Industry
Retail
Omnichannel CX and Intelligent Innovation – The Future of Retail
HIGHLIGHTS
- The retail industry, consistently leading the charge in rapidly adopting changes to deliver more value to consumers, is set for an exciting 2025 driven by unique trends for retailers and consumers alike.
- With rapid digitalization, retailers have been innovating to better understand and serve their customers who are now truly empowered and spoilt for choices.
- Amid economic uncertainties, evolving customer expectations, cutting-edge technologies, innovative value propositions, and regulatory advancements, the retail landscape is poised for significant progress.
On this page
Overview
The retail industry, known for its diverse range of products and services, thrives in a fiercely competitive environment.
It has consistently led the charge in rapidly adopting changes to deliver more value to consumers. We believe 2025 will be an exciting year, with unique trends that are experiential, AI-driven, and sustainable set to revolutionize the way retailers operate and engage with customers. These trends, we believe, will create unique differentiation, boost customer confidence, enhance loyalty, and improve operational efficiency.
Recapping 2024
The year 2024 has been exciting and agile for retailers, with numerous innovations, especially those spurred by artificial intelligence (AI) across the retail value chain.
Generative AI (GenAI) is now a key topic for boardroom discussions among CXOs, as several enterprises partake experiments to reimagine customer experiences, improve operational efficiencies, and save costs.
Retail Outlook 2025
Amid economic uncertainties, evolving customer expectations, cutting-edge technologies, innovative value propositions, and regulatory advancements, the retail landscape is poised for significant progress.
We believe the year ahead will bring in a lot of transformation and excitement in the world of retail. Here are 10 ways, we think, retail will be transformed in 2025:
1. Retailtainment-Turning a store into an experience: Future stores and digital spaces are set to offer more than just products and services. They will offer exciting experiences beyond shopping for the customers. In specific domains like home improvement, fashion, and food, shopping is back to being a family activity. Going forward, retail spaces will feature immersive experiences and entertainment, such as events, workshops, dining options, and children's play areas, to drive purchases. For example, home improvement retailers are looking to engage customers by offering the experience of furniture in a real setup to help them better visualize the fit in personal spaces. This strategy can help retailers differentiate, provide engaging and enjoyable customer experience, drive traffic, sales, and loyalty.
2. AI-driven curated customer engagements: Customer-centric retailing has helped many enterprises build long-term relationships with customers. Retailers have always strived to understand and meet the unique needs of each customer in a bid to provide the best experience, while staying relevant. Going forward, GenAI can help retailers achieve hyper-personalized interactions and targeted conversations with contextual content, recommendations, ads, and promotions.
According to TCS ‘AI for Business’ study 2024, 93% of over 160 leading global retailers have AI implementations planned, in process, or already implemented. That means we are looking at a significant AI infusion across the enterprise landscape that can aid retailers through the value chain of creating products or services tailored to individual customer needs all the way to value engagement with customers post the purchase. AI will play a crucial role in defining the next level of customer engagement and can be a significant differentiator for increasing customer loyalty.
3. Turning likes into sales-Social influencers driving retail: Social influencers are already a major force in driving customer purchase decisions. However, retailers need to keep up with the evolving trends and seek influencers with higher engagement metrics and not just the size of their following. More recently, micro and nano influencers with a relatively smaller follower base have been seen to be game changers in marketing strategies and establishing lasting relationships with customers. Seeking the right influencers will help build trust and authenticity, making the products relatable to their followers. The popularity of various social media platforms among Gen Alpha and Gen Z can help retailers combine influencer content and customer data to increase brand awareness, drive sales, and improve loyalty.
4. Sustainable and circular: Today's customers are visibly more health and environment conscious than earlier generations. Millennials and Gen Z prefer purpose-driven brands and are more aware of the challenges to the environment, which has translated to their shopping preferences. That, in turn, has led to the organizations switching to sourcing sustainable materials, reducing waste and extending life span of products, making these a part of core retail strategy to create competitive differentiation. To build and sustain trust retailers will need to ensure they make steady investments to achieve ESG (environmental, social, and governance) goals. Stringent environmental regulations will make sustainability and circular economy default strategies across all operations—sourcing, manufacturing, packing, storing, transportation, and recycling. We believe retailers will be seen to embrace circular economy innovations, designing products for reuse, recycling, and resource regeneration.
