2025 State of the Industry: Expectations for the year

To say the last five years have been eventful for the retail industry would be an understatement. Retailers and wholesalers alike have encountered quite the gamut of headwinds, including a pandemic, inflation and supply chain disruptions. But here we are, still standing, and 2025 is a new year with new hope and promises. With an anticipated market size of $7 trillion by 2025, there is no shortage of growth opportunities for retail — from embracing e-commerce to expanding physical retail spaces. In the fall of 2024, Gift Shop® Plus surveyed hundreds of retailers across the U.S. to gain insight into how they feel about the state of the economy, how their business has fared and their expectations for the year ahead. Our findings highlight the challenges retailers experienced across the board — and it is important to us that we report those in full. But it wasn’t all doom and gloom; the report also showcases the optimism and enthusiasm that retailers feel as they enter 2025. Buoyed by trends in experiential shopping, sustainability and digital engagement, many industry members are approaching their business with zeal, hope and innovation — determined to create a bright future for themselves. In this report, we explore the headwinds, opportunities and evolving strategies propelling the retail industry forward into another exciting year. Here we present an overview of our findings.

WE ASKED, YOU ANSWERED…

MOST SIGNIFICANT

TRENDS IMPACTING THE GIFT & RETAIL INDUSTRY Approximately 60% of respondents highlighted economic factors, including inflation and rising costs, as the primary challenge influencing customer spending habits. There was also a widespread consensus that shoppers are exhibiting more selective, needs-based behaviors.

NUMBERS TO KNOW

60% of retailers indicated that consumers are exhibiting increased price sensitivity and reduced spending on discretionary items. 74% of respondents highlighted the anticipated growth of e-commerce and the need to enhance digital presence as key trends. 68% of respondents cite social media as their most effective marketing channel. 91% of respondents’ sales come from in-store purchases, on average.

IN THEIR WORDS…

How do you see the gift & retail industry evolving over the next five years? “People seem to be becoming more and more interested in the backstory behind their purchases. They want to feel good about what they buy.” “I see the older customers spending money on things and the younger customers spending money on experiences.” “Customers will continue to seek deals online more than ever and will seek out small businesses for what the big box cannot provide, especially with regards to customer service. Customers more and more want to see best practices when it comes to manufacturing and sustainability. When given the choice, we believe customers will choose the more eco-friendly option.” “We think there will be more online purchases — both for us and customers. With the cost of shows and hotels, we see more people limiting show attendance. We’ve had more online purchases coming from out of state lately, so consumers are less likely to go out and shop when hunting for something specific — they go online and search for it.”

IN THEIR WORDS…

How have you seen consumer behavior over the past year? “Consumers are willing to spend if the items are good quality and/or support a good cause, but generally people are done dropping money on junk.” “Sales have decreased in personal purchases but remained the same for gifting. Preferences lean toward funny items and consumables.” “Purchases by the guests are more thought out and not as impulsive as in past years.” “Less personal impulse buying and less money spent on fashion. Consumers are watching their finances a bit more, but still spending.” “Purchases have been focused on smaller purchases versus more expensive, bigger items. We carry a variety of price points across categories to encourage bigger sales totals, even if it’s made up of many lower-priced items.” “They are more careful with their money, but if they like it, they will buy it. They are all in for the experience you provide for them when they enter — and will spend more because you’re giving it to them.”

OPPORTUNITIES FOR GROWTH

Experiential Retailing and Community Engagement: 74% of respondents cited experiential retail (in-store events, workshops) as a significant area for growth

TOP CATEGORIES THAT HAVE EXPERIENCED GROWTH IN 2024:

1. Jewelry & Accessories
2. Apparel
3. Food & Gourmet
4. Kids & Baby
5. Beauty & Self-Care

HOW ARE YOU ADAPTING TO CHANGES IN CONSUMER BEHAVIOR?

• Diversifying product offerings • Expanding online presence • Partnering with local vendors and artisans

INVESTMENT PRIORITIES FOR THE NEXT 12 MONTHS:

• Marketing and advertising • Expanding online presence • Store renovations

TOP CONCERNS FOR BUSINESS RIGHT NOW:

1. Rising operational costs
2. Changes in consumer behavior
3. Declining foot traffic

IN THEIR WORDS…

What do you see as the biggest opportunities and areas for growth for your business? “Diversifying our buying opportunities by adding a meeting space we will use for parties, events, classes and general meetups. We are also adding an espresso bar; we want to become the second ‘living room’ to our city — a place to hang out, bring your friends and feel right at home. And hey, if you happen to purchase something, that’s just fine with us!” “While we have a strong base of regular customers, we are slower in reaching new audiences. Learning more about social media marketing to maximize that potential and creating opportunities for current customers to introduce new ones to us, are things that could help us grow.” “Both online presence (socials, website, blogs, etc.) and in-store events. Outside-the-box marketing.” “We are putting a lot into a new website and getting more involved with local events as well as sponsoring our own events. We’re also working on more social media involvement.” “Hosting community events, whether in-store or virtual, can also strengthen relationships with our customers. Additionally, focusing on ethical sourcing and promoting our local, family-owned values will help build customer loyalty.” “Moving toward items that demonstrate a long-lasting value.”