025. Our future, including what is in front of us, has not been written. Always remember that you are in control of your destiny and can craft the life you always dreamed about.
Have a happy, healthy, safe, and prosperous New Year. In my native Italian, a toast to all of you, 'Salute', which literally translates 'to your health'.
Categories
Brilliant Research
The Impact of Retail Theft & Violence 2024 in USA Retail
USA retailers surveyed experienced a 93% increase in the average number of shoplifting incidents per year in 2023 versus 2019 and a 90% increase in dollar loss due to shoplifting during that same time period. And the rise in shoplifting has continued past the pandemic. 73% of those surveyed say that shoplifters are exhibiting more violence. - From National Retail Federation Read more
Smart Infographic
Visualizing What the World Googled in 2024
Insightful Videos
Why Food Prices Are Still So High In The U.S. -CNBC
As inflation cools considerably, prices for items like gasoline, used cars and energy have all declined accordingly. But food prices continue to outpace inflation, increasing by 28% since 2019. Read more
