Retail executives know they have to invest for the future, and technology is at the top of the list.
In a study from Deloitte Insights, the expectation is that investments in technology and innovation should enable more effective decision-making and operational efficiency, as well as address the demands of a fragmented consumer base. Deloitte’s Retail Outlook is based on a survey of 75 retail industry executives, of which 80 percent were from companies with annual revenue of $10 billion or more, as well as interviews with industry experts and a financial analysis.
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One area of focus is the modernization of their supply chain, such as unifying merchandising and store operations. Retail executives surveyed said they are focusing investments around artificial intelligence (AI), warehouse automation and real-time inventory visibility. Forecasting using AI is expected to help with demand planning, inventory management, and delivery and supply routes, while real-time tracking systems will allow retailers to monitor shipments and inventory throughout their distribution channels.
These planned investments could be through mergers and acquisitions (M&A) of technology players, consumer brands, logistics capabilities, and digitally native players. In the year-ago survey, 30 percent of those surveyed said they planned to make moderate-to-major investments in M&A in 2024. That percentage has spiked up to 53 percent regarding M&A investments in 2025.
“Retailers are looking to scale up through mergers or acquire diversified revenue streams to create a more efficient path to profitability,” the report said. It also noted that these transactions can help retailer “meet their mass-to-micro goals” through technology players or logistic companies that can help them create more personalized experiences. In addition, acquisitions can also help retailer add to their customer base beyond their core retail operation.
In addition, two-thirds of the retail executives surveyed said they plan to focus on workforce hiring, retention, and future-readiness in 2025. Labor costs are a concern for retailers, particularly due to high turnover rates among frontline workers, which include store associates, managers and distribution center employees. And using AI tools can help employees get up to speed quickly and operate more efficiently, which in turn can improve the customer experience. And while headlines suggest a decline in physical stores, Deloitte said that 80 percent of all shopping still happens in stores. And as stores evolve, AI can help with data-driven store design and layout optimization to improve the in-store shopping experience.
Another area for increased investment is retail theft prevention. Deloitte said the recent price reductions in radio frequency identification tags allow retailers to enhance their inventory tracking and visibility by tagging a broader range of items, allowing more goods to be on display instead of behind locked display cases.
The Deloitte report said that more retailers are testing the market by adding surcharges for quick pickups, such as a 30-minute or one-hour delivery window, with fees ranging from $3.99 to $9.99, depending on the retailer and location. While many omnichannel services—such as buy online and pickup in-store and curbside delivery—have been offered for free, Deloitte said the expansion of these service choices and the addition of surcharges for select options could allow retailers to garner increased profitability in their omnichannel operations. And another retail trend the report noted centers on how to appeal to the value-seeking consumer, whether through loyalty programs, improved shopping experiences that engage customers, convenience through last-mile delivery options, and discounts and promotions.
Deloitte economist Akrur Barua concluded that retail sales in 2025 are expected to “continue to benefit from a growing economy.” A healthy labor market and an expectation that borrowing costs will decline as the U.S. Federal Reserve eases rates to between 3.75 percent to 4 percent by the end of 2025 should allow consumer spending to grow at a healthy pace of 3.1 percent for the year, he concluded. While a sharp hike in tariffs could lead to a broader economic slowdown, the Fed could be forced to raise interest rates, but that’s not likely to happen until 2026.