5. Resilient and agile supply chains: Recent geopolitical uncertainties, climate change, unpredictable customer demands, and global supply chain dependencies highlight the need for resilient supply chains. Traditional supply chain models are no longer sustainable. Enterprises might adopt a new paradigm focused on diversification, flexibility, adaptability, and risk mitigation. That means we will likely witness investments in advanced technologies like AI, ML, and IoT to reimagine supply chains, enabling automated decision-making, real-time visibility, and increased resilience to respond to demand and supply changes. Identifying return frauds, reducing return rate and improving efficiencies of reverse supply chain will also be key focus areas.
6. AI to combat store shrinkage: Store shrink and loss, a persistent issue for retailers, has become an increasingly significant concern in recent times. The financial implications of shrinkage are substantial, impacting both the large retailers and small businesses alike, directly impacting their inventory availability and their bottom-lines. AI-driven surveillance systems, leveraging advanced technologies like facial recognition, MCMOT (multi-camera, multi-object tracking), and correlated event analytics and syndicated audits, could be increasingly deployed at retail stores to detect and alert store shrinkage more effectively while avoiding intrusion to the shopping experience.
7. Resetting the cloud strategy: Public cloud providers have revolutionized the retail landscape, but enterprises are re-evaluating their cloud strategies based on specific needs and long-term priorities. With growing emphasis on customer data privacy, security, and compliance, retailers could shift from public cloud to private cloud, on-premises infrastructure, or hybrid cloud to secure sensitive data. Public clouds will still be used for high-volume, non-confidential transactions, but unexpected charges and limited control have prompted many enterprises to repatriate sensitive data. This strategic move can ensure enterprises have complete control over their data, applications, AI, and services, reducing costs and increasing agility.
8. Safeguarding the digital future with sovereign cloud: The adoption of sovereign cloud solutions is rising due to growing concerns about data breaches and unauthorized access. As enterprises expand globally, they must navigate evolving data privacy and compliance laws. To that end, sovereign cloud might become a strategic imperative, allowing enterprises to store critical data locally, ensuring compliance with regional laws and regulations. This approach can help secure customer data and maintain trust.
9. From BI to AI-Real-time insights from data: Retailers handle vast amounts of customer, product, and transactional data, and there has been a rapid increase in the rate of new data generated. Traditional business intelligence (BI) tools work with data at rest, focusing primarily on historical data. This makes it challenging for retailers to derive real-time insights and make proactive decisions. Additionally, deriving actionable insights is a manual-intensive process, leading to delays in decision-making.
In today's dynamic retail environment, there is need for correlated analysis of real-time data streams, customer interactions, and transactional data across multiple formats to enable faster decision-making. This will allow retailers to respond spontaneously to change.
AI-driven analytics can help address these limitations and can provide real-time insights, such as:
- Bundling of right products to maximize ongoing sales
- Optimizing product stock based on sales trends across stores
- Best promotions to improve sales for the day in a particular store
The transition from BI to AI-driven analytics can help retailers gain a competitive edge, and deliver exceptional customer experiences.
10. Retail as a Service (RaaS)-Innovating business models: Retail as a Service (RaaS) is set to revolutionize the industry landscape in 2025 and beyond by offering a more efficient, flexible, and customer-centric approach. Per the model, companies offer retail infrastructure and services to brands, allowing enterprises to focus on core competencies, innovate products, and engage with customers dynamically. As new brands emerge, RaaS can enable quick market entry and rapid scaling without significant investments in traditional retail operations. This model can drive innovation and growth in the evolving retail landscape.
With rapid digitization and empowered customers, retailers have been innovating to better understand and serve their customers. We believe 2025 will be even more exciting, with significant enterprise strategies and investments in customer engagement, AI, cloud, supply chain, sustainability, data privacy and insights.
