Smarter shopping: 2025 trends to watch, from sustainability to AI

The retail industry is undergoing a period of significant transformation as we move into 2025, driven by the dual forces of technological innovation and evolving consumer expectations. Artificial intelligence (AI) has emerged as a pivotal enabler, revolutionising the ways in which consumers shop, retailers operate, and investors identify opportunities. From personalised shopping experiences to data-driven market insights, AI is redefining the way in which consumers interact with brands, products, and services. Alongside this digital revolution, a growing emphasis on sustainability and conscious consumption is reshaping the retail landscape, as consumers demand more transparency, accountability, and environmentally friendly options.

The steady growth of sustainable shopping

The retail landscape of 2025 is poised to be reshaped by a rising wave of sustainable shopping practices. This movement is underpinned by a broader push towards sustainability, with consumers prioritising brands and retailers that demonstrate genuine commitments to ethical practices and waste reduction. It is estimated that 22% of global shoppers now intend to make more conscious purchasing decisions, searching actively for environmentally friendly products and transparent and ethical business practices.¹ Certifications such as B Corporation^® status, achieved by sustainability-focused firms, are becoming essential indicators of trust and accountability.

22% of global shoppers now intend to make more conscious purchasing decisions, searching actively for environmentally friendly products and transparent and ethical business practices

Driving this transformation is the integration of circular economy principles such as resale, rental, and refurbishment, which extend product lifecycles and align with global sustainability goals. When it comes to the fashion industry, which is currently the second-largest consumer of water and responsible for about 10% of global carbon emissions², consumers are increasingly gravitating towards re-commerce platforms such as Vestiaire Collective, demonstrating the growing adoption of circular economy models. These platforms offer pre-owned items, catering to a demand for conscious purchasing while reducing environmental impact.

Sustainable shopping encompasses a broad spectrum of practices, extending beyond the realm of re-commerce. The manufacturing of new clothes is also undergoing a significant transformation, with eco-friendly innovations at the forefront. Fabrics derived from alternative materials, such as fish leather, fungi, and other plant-based leathers are gaining traction as viable substitutes for traditional leather. Similarly, new methods for sourcing raw materials – from regenerative agriculture to zero-waste processes – are redefining the fashion supply chain. Every day, new techniques and technologies are emerging, such as colouring clothes with innovative scientific processes, which are driving sustainability in manufacturing and offering consumers more environmentally conscious options.³

Legislators and governments are also playing a crucial role in facilitating the transition towards sustainable practices. California’s recent legislation mandating take-back programmes for textiles aims to reduce waste and promote recycling within the fashion industry.⁴ Meanwhile, France has introduced broad regulations targeting various industries to curb waste and increase sustainability. These include initiatives to improve product life cycles, support repairability, and enforce stricter standards for eco-labels, thereby promoting transparency and accountability across the retail spectrum.⁵

A digital assistant to unearth the best deals

In a potentially game-changing move, consumers are turning to generative AI to power-up their product search experience. Research indicates that 13% of global shoppers have already used generative AI in their shopping experience, and 25% intended to use it for their end-of-year shopping in 2024.⁶

New tools and technologies are being rolled out. For instance, in November 2024, AI-firm Perplexity launched an AI-powered commerce tool. This new tool enables shoppers to conduct product research by conversing with Perplexity’s search engine, or to find products by uploading images and to complete purchases with a single click. In July of the same year, e-commerce giant Amazon released its new AI assistant Rufus nationwide in the US, and towards the end of the year, the beta version was made available across Europe. Rufus assists customers by answering questions about products, providing answers based on product listings, customer reviews and community FAQs.⁷

13% of global shoppers have already used generative AI in their shopping experience, and 25% intended to use it for their end-of-year shopping in 2024

AI is not only assisting customers in the online space, however. Hybrid shopping – the combination of in-store shopping with a mobile phone-based, online shopping experience – is becoming ever more prevalent. Towards the end of 2024, Google released new features to assist its users, with significant advancements in Google Lens’s AI-powered image recognition technology. Shoppers can now take a photo of a specific item in-store using the mobile application, and then receive a customised page with price comparisons, customer reviews and a list of similar products.⁸

