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.