What: Holiday 2025 retail spending is declining for the first time since 2020, with Gen Z cutting back sharply while older generations maintain or increase their budgets.

Why it is important: The generational divide and economic pressures reinforce the importance of flexible retail models and personalised engagement to capture shifting demand.

The 2025 holiday season signals a notable shift in retail dynamics, with overall consumer spending expected to decline by 5%—the first such drop since 2020. Gen Z is leading this contraction, planning to reduce their holiday budgets by 23% as they navigate economic uncertainty, early career challenges, and a heightened focus on value, sustainability, and wellness. In contrast, baby boomers are set to increase their spending, and millennials are holding steady, highlighting a pronounced generational divide. Despite tighter budgets, consumers remain committed to holiday traditions, with spending on travel and entertainment holding firm and food emerging as a resilient gift category. Value-driven choices are shaping the season, as shoppers seek affordable alternatives, embrace secondhand and upcycled gifts, and prioritise meaningful experiences over material goods. Flexible shopping and payment channels, including omnichannel integration and diverse payment options, are increasingly important, while technology and AI are playing a growing role in product discovery—especially among younger consumers. Retailers are challenged to move beyond one-size-fits-all strategies and respond in real time to evolving consumer needs.

IADS Notes: The generational and value-driven shifts described in the 2025 holiday outlook are echoed in recent industry findings. Gen Z’s changing definition of necessities and their rising economic influence are prompting retailers to adapt, while baby boomers’ wealth and loyalty remain underleveraged. The surge in secondhand gifting and the anti-materialist movement, highlighted in late 2024 and early 2025, reflect a broader move toward affordability and sustainability. Hybrid shopping patterns and the adoption of flexible payment options, such as BNPL, are reshaping consumer journeys, as seen in the 2024 holiday season. Economic pressures, including tariffs and inflation, are eroding consumer confidence and driving more cautious, deliberate spending. Meanwhile, the growing use of AI for product discovery among younger shoppers coexists with a persistent demand for human interaction, confirming that successful retail strategies must balance technology with personal service.

US Holiday Outlook 2025: Value, meaning and generational shifts

What:

AI agents are now mediating and automating e-commerce transactions, redefining the relationship between brands, retailers, and consumers.

Why it is important:

This shift reflects a major reconfiguration of retail power structures, as tech giants and AI agents increasingly control consumer access and decision-making.

The global fashion industry faces a mounting crisis of textile waste, with 120 million metric tons discarded annually and only a fraction recycled into new fibers. As apparel production and consumption rise, the environmental and economic toll intensifies, with 80% of discarded clothing ending up in landfills or incinerators and less than 1% recycled into new textiles. The industry’s reliance on linear models is unsustainable, prompting a shift toward circular economy strategies and advanced recycling technologies. Retailers are responding by adopting circular models, driven by both consumer demand—nearly a third of shoppers now prioritize eco-friendliness—and regulatory pressure, particularly in regions like the EU. However, operational and financial barriers persist, including the high cost of recycled materials, inadequate infrastructure, and the complexity of scaling next-generation materials. Overcoming these challenges requires industry-wide collaboration, investment in innovation, and active consumer engagement. As circularity becomes a mainstream imperative, the fashion sector must accelerate its transition to sustainable practices to ensure long-term competitiveness and resilience.

IADS Notes:

Bangladesh’s textile waste challenge, with 577,000 metric tons of factory waste annually, exemplifies the urgent need for expanded recycling infrastructure as global sustainability standards tighten. This mirrors the broader industry shift, where circular economy strategies are becoming essential for retail survival, and operational barriers to scaling next-gen materials remain significant. The convergence of consumer demand, regulatory action, and business innovation is transforming circularity into a mainstream imperative, making cross-industry collaboration and consumer engagement critical for large-scale impact.

Spinning textile waste into value

What: Retail merchandising is being redefined as merchants evolve into “consumer visionaries,” blending human insight, technology, and agility to drive customer intimacy, dynamic assortment, and brand loyalty.

Why it is important: By redefining the merchant’s role, retailers can break down silos, foster innovation, and deliver more relevant, personalized experiences that drive loyalty and long-term value.

The role of merchandising in retail is undergoing a profound transformation as merchants shift from traditional, margin-focused planning to becoming “consumer visionaries” who blend deep human understanding with technology and agility. Today’s merchants are expected to act as content curators and influencers, integrating social commerce, omnichannel experiences, and real-time data to build true consumer intimacy. AI and automation are elevating the merchant’s role, freeing teams from routine tasks and enabling rapid test-and-learn cycles, dynamic assortment, and personalized value propositions. Success now depends on decoding customer motivations, orchestrating connected offers, and delivering delight at speed—requiring merchants to collaborate closely with marketing, planning, and inventory teams. This evolution is driven by the need for resilience, innovation, and the ability to pivot quickly in response to economic headwinds, supply chain disruptions, and shifting consumer behaviors. Retailers that invest in developing these capabilities will create durable advantages, positioning the merchant as a key driver of brand loyalty and sustainable growth.

IADS Notes:

The transformation of retail merchandising is being driven by a convergence of technology, data, and evolving consumer expectations, as documented by BCG (May 2025), Inside Retail (March 2025), Retail Systems Research (April 2025), and Forbes (March 2025). The BCG survey of 350 retailers reveals a significant gap between current merchandising practices and future requirements, with AI adoption and automation emerging as critical enablers for efficiency, dynamic assortment, and real-time decision-making. Inside Retail highlights how AI-driven hyper-personalisation is now essential for meeting consumer demand for tailored experiences, while Retail Systems Research underscores the urgency of moving beyond traditional Excel-based planning to data-driven, AI-enabled merchandise management. Forbes emphasizes that true productivity gains come from integrating technology with people and process changes, enabling merchants to focus on strategy, creativity, and customer intimacy. Collectively, these developments illustrate how the merchant role is evolving into that of a “consumer visionary”—one who blends human insight, digital fluency, and agility to drive brand loyalty, competitive advantage, and sustainable growth in a complex retail landscape.

