US retail sales are projected to increase by 4% year-over-year in 2025, reaching an estimated $5.2 trillion, according to a new report from Bain & Co.’s retail team.
The report highlights this as a ‘strong outlook’ despite challenges such as stagnant consumer sentiment, slowing inflation, and negative year-over-year employment trends.
Additional challenges include falling consumer savings, rising credit card debt and higher essential costs, all of which could weigh on spending.
“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,” the report’s authors said.
“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.”
The authors also note that retailers ready to capture the most growth will proactively seize opportunities, not just react to challenges. While AI can be a key driver, success hinges on using it to fuel meaningful strategies rather than just ticking a box.
“Successful businesses will go beyond the familiar, tapping into cutting-edge technologies, reimagining loyalty programs, and fortifying supply chains against an unpredictable global backdrop,” they added.
This overall 4% growth is expected to be driven by a 10% increase in non-store sales, while in-store sales will see more modest 2% gains, led by general merchandise, apparel, and health and personal care stores.
Retail resolutions
The report also underscores the importance of learning from ‘scale players’ like Walmart, Amazon, and Costco, which have become go-to destinations for many consumers.
These retail giants accounted for 57% of US retail growth over the past three quarters and 17% of total retail sales in 2024, a 6% increase since 2014.
While competing directly with these titans is increasingly challenging, the research suggests that retailers can still carve out a niche by crafting a unique value proposition.
According to the report, a strong value proposition starts includes fast shipping, consistent quality, and 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,” the authors explain.
For instance, balanced assortments aligned with customer preferences can boost sales by 2% to 5%. Private brands, which offer exclusivity, are another powerful tool. Bain’s research shows that high-performing private brands can increase a grocer’s share of wallet by 12%.
Pricing and promotions are equally important, with the report noting that ‘strong value perception doesn’t always mean chasing the lowest price.’ Instead, winning retailers prioritise well-structured pricing strategies that align with their customer needs and product goals.
Bain argues that grocery store chain Trader Joe’s exemplifies this approach, with its curated assortments, innovative private brand products, and resonant brand identity inspiring strong customer loyalty.
“Trader Joe’s proves that value creation goes beyond price—it’s about building a differentiated proposition that keeps customers coming back.”
Supply chain
Bain also advises retailers to diversify their supply chain through ‘right-shoring’ strategies that balance cost, speed and resilience.
Rather than relying on a single region, the goal is to build a system that can adapt to priorities like response times, market proximity, and resource during periods of instability.
The research also shows that around 70% of US retailers plan to increase onshoring or nearshoring efforts over the next three years, with many American companies reducing reliance on China and shifting focus to regions like India and North America.
For instance, Steve Madden recently announced plans to reduce its imports from China by 40% to 45% next year by sourcing to alternative countries.
The footwear brand was among the first to respond to the potential tariffs on China proposed during President Trump’s first administration.
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