The retail sector faces an economic landscape characterised by both heightened uncertainty and significant opportunity. While many remain optimistic about global growth and their companies' ability to drive revenue, the sector is navigating ongoing challenges, from economic volatility to supply chain disruptions.
Every year, we survey retail business leaders to explore how businesses address the industry's most critical issues. Here are the findings of the latest survey.
The retail sector is stepping into 2025 with a sense of measured optimism. More than half (52%) of surveyed leaders believe that global economic growth will accelerate—a confidence level unseen since the pre-pandemic era. Even more striking is their outlook on their own businesses: Nearly 90% of retail executives express confidence in their company's ability to increase revenues in 2025, with the most assured voices coming from China, Brazil, Japan, France, and South Africa.
However, beneath this optimism lies a cautious pragmatism as business leaders remain aware of ongoing challenges. From economic volatility to supply chain pressures, disruption remains a constant theme for the sector.
Economic uncertainty remains the main concern for the retail sector, with 87% of respondents citing it as a potential threat to business stability.
While still a consideration, inflation has begun to loosen its grip as central banks gradually ease borrowing rates. Other pressing concerns include cybersecurity threats, trade flow disruptions, and rising resource costs—all flagged by 71% of respondents.
Operating in an environment where digital threats are constantly evolving, cybersecurity has long been one of the top priorities for retailers. Unlike other sectors rushing to catch up, retail businesses have already integrated cybersecurity strategies into their operations. Over half (54%) of retailers plan to increase investment in IT security infrastructure. This in addition to 42% who plan to maintain current levels of investment.
Retailers are targeting leaner, more agile operations. Following operational efficiency improvements, retail leaders cite cost reduction, which is a priority for 57%, and cost management, a priority for 30%, as persistent weak spots that must be addressed.
Alarmingly, a large majority (81%) of retail leaders admit their business models are in need of an upgrade, suggesting a widespread push toward more future-proof operating frameworks.
62% of retail businesses plan to improve operational efficiency, making it the most widely pursued strategy among respondents
To hit these lofty goals, retailers are focusing their efforts on a range of structural improvements like upgrading technology systems (43%), enhancing business agility (42%), and organisational restructuring (41%).
Additionally, 37% are actively streamlining processes to eliminate redundancies, while another 37% are advancing their data analytics capabilities.
Artificial intelligence (AI) is emerging as a key driver of this transformation. Of those planning technology upgrades, 68% are leveraging AI to expedite the process. Process optimisation is an area where AI is proving indispensable, with 55% of retailers deploying AI to standardise operations and enhance efficiency. AI also plays a key role in improving agility (45%) and organisational restructuring (38%).
"We are using AI to handle repetitive, low-complexity tasks, allowing our employees to focus on more strategic initiatives," shared a retail leader from Asia. Meanwhile, an executive from Africa and the Middle East highlighted how AI-driven demand forecasting has significantly reduced both overstock and stockouts, enhancing inventory efficiency by enabling product demand estimation with greater precision.
Data analytics is another frontier where AI is demonstrating its potential. Among retailers prioritising advanced analytics, 72% are integrating AI to refine their insights. "Automated data processing is saving employees time while boosting efficiency and profitability," noted a European retailer.
In North America, a business intelligence leader observed, "AI has been most effective thus far in our Business Intelligence team - it has increased productivity by reducing the time it takes for a BI analyst to translate analytics into digestible formats, like a PowerPoint deck. Where time to market or client isn't increased, quality is - with better metrics presented in a more engaging way."
Businesses often prioritise operations over innovation, but retailers are making a concerted effort to invest in growth, with over half of respondents actively investing in new product development and services as a growth strategy.
However, only slightly more than a third (35%) consider themselves effective innovators, demonstrating a need for improved methodologies. Better data-driven decision-making is at the core of this effort. Nearly 41% of respondents are refining how they collect and analyse customer behaviour data to fuel innovation. Others are setting aside dedicated budgets and resources (33%), reimagining the customer journey (30%), and deploying AI-powered personalisation strategies (29%).
AI is becoming a key tool in retail's quest for differentiation. "AI has the most positive impact when engaging with our customers digitally by using personalised marketing messages that drive sales," a North American CTO explained.
A European CFO echoed this sentiment, highlighting how an AI-powered customer relationship management system frees up sales teams. "The Customer Relationship Management system, built internally using AI, is set to have a significant impact on the business by reducing admin time for the sales team, allowing them to engage more effectively with customers", they shared.
Three-quarters of retailers establishing innovation labs are leveraging AI to accelerate breakthroughs. Meanwhile, 69% of those dedicating resources to innovation are using AI to enhance product development workflows. The momentum behind AI adoption is evident.
Technology adoption remains a cornerstone of retail growth strategies in 2025. Roughly half of respondents prioritise new tech investments, with AI leading the charge. However, AI enthusiasm in retail trails behind other industries.
Beyond AI, cloud computing (42%), robotic process automation (35%), and the Internet of Things (34%) rank as important technologies for the sector. Immersive-reality technologies—such as augmented reality (AR), virtual reality (VR), and interactive displays—are also gaining traction, with 19% of retailers integrating them to enhance customer experiences.
54% of retail executives rank AI as the most critical technology over the next 5 years, versus 70% of execs in other sectors who view it as essential for their future growth over the same period.
Despite AI's growing footprint, the retail sector navigates its adoption with greater selectivity. It appears that the sector's AI adoption curve is shifting, with only 37% of retailers identifying as AI innovators—down from over half last year. At the same time, AI scepticism is rising, with 23% expressing doubts, up from 11% in the previous year.
This shift suggests a more nuanced approach, where businesses are fine-tuning their AI strategies rather than pursuing blanket implementation. Retailers are concentrating their AI efforts on customer engagement, content generation, and analytics. Over a third have successfully integrated AI into sales and customer service functions. One executive in the Middle East highlighted the power of AI-driven customer insights, stating, "AI helps us analyse data to tailor our marketing campaigns with precision."
Retail leaders are placing a growing emphasis on investing in their workforce, with 50% prioritising people in 2025, alongside technology and innovation. However, only 41% rate their workforce as highly engaged, with many focusing on improving training, development, and performance management through AI. As the sector shifts focus towards retaining and upskilling existing staff, there is a marked reduction in hiring new employees, highlighting the shift towards investing in current talent.
While the sector remains optimistic about growth, leaders are aware of the hurdles ahead. With AI as both a catalyst and a challenge, retailers face a defining moment.
As AI becomes a critical differentiator, finding the right balance between customer-centric strategies, streamlining operations, and investing in their workforce to boost profitability will be key to thriving in a hyper-competitive landscape.
As the landscape becomes more complex, expert guidance is crucial. With our deep industry knowledge and data-driven insights, HLB is here to help retailers navigate these challenges, seize emerging opportunities, and build resilient, future-proof businesses. us to guide you through 2025 and beyond.
By submitting your email address, you acknowledge that you have read the Privacy Statement and that you consent to our processing data in accordance with the Privacy Statement (including international transfers). If you change your mind at any time about wishing to receive the information from us, you can send us a message using the Contact us page.
Submit