The rise of the consumer visionary merchant

What: Flagship stores remain vital for brands, serving as innovation labs, customer engagement hubs, and powerful drivers of both physical and online sales in an increasingly digital retail landscape.

Why it is important: The continued investment in flagship stores demonstrates that physical retail, when focused on experience and innovation, is essential for brand differentiation, customer loyalty, and omnichannel growth.

Despite the rise of e-commerce, global flagship stores are thriving as essential brand assets, offering immersive experiences that go far beyond traditional retail. These spaces serve as innovation labs where brands test new concepts, technologies, and services, learning from a diverse and engaged customer base. Flagship stores attract not only local shoppers but also tourists and destination visitors, amplifying brand visibility and providing valuable insights for broader rollout. The “halo effect” of a memorable flagship experience boosts both physical and online sales, as positive impressions carry over to the brand’s entire offering. Retailers are increasingly integrating advanced technology, such as next-generation POS systems, to streamline operations and gather actionable data, ensuring seamless customer journeys. The evolution of flagship stores reflects a broader industry trend: blending marketing and sales, prioritizing inspiration and utility, and creating spaces that are both brand showcases and operationally effective. This approach is setting new standards for customer engagement and brand loyalty in the digital age.

IADS Notes:

The enduring relevance and evolution of flagship stores are well documented by The Robin Report (January 2025), which highlights how retailers are transforming physical spaces into experiential destinations, using flagship locations as test grounds for new concepts, technology, and memorable customer engagement. The Los Angeles Times (March 2025) underscores the global momentum behind experiential retail, with participatory experiences and social spaces in malls and flagships driving footfall and brand visibility, especially among Gen Z and Millennial consumers. The Retail Bulletin (April 2025) further illustrates how department stores and flagship locations are blending marketing and sales, investing in innovative design, and setting new standards for customer experience. Inside Retail (September 2024) provides international context, showing how flagship stores in Japan are pivotal in attracting tourists and supporting economic growth. Collectively, these sources demonstrate that, far from being obsolete, flagship stores are central to brand strategy, innovation, and the creation of positive “halo effects” that benefit both physical and online sales in the modern retail landscape.

***Why the global flagship still matters***

What: Retailers face a new cybersecurity threat as AI systems become vulnerable to manipulation through hidden prompts, potentially compromising product recommendations, customer service, and operational decisions.

Why it is important: With ransomware now accounting for 30% of retail security incidents and average losses reaching £1.4 million per attack, this new threat vector through AI systems represents a critical vulnerability that could amplify existing security risks.

The integration of AI tools into retail workflows has created an unexpected vulnerability: prompt injection attacks. While these AI systems efficiently handle tasks from customer service to inventory management, they also present a new attack surface that doesn't require traditional hacking methods. Through carefully crafted text or metadata, malicious actors can manipulate AI models to override policies, distort analysis, and compromise decision-making processes. The threat is particularly insidious because it exploits what makes AI powerful - its training to follow instructions - while leaving no obvious intrusion points.

The risk extends across multiple retail touchpoints, from marketplace platforms using AI for product listings to chatbots handling customer requests. Unlike conventional cyber attacks, prompt injections can create falsified summaries, manipulated product comparisons, and distorted personalised promotions without triggering security alerts. This creates a diagnostic challenge for retailers, as tracing the source of manipulated outputs becomes increasingly complex in an environment where data flows from numerous sources simultaneously.

The retail sector's vulnerability is heightened by its fragmented architecture and real-time data processing requirements. Forward-thinking retailers must now approach AI not just as a tool for efficiency but as a critical security concern requiring robust governance, clear data lineage, and sophisticated monitoring systems.

IADS Notes: Recent cyber incidents underscore the urgency of addressing AI vulnerabilities in retail. The April 2025 attack on Marks & Spencer that wiped £700 million off their market value demonstrates the severe financial implications of security breaches. This is particularly concerning given that 82% of companies lack strong digital core security maturity, while 86% use third-party tools but only 13% fully understand their data collection practices. The March 2025 incident resulting in £5.4 billion in losses across Fortune 500 companies further highlights how quickly security vulnerabilities can escalate in today's interconnected retail systems.

Retail’s next tech breach won’t be a hack

What: Australia secures competitive edge in US market through favourable 10% tariff rate, while global competitors face significantly higher trade barriers up to 55%.

Why it is important: The favourable rate offers Australian manufacturers strategic opportunities for market expansion at a time when global retailers are fundamentally restructuring their supply chains and establishing geopolitical nerve centers to manage tariff complexity.

Australia's position in the latest US tariff regime represents a significant strategic advantage in global trade dynamics. While allies like Canada face a 35% tariff rate and New Zealand confronts a 15% rate, Australia's maintenance of a 10% baseline offers crucial market access benefits. This competitive edge becomes particularly valuable for Australian manufacturers, who can leverage the lower rate to maintain viable margins in the US market. However, the implications extend beyond simple tariff rates, as Australian retailers with offshore production must navigate more complex scenarios, particularly regarding Chinese-manufactured goods facing minimum 30% tariffs. The situation presents both opportunities and challenges, potentially encouraging partial reshoring of manufacturing to Australia under current rules of origin. This development comes at a critical time when global supply chains are being reimagined, with pricing strategies and sourcing decisions increasingly influenced by strategic market access rather than cost considerations alone.

IADS Notes: Australia's relatively favorable 10% tariff position gains significant context when viewed against the broader retail landscape of 2025. While BCG projects $640 billion in additional US import costs from expanded tariffs, Australian retailers benefit from a more stable trading environment. This advantage becomes particularly relevant as department stores globally implement varying price increases, with footwear seeing rises of up to 4.2%. The impact on consumer behavior is notable, with data showing projected price increases of 1-1.5% and lower-income households facing potential 2.3% drops in disposable income. Major retailers' responses, including Costco and Walmart pressuring Chinese suppliers for price concessions, highlight the strategic value of Australia's position. As retailers globally establish geopolitical nerve centers to navigate tariff complexity, Australian manufacturers' competitive edge in the US market could prove increasingly valuable for maintaining stable supply chains and pricing strategies.

