2025 Retail Insights: AI, Sustainability, and Consumer Shifts

The retail industry is bracing for an impactful year in 2025, marked by technological advancements, economic pressures, and growing sustainability demands. Carl Boutet, a leading retail strategist, recently shared his insights on how retailers can adapt to these challenges. From the rise of agentic AI to the importance of balancing global uncertainties, Boutet’s predictions provide a roadmap for navigating the evolving retail landscape.

AI’s Next Frontier: The “Agentic” Revolution

Artificial intelligence continues to transform retail operations, but Boutet sees 2025 as the year when “agentic” AI becomes the focal point. Unlike traditional AI, agentic systems can perform tasks independently, such as automating purchasing decisions for both consumers and retailers.

“Agentic AI will automate a range of activities for both buyers and sellers,” Boutet explains. “For low-consideration, non-discretionary purchases, these agents can streamline decision-making and purchasing processes, fundamentally altering how consumers shop.”

While agentic AI offers immense potential, Boutet warns against over-reliance. “Blind spot number one is becoming too dependent on AI. Retailers still need to differentiate and offer value beyond what AI can provide. Efficiency is critical, but long-term success hinges on creating meaningful customer experiences.”

AI’s impact often goes unnoticed by consumers, he adds. “Optimization, prediction, and anticipating consumer needs are where AI is making the most significant contributions. It’s not just about flashy technology in stores.”

Quantum Computing: A Future on the Horizon

Quantum computing, though still in its infancy, is generating interest within the retail sector. Boutet predicts its relevance will grow by the end of 2025, although practical applications remain years away.

“Quantum computing has the potential to make current systems look archaic,” Boutet notes. “It’s a massive leap forward in computational power, but we’re still in the early stages. Practical implementation is likely decades away.”

Boutet cautions retailers against falling for “quantum washing,” where companies exaggerate their quantum capabilities to capitalize on hype. “It’s similar to the AI buzz we saw years ago. The key is focusing on tangible benefits and not getting distracted by marketing noise.”

Sustainability Stays in Focus

Sustainability remains a cornerstone of retail strategy despite economic uncertainties. Boutet emphasizes the importance of circular economy initiatives, such as resale models and waste reduction.

“Sustainability hasn’t vanished,” he says. “Companies are finding innovative ways to meet consumer demand for eco-conscious options while embracing the circular economy as a key strategy.”

Reflecting on his 2020 prediction that sustainability would dominate the decade, Boutet highlights its resilience. “The pandemic could have derailed this momentum, but it remains top of mind for many retailers,” he explains.

He also points to McDonald’s keynote at NRF 2025, where sustainability ranked among the company’s top three priorities. “It’s not just a trend; it’s an imperative,” Boutet asserts.

Canadian Retail’s Economic Divide

In Canada, economic polarization is reshaping the retail landscape. Boutet highlights the contrast between thriving value-driven retailers and high-performing premium brands like Aritzia.

“We’re seeing the haves and have-nots split even further,” Boutet observes. “You’re either delivering exceptional value or providing a premium experience. Mid-market retailers are struggling to maintain relevance.”

Economic pressures are exacerbating this divide. “Almost 50% of Canadian households are within two missed payments of financial trouble,” Boutet notes. “This reality drives demand for value-focused retailers while challenging those relying on discretionary spending.”

The Rise of Experiential Retail

Experiential retail is gaining traction as physical and digital experiences merge. Boutet emphasizes creating environments that offer more than shopping.

“Experiential retail is where social commerce and augmented reality intersect,” he explains. “It’s about crafting spaces that blend shopping, entertainment, and hospitality.”

Boutet shares his experience visiting American Dream in New Jersey. “They’ve created incredible retail environments blending hospitality, entertainment, and shopping. Concepts like Gentle Monster are pushing boundaries,” he says.

In Canada, projects like Royalmount in Montreal illustrate this trend. Although the initial rollout received mixed reviews, Boutet remains optimistic. “With 75% of the first phase complete, it’s a long-term project. By 2030, it could redefine retail in Canada,” he predicts.

Preparing for 2025: Staying Flexible

As 2025 approaches, Boutet stresses adaptability as a key to success. “We’re operating in a VUCA world—volatile, uncertain, complex, and ambiguous,” he says. “Retailers need to stay flexible, keep their blinders off, and adapt to global trends.”

Despite challenges, Boutet identifies constants: digitization, the relevance of physical stores, and sustainability. “Physical retail isn’t going away,” he says. “If anything, it’s more important than ever. The challenge lies in seamlessly integrating technology into the in-store experience.”

Looking forward, Boutet advises caution with new technologies. “AI will continue shaping retail, but brands can’t lose their humanity. Differentiating through unique customer experiences is critical for long-term success,” he concludes.

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