December 12, 2024
The retail industry is on the road to significant change as we roll into 2025, particularly when it comes to promotions. The tactics used in the past have proven to be less and less efficient, signifying a strong need for change in the promotions space and retail as a whole.
From machine learning and AI in retail to rethinking how brands approach their marketing strategies and spend, it's clear that technology will play a major role in this next wave of innovation. And as the leading promotions platform in the U.S., we’re excited to see our industry take a turn toward the future. Let’s take a look at the retail trends 2025 has in store.
Real-time measurement of incremental sales
Traditionally, brands plan a marketing budget, receive aggregate data at the end of the year, and adjust their spend for the year ahead. But this type of once-a-year marketing budget allocation and planning is becoming increasingly archaic and ineffective. It often leads to paying for clicks and impressions without the ability to track in-store performance or tie to individual consumer data accurately — brands have no true way of knowing if their promotions are successful.
As we enter 2025, things are becoming much more agile. CPGs and brands will increasingly look for opportunities to measure the efficiency of their spend and make adjustments in real time. Machine learning capabilities, like the ones leveraged by Ibotta, will enable them to compare the purchasing behavior of consumers who were exposed to an offer with those who weren't. This retail trend will allow clients to measure and optimize their campaigns in near real time, using cost per incremental unit moved as a key metric. Marketing spend can then be adjusted in real time to flow into the programs and platforms yielding the best results.
AI-based optimization for targeted promotions
The one-size-fits-all approach to promotions, where every customer gets a $1 off regardless of their propensity to buy, has become antiquated. More and more, marketers view traditional promotional tactics as a low-ROI endeavor — and they are when you offer the same promotion to every single consumer. Throughout 2025, brands and retailers will continue shifting away from that approach and instead, move toward leveraging AI, or utilizing companies that leverage AI, to place the right offers in front of the right people at the right time.
This will pose a radical shift in how one thinks about promotions moving forward. By accounting for factors like likelihood to purchase, brand loyalty, and willingness to try new products, these AI algorithms can generate targeted, highly personalized promotions to the customers most likely to purchase at that price, making the most of marketing budgets. By utilizing real-time data to enhance personalization, promotions will continue to prove themselves as a critical revenue-driving retail trend in 2025.
Combating private label & premium competition with smart promotions
Ibotta’s State of Spend report found that 72% of consumers said a challenging economy has had a direct impact on their grocery spending habits. Recently, brands are facing many consumers trading down to private label brands or omitting purchases altogether to combat inflation. However, research by Bloomberg shows brands are finding they’re also competing with premium options that provide products consumers are willing to splurge on due to their higher quality and creative innovation.
The cost of brand inaction is steep. If consumers take an exit ramp to a private label or premium product, the toll brands have to pay to reacquire them is much higher than if they’d incentivized efficiently at the onset. As brands think strategically about how to win consumers back in 2025, we’ll see an increased effort to retain customers using innovation and digital promotions to encourage savings as well as to drive brand trial. Specifically, we’ll see an increase in smart promotions that can capture the right customers when they’re most primed to buy. These types of promotions are one of the most cost-effective and immediate solutions to retain and grow market share.
Hybrid shopping for a streamlined experience
Sparked by the COVID-19 pandemic, retailers have seen an increased need for hybrid shopping options over the past several years. Though we’ve returned to in-person shopping, customers have reported they still value this retail trend and would like more of it in the upcoming year. In particular, 89% of shoppers say they want more flexible pickup options. Hybrid shopping — which includes buy online, pick up in-store options, as well as the addition of in-aisle and augmented reality (AR) technologies — will continue to ramp up in 2025.
Hybrid shopping not only provides greater convenience for consumers but can give retailers valuable insights into consumer trends and preferences, build better relationships with customers, and increase sales overall. With hybrid shopping tactics, retailers can provide customers with a seamless integration of the digital and in-person shopping experience, especially when it comes to loyalty programs. With mobile apps taking center stage, loyalty programs can seamlessly integrate into both on- and offline transactions, allowing for targeted offers and promotions and a cohesive shopping journey no matter where or how users are purchasing.
Grocery e-commerce for even more shopping options
As we continue to see a rise in the hybrid shopping experience, grocery e-commerce will see steady growth in 2025 and through the coming years. In fact, 55% of consumers reported grocery as the most prominent category for hybrid shopping needs. Grocery e-commerce in the U.S. is expected to rise at a compound growth rate of 1.6% through 2028, with sales expected to reach $120B annually, representing 12.8% of all grocery spending. This is a trend we’re already seeing movement on, with a 17.8% increase in online grocery sales since this time last year.
Grocery e-commerce can come in the form of delivery and pickup sales directly from retailers, as well as orders and subscriptions for regularly purchased items through retailers like Walmart and Amazon Fresh, and grocery delivery purchases through apps like Instacart and DoorDash. Alongside digital purchase options through retailer apps and websites, we’ll see an increased ability for brands and retailers to directly reach those customers with promotions, like those offered through Ibotta’s app integration capabilities. This will not only help encourage customers to save money but can also drive brand trial and increase sales.
Increased social commerce
On the heels of higher digital shopping options, we’ll see an increase in social commerce in 2025. Social commerce, or buying products completely through a social media platform, has seen an uptrend over the past year, with an estimated 110.4M social media purchasers in 2024 — a number that will continue to grow through 2025. Customers can discover new brands and products while they scroll through the apps they already use every day.
As this retail trend continues its upswing in 2025, we’ll see even more purchases through platforms like Facebook Marketplace, TikTok Shop, Instagram, Pinterest, YouTube, and more.
Worldwide, there are 5 billion people actively using social media — more than half of the world’s population. That provides an incredible opportunity to meet those consumers where they already spend their time. In fact, 81% of consumers reported they already use social media to research products and reviews — why not let them buy those products right in the app? By integrating a shopping experience into these popular social platforms, we’re able to utilize social media’s AI algorithms and targeting to present them with products they’re already primed to buy. With 50% of marketers already planning to increase their social selling, this trend will only continue to grow in the coming year.
The future of retail: tech in the aisle
Today, 75% of purchase consideration happens in the aisle. This is hugely important for the future of retail, because every single aisle in every single store will eventually have digital shelf tags, also known as electronic shelf labels (ESLs). Until now, the focus on ESLs has centered around operational impact, but their untapped potential lies in the ability to alert consumers to timely discounts on the products most relevant to them while they shop.
ESLs provide a new way to interact with consumers in the aisle and through their mobile devices as they’re shopping, rather than before or after purchases have been made. These devices can deliver targeted offers to individual consumers in-store based on their likelihood to buy, brand loyalty, and purchase history. This allows for even more influence on product purchasing decisions in real time.
With the addition of AI and machine learning, new tech like ESLs and smart promotions, and an increased digital retail presence, the industry is facing its biggest year of change yet. As we march toward the future, these retail industry trends will continue gaining traction, changing the way brands and retailers approach their promotions and marketing spend and how they reach their customers.