What Australia’s tariff win really means for retail and supply chains

What: Luxury retailers face strategic pricing decisions as EU-US trade agreement introduces 15% tariff, with different impacts expected across true luxury and aspirational consumer segments.

Why it is important: The divergent impact on consumer segments highlights a critical moment for luxury retail strategy, where brands must balance maintaining exclusivity with market accessibility, while the resale sector emerges as a significant beneficiary of changing consumer behaviour.

The recent US-EU trade agreement establishing a 15% tariff on European imports presents a complex challenge for luxury retailers, particularly affecting their pricing strategies and market positioning. While this rate is more favorable than the initially threatened 30%, it still requires careful navigation by luxury brands. Hermès has already implemented a global price increase of 7% with an additional 5% specifically in the US market, setting a precedent for the industry. Financial analysts predict minimal impact on true luxury consumers, with price increases expected in the low single-digit range. However, the situation poses a more significant challenge for aspirational luxury shoppers, who are increasingly price-sensitive across product categories. This bifurcation in consumer response is likely to accelerate existing market trends, particularly benefiting luxury resale platforms like Vestiaire Collective and The RealReal. The tariff's implementation forces luxury brands to balance maintaining profit margins with market accessibility, while potentially reshaping traditional luxury retail dynamics.

IADS Notes: The implementation of EU tariffs comes at a critical juncture in luxury retail transformation. As reported in April 2025, BCG projects $640 billion in additional US import costs from tariffs, while European suppliers controlling 70% of global luxury production face unprecedented pressure. This aligns with the article's analysis of brands like Hermès passing on costs to consumers. The impact on consumer behaviour is significant, with June 2025 data showing declining spending intentions among wealthy consumers, particularly affecting aspirational shoppers. The resale sector emerges as a key beneficiary, with March 2025 projections indicating the global secondhand market could reach $350 billion by 2028, supported by The RealReal's 444% stock surge in January 2025. Luxury brands are responding differently to these pressures, as evidenced by December 2024 reports showing some introducing sub-$500 products while others maintain premium positioning. This bifurcation in strategy reflects the broader market transformation, where traditional retail models face disruption from both tariff pressures and evolving consumer preferences.

How new EU tariffs could shift luxury pricing – and fuel the rise of resale

What: AI-powered attacks have become the primary concern for CISOs, with 80% citing them as their top threat while companies struggle to implement adequate protection measures.

Why it is important: As AI-enabled threats evolve from theoretical risks to operational realities, organisations must fundamentally rethink their cybersecurity strategies while balancing innovation with protection, particularly as only 30% have implemented specific AI security measures.

BCG's comprehensive survey of CISOs reveals a dramatic shift in cybersecurity concerns, with AI-powered attacks rising from fifth place to become the dominant threat, marking a 19-point increase over the previous year. Social engineering emerges as the most significant AI-enabled threat, with 62% of respondents identifying it as a major or critical concern. Despite this growing threat landscape, implementation of protective measures lags behind, with only 30% of organisations having deployed or tested cyber solutions specifically designed to protect AI-related systems. Companies are responding by increasing investments in cyber awareness training and threat intelligence, with most preferring to adopt AI-driven security features from existing vendors rather than new providers. The survey indicates a projected 10% growth in cybersecurity budgets, remaining resilient despite broader IT spending pressures, as organisations prioritise protection against evolving AI threats while balancing cost considerations with security needs.

IADS Notes: The BCG report's findings on AI security challenges align with significant developments in retail cybersecurity throughout 2025. The report's identification of AI-powered attacks as the top CISO concern mirrors the retail sector's experience, where ransomware accounts for 30% of security incidents with average losses of £1.4 million per attack as of April 2025. The urgency of this threat was dramatically demonstrated in June 2025 when major luxury retailers including Cartier, The North Face, and Adidas faced sophisticated AI-powered attacks. The report's emphasis on vendor consolidation proves particularly relevant given that 41% of retail breaches occur through third-party vulnerabilities, as evidenced by the May 2025 Co-op breach affecting 20 million customers. Implementation challenges remain significant, with only 2% of businesses achieving comprehensive cyber resilience measures by June 2025, while social engineering threats, highlighted in the report as a critical concern, were demonstrated by the Scattered Spider group's devastating attack on M&S, which wiped £700 million off their market value.

AI creates new cyber risks. It can help resolve them, too

What: Industry leaders and VCs predict robots will transform retail operations within a decade, from warehouse automation to customer service, with China and the US leading the technological revolution.

Why it is important: With retailers currently losing 4.5% of gross sales due to operational inefficiencies and 71% of employees already using AI tools weekly, the integration of robotics technology will be fundamental to addressing both labour challenges and operational bottlenecks.

The robotics industry stands at the cusp of a transformative decade, with investors and founders envisioning widespread adoption across retail operations. Leading voices in the field predict that robots will soon handle tasks ranging from basic warehouse operations to complex customer interactions. Chinese companies are driving cost reduction in hardware development, making automation more accessible to retailers of all sizes. The evolution extends beyond simple task automation, with emotionally intelligent robots being developed for customer service and personalised shopping experiences. While the US and China are expected to dominate this technological revolution, European companies maintain strength in industrial applications. The integration of AI with robotics is creating more sophisticated systems capable of learning and adapting to complex retail environments. However, the industry faces challenges in balancing automation with human interaction, particularly in customer-facing roles. The article emphasises that robots will serve as tools rather than replacements, augmenting human capabilities while addressing critical labour shortages in the retail sector.

IADS Notes: The retail industry's evolution towards robotics aligns closely with recent market developments. In March 2025, retailers achieved a remarkable 4.5% annual productivity growth through strategic automation, validating predictions about robots' role in enhancing operational efficiency. This transformation is already visible in warehouse operations, where Verity's AI-powered drones demonstrated in February 2025 how 24/7 robotic operations can eliminate 98% of operational errors. However, the human element remains crucial, as January 2025 data revealed that while 71% of retail employees use AI tools weekly, only 36% feel adequately prepared for technology integration. The success story of Intime Department Store in July 2024, achieving a 15% boost in counter sales through human-robot collaboration, demonstrates how robots can effectively complement human workers in retail operations.

