What's Ahead

What's ahead for retail in 2025, according to a former Amazon executive

Five forces will drive a retail reckoning next year, writes John Rossman, an early Amazon executive
By
John Rossman
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John Rossman, an early Amazon executive who helped launch the Amazon marketplace.
John Rossman, an early Amazon executive who helped launch the Amazon marketplace.
Photo: John Rossman

John Rossman was an early Amazon (AMZN) executive who played a key role in launching the Amazon marketplace business, and has served as senior technology advisor at the Gates Foundation and senior innovation adviser at T-Mobile (TMUS).

Today’s business landscape is increasingly separating companies into clear winners and losers, a reality that is especially evident in the retail sector. Inflationary pressures, technological evolutions, and consumer expectations are all on the rise, creating a looming “tale of two retailers” and making 2025 a make-or-break year for even the most storied brands.

Take Nike (NKE), Starbucks (SBUX) and Nordstrom (JWN) — all former pillars of success, now struggling to meet the demands of a new era. These established companies succumbed to “The Innovator’s Dilemma,” overemphasizing the importance of existing customers without sufficiently championing continuous innovation. They weren’t able to stay one step ahead of the competition, like 2024’s retail winners, including Amazon, Walmart (WMT), Aldi and Overstock.com.

The year to come will offer an opportunity for retailers of all sizes and across categories to make the “Big Bets” they’ll need to survive and thrive. That said, success will depend on their ability to deeply understand and navigate newer and evolving forces, centering them in strategic analyses determining what bets they’ll need to rapidly prioritize and advance.

These forces include:

1. Inflation-induced weariness. The “forever tax” that is inflation represents the first battleground for retailers in 2025. With costs still rising — albeit less steeply — in categories including raw materials, transportation, and labor, inflation continues to squeeze profit margins, forcing companies to make difficult decisions about pricing and product availability. The coming year will showcase which brands can use inflation as an impetus for sustainable, strategic cost-cutting, rather than reactive belt-tightening. Those that simply pass on their increased costs to inflation-weary customers will be among the first to fall.

 2. The customer is king again. 2025 will bring a resurgence in sky-high consumer expectations. This reflects a shift back to pre-pandemic standards, before many shrugged off operational hiccups and delays as simply part of the return-to-normal process. No more. Customers paying inflation-generated premiums will demand greater quality and attentiveness at a minimum, showing the most loyalty to brands offering more than just price-based incentives. They’ll spend the lion’s share of their hard-earned dollars on retail experiences that reflect brands’ core values and on companies that cultivate loyalty-driven relationships.

 3. Omnichannel: more buzzkill than buzzword. Despite talk of the continued necessity of “omnichannel integration,” the concept has grown stale. Today’s consumers don’t want a disconnected shopping experience — just seamlessness. They’re not interested in whether a brand embraces “omnichannel.” They simply want efficient, smooth and reliable interactions. Retailers still trying to crack the “omnichannel” code are likely lagging in other critical areas as well. Those able to successfully bridge these channels and go beyond the jargon surrounding them will be better prepared for the new retail environment compared with companies trapped by their own buzzwords and silos.

 4. Efficiency-driven back-office innovations. In 2025, retail back-office and mid-office functions will be under even more scrutiny as budgets tighten and the demand for efficiency continues to rise. Companies will face mounting pressure to reduce these operations to their bare essentials, driving an industry-wide shift toward automation and AI-driven processes. With staff reductions and the need for streamlined productivity, businesses will lean heavily on the most innovative, intelligent systems to manage everything from inventory to customer support — reshaping the retail workforce and significantly increasing output per employee.

 5. Practical AI applications. Computer vision and AI technology will become critical for enhancing customer experiences and improving store operations, emerging as top priorities for retailers in 2025. Rather than diverting resources to trendy but peripheral technologies like AR and VR, savvy retailers will focus on practical applications of AI that directly impact customer satisfaction and operational efficiency. This pragmatic approach will transform store environments and streamline the shopping experience, from automated checkout systems to tech-driven customer assistance, effectively bridging the gap between online convenience and in-store engagement.

Retailers that clearly recognize these forces, strategize around them, and move forward with carefully conceived and tested innovations — thinking big while betting small — will be those that succeed in the year ahead. Those that remain on the sidelines, bet too big without eliminating ambiguity, and/or succumb to lazy thinking that opens the door to uncertainties will likely see their relevance and profit margins decline as others rapidly steal customer share.

An author, advisor and leadership keynote speaker, John Rossman wrote Big Bet Leadership: Your Transformation Playbook for Winning in the Hyper-Digital Era and The Pig, The Lipstick and the Three Pillars of Champions: Reclaiming Your Business Culture to Win, a business manifesto for 2025.