Hyper-personalised shopping experiences

According to consultancy firm the Boston Consulting Group, retailers should see consumers’ embrace of new technology not as a threat, but as an opportunity. By deploying chatbot ‘gifting advisers’, they explain, retailers can take the chance to cross-sell, up-sell, and assuage any customer concerns, while virtual fitting rooms – where consumers can “try on” clothes virtually – can help to drive conversions. AI-powered curation, including advanced search tools and personalised content recommendations, is making it easier than ever for customers to discover new brands and products that are tailored to their preferences. This approach not only simplifies the decision-making process, but also encourages higher spending by creating a more engaging shopping experience. Deanne Evans, managing director, EMEA at Shopify, agrees: “Technology is what can unlock competitiveness: our data shows 40% of UK shoppers are more likely to purchase from and spend more money with brands that actively integrate technology into the shopping experience.” ⁹

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AI is also becoming increasingly important for targeted marketing, with the technology used both to create marketing materials and analyse large datasets to ensure potential customers receive the right promotions at precisely the right times. For smaller retailers this could be an opportunity to level the playing field, with powerful new marketing and data analysis tools now allowing them to compete with larger rivals.

Many are already taking advantage of the opportunity. Research by Amazon, for instance, shows that around half of SMEs on the platform actively deploy data analytics to help them stand out, while 40% believe that AI has become the most integral tool to their business growth and success.¹⁰

‘Alternative data’, a vast mosaic of information derived from multiple sources can be analysed by AI to help retailers anticipate both an individual’s needs and broader changes in consumer behaviour

The information edge: predicting the future with ‘alternative data’

Crucially, many retailers of all sizes are now using AI-powered strategies to not only react to trends, but to predict them ahead of time. ‘Alternative data’, a vast mosaic of information derived from multiple sources – such as web searches, app downloads, geo-location, credit card and online spending, airport traffic, insurance policy data and even, in some jurisdictions, drug prescriptions – can be analysed by AI to help retailers anticipate both an individual’s needs and broader changes in consumer behaviour.

For investors, AI-synthesised alternative data can offer a similar information edge, enabling them to analyse and predict consumer behaviour so as to gain insight into the retail sector ahead of company earnings announcements. Hundreds of dedicated firms have sprung up to gather alternative data for sale to investors. The sector is growing fast – according to Michael Finnegan, CEO of alternative data provider Eagle Alpha, there were just 100 alternative data providers in the 2010s, now there are 2,000¹¹.

In 2023, professional services firm Deloitte predicted that the global market for alternative data would reach USD 137 billion by 2030, increasing at a compound annual growth rate of 53%. Further, they anticipate that alternative data providers could collectively be worth more than traditional financial services data providers as soon as 2029.¹² Lending credibility to this forecast, Jonathan Chin, Co-Founder of alternative data firm Facteus, says his firm has seen revenue growth of 300% since the start of 2023.

Read also: How green data will power the energy transition

The rapid expansion of this field is creating a double opportunity for investors, both in the alternative data market itself and the broader gains that can be made from analysing the data they provide. At Lombard Odier we believe alternative data is fast-becoming an essential component of investing in the retail sphere. That’s why, in 2024, we launched a new strategy that leverages alternative data to build market neutral equity portfolios that offer strong potential for outperformance, with low correlation to traditional asset classes.

AI could be the key that unlocks a year of record sales. For consumers, retailers and investors alike, this breakthrough technology is offering deeper understanding and engagement, and new opportunities for bargains, sales, and investment outperformance. At the same time, the growing emphasis on environmentally friendly practices – such as circular economy models and eco-conscious manufacturing – ensures that this innovation-driven growth aligns with sustainability goals, meeting the expectations of a more conscientious consumer base. By combining AI-powered insights with a commitment to sustainability, the retail industry is poised to deliver transformative value in 2025.