What the robotics industry will look like in 10 years, according to founders and VCs

What: The luxury industry faces its deepest identity crisis since 2008 as major groups like LVMH and Kering report significant sales declines while Hermès thrives through exclusivity-focused strategy.

Why it is important: The contrasting performance between mass-market focused brands and those maintaining exclusivity demonstrates how the luxury sector must recalibrate its approach to growth and brand value preservation.

The luxury industry is experiencing a profound transformation, evidenced by LVMH's 15% profit drop and Kering's 18% revenue decline in early 2025. This downturn reflects deeper structural issues beyond economic challenges, as brands grapple with the consequences of aggressive expansion strategies. The contrast between struggling mass-market oriented brands and the success of exclusivity-focused houses like Hermès, which saw 9% growth, highlights a critical industry divide. The shift in consumer sentiment, particularly among younger demographics, suggests a growing fatigue with overexposed luxury brands and a return to values of craftsmanship and authenticity. This transformation is forcing luxury groups to reevaluate their strategies, balancing growth ambitions with brand equity preservation. The industry's challenge lies not in temporary market fluctuations but in rediscovering the essence of luxury: exclusivity, intimacy, and enduring value.

IADS Notes: Recent market data underscores the luxury sector's transformation throughout 2024-2025. In February 2025, Bain-Altagamma reported the first contraction in personal luxury goods in 15 years, with the industry losing approximately 50 million customers. March 2025 revealed how successful brands like Hermès maintained their allure through controlled distribution, while others struggled with overexposure. This trend coincided with a significant shift in consumer behaviour, as December 2024 data showed luxury brands introducing products under $500 to retain middle-class consumers The transformation is particularly evident in China, where June 2024 reports showed growing "luxury fatigue" and a shift towards more discreet consumption patterns.

Is the luxury industry facing an identity crisis?

What: Notre Dame study demonstrates how "returnless returns" transform transactional relationships into personal ones, driving customer loyalty through psychological principles of reciprocity and trust.

Why it is important:

As retailers face an $890 billion returns challenge, this research provides a psychological framework for transforming a major cost center into a strategic advantage for building lasting customer relationships.

New research from the University of Notre Dame reveals that allowing customers to keep unwanted items instead of returning them creates a powerful psychological shift in brand perception. The study, published in the Journal of Marketing Research, demonstrates that "returnless returns" significantly boost customer loyalty and repurchase intentions by transforming transactional relationships into more personal ones. This practice has gained substantial traction, with 59% of major retailers now implementing this approach, more than doubling from the previous year. The research shows that trust plays a crucial role, as requiring proof of defects diminishes the positive effects. When companies demonstrate trust by not requiring documentation, customers respond with dramatically increased loyalty and advocacy. The study also found that framing these policies on a case-by-case basis proves more effective, as customers feel they're receiving special treatment. Additionally, suggesting donation options for unwanted items further enhances brand perception and trustworthiness compared to recommending disposal.

IADS Notes: The Notre Dame study's findings on returnless returns align with significant industry developments throughout 2024-2025. While the NRF reported an unprecedented $890 billion in returns by December 2024, retailers are actively seeking innovative solutions to balance customer loyalty with financial sustainability. Decathlon Hong Kong's successful implementation of a lifetime returns policy in August 2024 demonstrated how trust-based approaches can strengthen customer relationships without compromising profitability. This contrasts with the industry-wide challenge revealed in September 2024, where 39% of consumers were returning online purchases monthly, each return costing retailers $25-30. The trend has prompted varied responses, from Chinese e-commerce platforms ending refund-without-returns policies in April 2025 to retailers exploring circular economy approaches. These developments underscore the study's central thesis that returns management can be transformed from a cost center into a strategic tool for building customer loyalty.

Why letting customers keep their returns creates loyalty

What: Thailand's retail sector faces significant disruption as border conflict with Cambodia threatens THB500 million in daily trade and compounds existing tourism challenges.

Why it is important: This crisis highlights the vulnerability of Southeast Asian retail markets to geopolitical tensions, particularly as Thailand struggles to revive its crucial Chinese tourism market while managing regional conflicts.

Thailand's retail sector confronts a complex crisis as border tensions with Cambodia disrupt vital trade routes and tourism flows. The conflict over ancient temples, including Prasat Ta Muen Thom and Preah Vihear, threatens THB500 million in daily cross-border commerce, affecting essential supply chains for consumer goods, apparel production, and electronics components. The situation compounds Thailand's existing tourism challenges, with international arrivals already down 5% in the first half of the year. Chinese tourism, traditionally a crucial market, has been particularly affected, with projected visitors revised down from 6.9 million to 5 million. While Malaysia has overtaken China as the top source of international tourists, their lower spending power presents a significant concern for retailers. The government's ambitious target of generating 3.5 trillion baht in tourism spending this year appears increasingly challenging, impacting retailers across major tourist destinations like Bangkok, Pattaya, and Phuket, where tourism accounts for 18% of retail merchandise spending and 23% of food and beverage revenue.

IADS Notes: The current border conflict's impact on Thailand's retail sector occurs against a backdrop of significant industry transformation throughout 2024-2025. While June 2025 data showed the retail sector contributing THB2.8 trillion to GDP, with tourism accounting for 18%, the industry faces multiple challenges. Despite this, major retailers remain optimistic, as evidenced by Central Group's October 2024 announcement of a $461 million investment in tourist destinations like Krabi and Chiang Mai. This confidence is supported by projections from November 2024 showing Thailand's luxury market growing to $3.6 billion by 2029. However, March 2025 reports revealed mixed results for major retailers like Central Retail, with declining same-store sales despite continued expansion. The current crisis adds another layer of complexity to Thailand's retail recovery, particularly concerning Chinese tourism, which was already showing signs of weakness before the conflict. This situation highlights the delicate balance between Thailand's ambitious retail development plans and its vulnerability to regional geopolitical tensions.

What Thailand’s latest crisis means for retailers and tourism recovery

What: A two-page Guess advertisement in Vogue's August 2025 issue, created by AI company Seraphinne Vallora, triggers industry-wide debate about the future of fashion photography and modeling.

Why it is important: This development represents a critical turning point in fashion media, as the industry's most influential publication embraces AI-generated content, potentially setting new standards for advertising and content creation while raising significant ethical concerns about the future of modeling.

Vogue's August 2025 issue has sparked intense debate within the fashion industry by featuring AI-generated models in a Guess advertisement. Created by Paris-based creative house Seraphinne Vallora, the campaign showcases hyper-symmetrical imagery that treads the line between photorealism and impossible beauty standards. The advertisement's discreet labelling as AI-generated content did little to prevent significant backlash from subscribers and industry professionals. This technological advancement eliminates the need for traditional production elements such as casting directors and retouchers, potentially reducing campaign costs by up to 70%. However, the controversy extends beyond economics, raising fundamental questions about authenticity, artistic expression, and the future of human modeling. Industry experts, including Dr Jade McSorley from the Centre for Sustainable Fashion, express concerns about the impact on creative teams and the loss of human personality in fashion imagery. Meanwhile, Matthew Drinkwater of the Fashion Innovation Agency argues that AI will redefine rather than replace creative roles, comparing it to digital photography's historical impact on the industry.

IADS Notes: The controversy surrounding Vogue's AI-generated model campaign in August 2025 reflects broader industry developments throughout the year. In March 2025, H&M pioneered a more transparent approach by implementing 30 digital twins with clear ethical guidelines and fair compensation policies. This contrasts with Vogue's more discreet implementation, which sparked significant backlash. The economic rationale for such transitions is compelling, as February 2025 data showed 87% of retailers implementing AI reported revenue increases of 6% or more. However, the industry's response remains mixed; while Mango successfully launched AI-generated campaigns in November 2024, focusing on younger demographics, May 2025 reports revealed that only 10% of retailers successfully scaled their AI applications across creative functions. Consumer sentiment is similarly divided - March 2025 data showed 38% of global consumers actively embracing AI shopping tools, with 80% reporting positive experiences, yet Vogue's subscriber reaction demonstrates the delicate balance between innovation and maintaining authentic human connections in fashion media.

Vogue erupts: AI-generated models spark reader fury and industry panic

What: A new agent-based model for simulating organisational change identifies four critical factors that determine transformation success: organisational hierarchy, social connections, change magnitude, and impact predictability.

Why it is important: With major retailers like Macy's, Saks, and El Corte Inglés implementing significant transformations, this framework provides crucial insights for increasing success rates through strategically designed change programs.

BCG's innovative approach to organisational change introduces a sophisticated agent-based model that simulates how companies adopt transformational initiatives. The research identifies four crucial contingencies that change programs must address: organizational structure, social networks within the firm, scale of change, and certainty about its impact. The model demonstrates that hierarchical organisations benefit from leadership-driven change cascading through levels, while flat structures require different approaches focused on peer influence. Social networks prove equally critical, with tightly knit organizations benefiting from champion-led change, while looser networks demand broader educational approaches. The scale of change, from incremental to fundamental, requires different motivational strategies, with smaller changes needing extrinsic motivation and larger ones requiring clear communication of benefits. The research emphasizes that change impact certainty significantly affects adoption rates, with unclear benefits often leading to implementation backsliding.

IADS Notes: Recent retail transformations validate BCG's findings throughout 2024-2025. In January 2025, Saks Global demonstrated successful hierarchical change by implementing AI-driven operations under new leadership. March 2025 saw El Corte Inglés leverage social networks through its Transformation Office, achieving significant progress in digital integration. By April 2025, Manor's CHF 200 million transformation showed how clear benefit communication drives adoption, achieving its highest operational profit in years. In June 2025, Bloomingdale's success with customer experience transformation highlighted the importance of measuring change impact through new metrics. Most recently, July 2025 saw Galeries Lafayette successfully implement a comprehensive leadership restructuring, demonstrating how family-owned retailers can balance tradition with modern management approaches.

From change management to change strategy

What: The EU-US trade agreement establishes a 15% tariff framework with strategic sector exemptions, marking a significant shift in transatlantic trade relations.

Why it is important: The framework's impact on retail pricing and sourcing strategies comes at a critical time when consumer confidence is already showing its sharpest decline since 2021, with 62% expressing concern about rising costs.

The newly announced EU-US trade framework represents a significant development in international commerce, establishing a 15% tariff rate for EU imports into the US. This agreement includes strategic exemptions for several sectors, including aerospace, chemicals, semiconductors, and certain food products, which will maintain zero tariffs. The automotive sector sees a notable shift from the previous 27.5% rate to the new 15% ceiling, though complexities remain regarding the stacking of tariffs with existing rates. The framework's implementation has immediate implications for supply chains, with steel and aluminum still subject to separate negotiations for potential tariff rate quota arrangements. The EU has committed to substantial energy purchases and direct investment in the US, though the specifics and enforcement mechanisms remain unclear. This agreement adds to the growing patchwork of bilateral trade deals that increasingly characterise global commerce, potentially challenging WTO principles while reshaping international trade relationships.

IADS Notes:

The retail landscape has undergone significant transformation throughout early 2025. In January, BCG's analysis projected staggering additional import costs of $640 billion from expanded tariffs, catalysing widespread industry restructuring. February saw the elimination of the $800 de minimis rule, disrupting e-commerce operations and affecting 4 million daily shipments. By March, 62% of consumers expressed serious concern about rising retail prices, while major retailers like Costco and Walmart actively pressured Chinese suppliers for price concessions. Consumer behaviour shifted dramatically, with data showing 84% of shoppers reconsidering their purchasing strategies. The impact became increasingly visible in May, when consumer confidence recorded its sharpest decline since August 2021. By July, department stores were implementing strategic price increases, with footwear leading at 4.2%, demonstrating how tariff impacts were finally reaching consumers after retailers' initial absorption efforts.

The EU-US trade agreement: Some clarity and ongoing uncertainty

What: The Global South emerges as a powerful economic force, representing 62% of global population and projected to reach 20% of global GDP, driven by strategic multi-aligned trade policies and business-friendly environments.

Why it is important: This development marks a historic transition in global retail, as these nations move from being market followers to trendsetters, backed by substantial consumer bases and strategic trade relationships.

The Global South is fundamentally reshaping the global economic landscape, representing a powerful bloc of over 130 nations that collectively account for 62% of the global population. These nations are distinguishing themselves through a pragmatic approach to development, combining business-friendly policies with strategic neutrality in international relations. Their projected GDP growth of 4.2% annually through 2029 significantly outpaces advanced economies' 1.9%, reflecting their increasing economic strength. The transformation is particularly evident in their approach to trade and development, where countries maintain beneficial relationships with both Eastern and Western partners while advancing their own economic interests. This strategic positioning, coupled with rich resources, growing labour forces, and expanding consumer markets, positions the Global South as a crucial engine of global growth. Their success in balancing climate goals with development objectives while fostering innovation and trade demonstrates a sophisticated approach to economic advancement that is attracting significant international investment and partnerships.

IADS Notes: Recent market developments validate the Global South's rising influence in global retail. In September 2024, India's emergence as the most attractive market for retail expansion attracted luxury brands like Birkenstock through strategic local partnerships . By January 2025, Asia-Pacific markets showcased diverse consumer behaviours, with India pioneering experiential retail while Southeast Asian nations prioritised infrastructure . The momentum continued in February as Vietnam targeted a $350 billion retail market, while Korean retail giants expanded their regional presence . March 2025 highlighted India's transformation, with affluent households set to reach 30% by 2035 and trillion-dollar infrastructure investments attracting international brands . This culminated in April 2025 with the Global South achieving 4.2% annual GDP growth, more than double that of advanced economies .

The CEO’s guide to the Global South

What: A comprehensive framework redefines workplace diversity accountability in 2025, emphasising shared responsibility across all organisational levels.

Why it is important: As retailers navigate complex legal and social pressures around DEI, this approach offers a practical framework for maintaining inclusive practices while achieving measurable business outcomes.

The evolution of workplace diversity responsibility reflects a fundamental shift in how organisations approach inclusion and equity. Rather than limiting accountability to hiring teams, the framework establishes a shared responsibility model that encompasses every employee and leader. This comprehensive approach addresses three critical areas: recruiters building diverse candidate pools, interview teams conducting bias-aware assessments, and hiring managers making equitable decisions. The model emphasises that increasing diversity extends beyond recruitment, requiring ongoing support and retention strategies. In 2025's complex DEI climate, organisations are advised to implement structured accountability through four key elements: making diversity a measurable priority, establishing sustainable programs, creating clear policies, and tracking performance metrics. This systematic approach helps companies maintain progress while navigating legal and social pressures, ensuring that diversity initiatives remain integral to business operations rather than isolated efforts. The framework's success depends on giving employees clear, structured ways to contribute, transforming abstract commitments into actionable responsibilities.

IADS Notes:

The retail industry's approach to workplace diversity has evolved significantly since late 2024. In November 2024, Walmart pioneered a strategic pivot by maintaining inclusion practices while modifying terminology, achieving strong market performance. By January 2025, the emergence of the FAIR framework (Fairness, Access, Inclusion, and Representation) offered retailers a structured approach to balancing inclusive practices with business performance. March 2025 data revealed FTSE 350 retailers achieved 42% female board representation, though only half met the 40% women in leadership target. This evolution culminated in April 2025 with overwhelming shareholder rejection of anti-DEI proposals at major companies, demonstrating sustained commitment to workplace diversity despite political pressures.

Who’s responsible for increasing workplace diversity in 2025?

What:

OpenAI plans to integrate checkout functionality within ChatGPT, transforming the platform from a research tool into a revenue-generating marketplace while prompting debates about fair competition and small business access.

Why it is important:

This evolution marks a significant transformation in digital commerce, where AI platforms become direct sales channels, challenging traditional e-commerce models and raising concerns about market fairness and accessibility.

OpenAI's development of a checkout system within ChatGPT represents a strategic shift that would enable users to complete transactions entirely within the platform. The system would require merchants to pay commissions to OpenAI for orders received and fulfilled through ChatGPT. This development has sparked mixed reactions among retail startups, with some expressing concerns about the potential creation of a "pay to play" environment that could disadvantage smaller businesses. While some brands have already seen benefits from ChatGPT's product recommendations, including increased website traffic, others worry about the platform prioritizing paid placements over educational content. Companies are responding by optimizing their web content for AI comprehension, with some testing different formats to ensure effective product representation within ChatGPT's system. The impact on customer data access and brand accountability remains a key concern for retailers considering participation.

IADS Notes:

OpenAI's potential checkout system development reflects broader transformations in AI-powered retail throughout 2024-2025. According to BCG's January 2025 report, AI agents are creating a new era of personalized retail experiences, with productivity improvements ranging from 15% to 30% in customer service operations. This evolution gained momentum as Adobe reported in March 2025 that 38% of global shoppers were actively using AI for purchase decisions, with 80% reporting positive experiences. The impact on small businesses became evident in February 2025, when Forbes' analysis of autonomous AI shopping agents highlighted how 32% of consumer goods companies had already implemented generative AI. May 2025's BoF coverage revealed how retailers leveraging these technologies saw revenue increases of 6% or more, though concerns about market access remained. The transformation of customer behavior was particularly notable among younger consumers, with Vogue Business reporting in May 2025 on Gen Z's increasing adoption of ChatGPT for shopping advice. This shift in consumer behavior was validated by BCG's November 2024 study showing 38% of shoppers using AI tools during major sales events. The Journal du Net's July 2025 coverage highlighted how retailers successfully balancing technological innovation with human expertise were creating more personalized and efficient customer experiences while maintaining team engagement.

What a ChatGPT checkout system could mean for retail

What: Kearney's Circular Fashion Index 2025 reveals slowing progress in circular fashion implementation, with only 5 brands scoring above 7.0 points despite growing regulatory pressure and market maturity.

Why it is important: The widening gap between industry leaders and mainstream brands signals a critical transition point where circular fashion must evolve from isolated initiatives to systemic transformation to meet intensifying regulatory demands.

The fifth edition of Kearney's Circular Fashion Index demonstrates both progress and persistent challenges in the fashion industry's journey toward circularity. Covering 246 brands across 18 countries and five product categories, the report reveals a growing divide between frontrunners and mainstream players. While overall scores have improved, with average and median scores reaching 3.40 and 3.20 respectively, progress is slowing. Most brands remain stuck in moderate maturity levels, struggling to move from pilot projects to scaled implementation. The strongest improvements are seen in circular design and closing the loop initiatives, with companies like Arc'teryx, ARKET, and Decathlon joining innovative projects. However, secondary market models such as repair, resale, and rental continue to lag, with 65% of brands scoring "limited" on repair services. As regulatory pressure intensifies, particularly in the EU and US, the industry faces a critical moment to transform circular ambitions into systematic execution.

IADS Notes: The Kearney CFX 2025 findings align with significant industry developments over the past year. In March 2025, The Retail Bulletin reported widespread adoption of multiple circular approaches by major retailers, validating the report's observation about maturing market practices. This evolution is driven by intensifying regulatory pressure, as evidenced by February 2025's EU regulations on textile waste management and France's landmark legislation against fast fashion. The market's complex dynamics are reflected in contrasting performance metrics: while January 2025 saw The RealReal's stock surge 444% and Nuuly grow to 297,000 subscribers, many platforms still struggle with profitability, echoing the CFX's findings about execution challenges. Consumer behavior continues to shift significantly, with December 2024 data showing 41% of consumers choosing repairs over replacement. The operational transformation is gaining momentum, as seen in October 2024 when major brands began integrating sustainable materials into regular collections rather than just pilot projects, demonstrating the industry's move from experimental to systematic implementation of circular practices.

The Kearney CFX 2025 report: circular fashion growing but still not at scale

What:

Retail media has evolved from an e-commerce add-on to a £4 billion strategic imperative, driven by retailers' ability to leverage first-party data and provide measurable advertising impact from impression to purchase.

Why it is important:

This transformation represents a fundamental shift in retail business models, where data monetization and advertising capabilities are becoming essential revenue streams, potentially doubling retail margins from 1.7% to 4.3%.

The retail media sector has emerged as a dynamic force in the advertising economy, projected to capture 10% of total UK advertising spend by 2025. This growth is primarily driven by retailers' sophisticated use of first-party data, particularly from loyalty programmes and transaction histories, enabling unprecedented precision in targeting and measurement. The technology evolution has made customer data more accessible and actionable for brand partners, allowing them to connect advertising directly to purchase decisions. For FMCG brands facing increased scrutiny of marketing budgets, retail media's ability to track campaigns from impression to purchase provides concrete ROI measurements previously unavailable. The sector's maturation is evident in retailers establishing dedicated business units and expanding beyond their owned digital properties to activate data across broader digital ecosystems. This comprehensive approach, combining physical and digital touchpoints with precise measurement capabilities, is creating stronger, data-driven relationships throughout the retail value chain.

IADS Notes:

The retail media landscape has undergone significant transformation throughout 2024-2025. In July 2024, Coresight research revealed retail media's potential to double retailers' margins from 1.7% to 4.3%, sparking increased industry interest. By October 2024, Retail Week reported major retailers like Boots and Co-op expanding their media networks, while John Lewis partnered with Dunnhumby to launch a real-time customer insight platform. The evolution accelerated in February 2025, when Forbes reported retail media spending was set to increase by $10 billion, though highlighting measurement challenges with brands managing an average of six retail networks. March 2025 saw Simon Property Group introduce sophisticated data capabilities leveraging two billion customer interactions, demonstrating how traditional retail operators were evolving into media network providers. By June 2025, BCG's analysis showed how leading retailers were achieving superior performance through data-driven platforms, while Retail Detail detailed Delhaize's success in standardizing measurement approaches, achieving 74% brand lift and 8.5% sales growth in case studies. This transformation culminated in July 2025 with John Lewis's expansion beyond owned websites to streaming services, exemplifying how retailers are moving from simple advertising platforms to sophisticated media networks integrating both physical and digital touchpoints.

From browsing to buying: the quiet power of retail media

What: Ikea pursues comprehensive 'real zero' carbon emissions strategy through operational transformation and infrastructure investment, moving beyond traditional offset-based approaches.

Why it is important: The shift from offset-dependent strategies to comprehensive operational changes provides a blueprint for retailers seeking to achieve meaningful environmental impact while driving business innovation.

Ikea is pioneering a transformative approach to sustainability by pursuing 'real zero' carbon emissions across its entire business operations. Rather than relying on carbon offsets, the global furniture giant is implementing fundamental changes throughout its value chain. The company has achieved 100% renewable electricity usage in its Australian stores, while over 70% of its delivery fleet now produces zero emissions. Lauren Sinfield, public affairs and advocacy lead at Ikea Australia & New Zealand, emphasizes the company's long-term mindset in embedding sustainability across all business aspects. The Marsden Park distribution centre exemplifies this commitment through its solar and battery project, demonstrating how logistics hubs can evolve from cost centres to sustainability assets. While the company faces challenges in regional zones where infrastructure gaps remain, its transparent approach to disclosure and climate governance, including reviewing 252 industry associations for climate alignment, sets new standards for retail sector transformation.

IADS Notes: Ikea's 'real zero' strategy exemplifies the evolving approach to retail sustainability observed throughout 2024-2025. As highlighted in Harvard Business Review's May 2025 analysis, successful retailers are moving beyond scattered environmental initiatives to implement focused, comprehensive strategies. This aligns with February 2025 data showing 47% of companies integrating sustainability into product development, while Euromonitor's research revealed 63% of consumers actively seeking environmental impact through purchases. The approach mirrors successful transformations seen in September 2024, when major retailers like Central Retail committed to net-zero emissions through practical operational changes. Ikea's transparent communication about regional challenges, particularly in delivery infrastructure, reflects the industry-wide response to March 2025's EU sustainability directives (CSRD, CSDDD, and ESPR), which demand comprehensive environmental reporting and due diligence. The company's investment in facilities like the Marsden Park distribution centre parallels Falabella's May 2025 strategy, demonstrating how infrastructure transformation can support both environmental goals and operational efficiency.

What retailers can learn from Ikea’s ‘real zero’ climate strategy

What: Research reveals retail CEOs are missing major growth opportunities by limiting AI to efficiency-focused improvements rather than pursuing transformative business model innovation.

Why it is important: With 87% of early AI adopters experiencing revenue increases of 6% or more, retailers who fail to think boldly about AI transformation risk falling behind competitors who are reimagining their entire business models.

Summary: The retail industry stands at a critical juncture in AI adoption, where success depends on CEOs' willingness to move beyond incremental improvements and reimagine their entire business model. While many organizations have deployed AI tools for automation and efficiency gains, only 10% successfully scale their applications to achieve transformative results. The most successful retailers are using AI to reshape core functions and create innovative new products, achieving up to 4.5% annual productivity growth compared to the industry's decade-long 0.3% rate. This transformation requires CEOs to personally lead innovation, creating focused teams and supporting blue-sky thinking while maintaining a portfolio approach to AI initiatives. The article emphasizes that success comes from viewing AI not just as a tool for optimization but as a catalyst for reinventing how value is created and delivered to customers.

IADS Notes: Recent retail developments validate the urgency of transformative AI leadership. In March 2025, data revealed that while 84% of retail executives planned increased AI investment, only 10% successfully scaled their applications. By June 2025, top-quartile retailers embracing comprehensive transformation were outperforming industry five-year TSR by 7 percentage points through integrated approaches. The stakes are particularly high as McKinsey's February 2025 report showed 71% of consumers now demanding personalized interactions. Success stories like L'Oréal's Beauty Genius demonstrate how bold AI initiatives can create entirely new value propositions, reaching over 10 million consumers and driving 30-70% higher engagement rates than traditional approaches.

CEOs aren’t thinking big enough with AI

What: European consumer spending shows signs of recovery in Q2-2025, with UK SMI reaching 101.3 and Eurozone rising to 97.4, driven by weather effects and shifting seasonal patterns.

Why it is important: This recovery signals a significant shift in European retail dynamics, where external factors like weather and seasonal events are increasingly influential in shaping consumer behavior and retail performance.

Consumer spending across Europe demonstrated encouraging momentum in the second quarter of 2025, with both the UK and Eurozone showing signs of improvement. The UK's Spending Momentum Index reached 101.3, indicating expansion compared to the previous year, with discretionary spending rising significantly by 5.2 points to 106.4 and non-discretionary spending increasing by 3.4 points to 102.2. The Eurozone, while still below the expansion threshold, showed positive movement with the SMI rising 2.6 points to 97.4. This improvement was particularly evident in non-discretionary spending, which increased by 3.6 points to 101.2, driven by a notable 8.7-point surge in April. Record-breaking heat across Europe during April influenced shopping patterns, prompting early seasonal purchases in categories such as garden furniture and summer apparel. The timing of Easter and school holidays further contributed to the quarter's performance, especially affecting food, travel, and leisure categories.

IADS Notes: The Q2-2025 improvement in consumer spending momentum aligns with broader retail trends observed across Europe. As reported in June 2025, BCG's analysis showed 40% of consumers maintaining optimism despite economic pressures, while the National Retail Federation's forecast of 2.7-3.7% growth for 2025 confirms the gradual recovery. The significant impact of April's record-breaking heat on seasonal retail parallels earlier observations from 2024 about weather's increasing influence on shopping patterns. Regional variations remain pronounced, with French department stores showing resilience at 1.7% growth in January 2025, while the UK's May 2025 performance revealed a complex picture with food sales rising 3.6% against non-food's 1.1% decline. The contrast between discretionary and non-discretionary spending reflects June 2025 findings showing 73% of European consumers adapting to higher prices, though premium segments maintain strength. These patterns, combined with the calendar effects noted in February 2025's French retail analysis showing a 13% decline in traditional sales periods, demonstrate how seasonal and environmental factors are reshaping European retail dynamics.

Europe Spending Momentum Index

What: The Mobley v. Workday lawsuit exposes how AI-driven hiring tools can perpetuate discrimination against minorities and people with disabilities through inherited biases in training data.

Why it is important: As retail companies increasingly adopt AI for recruitment, this case reveals the urgent need to balance technological efficiency with ethical considerations and proper validation of hiring algorithms.

Summary: The Mobley v. Workday lawsuit highlights a critical flaw in AI-driven hiring systems: their tendency to perpetuate discrimination through biased training data. The case centres on systematic rejection of candidates from protected groups, revealing how negative online content and skewed narratives become embedded in AI decision-making processes. Research shows that negative content about disability and employment spreads more widely than positive stories, creating a visibility problem that affects AI training. This bias manifests in concerning ways, such as AI systems downgrading résumés containing disability-related awards. The lawsuit challenges the common assumption that recruitment technology ensures equal treatment, exposing how features like "ideal" résumé cloning can reinforce existing biases rather than correct them. This case serves as a crucial warning about the risks of implementing AI hiring tools without proper validation and oversight mechanisms.

IADS Notes: Recent retail industry developments underscore the complexity of AI implementation in hiring. In March 2025, research showed AI-enabled teams reduced work time by 16% while maintaining performance quality, yet only 10% of retailers successfully scaled their AI applications. The Mobley v. Workday case, certified as a nationwide collective action in June 2025, highlights the risks of unchecked AI hiring systems, particularly in discriminating against protected groups. However, success stories demonstrate the potential: companies implementing systematic inclusion strategies achieve 21% higher returns, while those combining organizational learning with AI implementation are 1.6 to 2.2 times more effective at managing uncertainties, suggesting that balanced human-AI approaches yield the best results.

Biased by design: How AI reinforces hiring discrimination