Retail Sourcing Trends to Watch in 2025

Trade wars, inflation, geopolitics and disruption are factors companies will need to address next year.

A recent report, 2025 Supply Chain Trends, from TradeBeyond, found that supply chains will embrace AI, automation and sustainability. Other priorities include building a resilient and diversified supply chain as a hedge against the ongoing disruptions that have become the new normal.

The report found suppliers are taking the following actions:

• Deglobalization of Supplier Networks: Companies are reducing reliance on single regions to navigate global disruptions and strengthen supply chains.
• AI Makes its Mark: Advanced AI tools are already driving real-time monitoring, predictive risk assessment, and agile response across supply chains.
• Smart Procurement Strategies: Top-performing supply chains credit holistic procurement strategies that emphasize supplier relationships, cost savings, and data insights.
• Circularity on the Rise: Leading retailers are embracing circular supply chains, setting goals for waste reduction and sustainability.
• Data Preparedness: Quality data is linked to boosts in productivity and compliance readiness in companies utilizing advanced automation and analytics.
• ESG Tools for Compliance: Amid tightening global regulations, ESG tools have become essential for maintaining compliance and transparency and building consumer trust.

The report outlined the following three trends that companies should watch in 2025. (excerpted from survey)

Disruption

After an almost five-year period of conflicts in the Middle East and Eastern Europe, trade wars, the global pandemic, and natural disasters, disruption is repeatedly cited as one of the top challenges retailers are preparing for in the coming years. The World Economic Forum identified extreme weather or climate risk as one of the top global supply chain risks. The state of Florida, which has seen devastating hurricanes in 2024, causing hundreds of billions of dollars in damage, is a case in point. According to a survey by Supply Chain Dive, the average cost of a supply chain disruption in the retail industry is $1.1 million per day.

To survive and thrive in this climate of ongoing disruption in 2025, retailers must continue investing in supply chain resilience and in building more agile and customer centric supply chains with greater logistics capabilities. Conference Board reported that the average consumer is now spending an extra $1,200 per year on goods and services due to supply chain disruptions.

Companies that proactively manage the risk of supply chain disruption will face a significantly lower impact in the event of a disruption. In response to the recent U.S. Port worker strike, Gartner (among others) suggests that companies take “a strategic stand on risk, planning and automation.” This covers everything from inventory optimization to implementing advanced planning and diversifying supplier partners and logistics modes.

Geopolitics and Trade Wars 

Similar geopolitical factors we have witnessed in recent years will continue in 2025, with potential for a broader impact on global supply chains. Escalation of conflict in the Middle East is probably the biggest ongoing geopolitical risk for global supply chains. Red Sea shipping routes have already seen significant disruption, which has yet to abate. While we see less media coverage of the Russian/Ukraine conflict, the risk of escalation is still a reality.

Aside from actual wars, protectionist trade measures have also accelerated, resulting in tariffs on Chinese imports to Europe and the U.S. The EU voted in October to impose tariffs of up to 45% on Chinese EVs for a five-year period. President Biden will maintain existing tariffs on over $300 billion of Chinese goods and added tariffs on another $18 billion of China imports. This is creating a domino effect of Chinese tariffs on U.S. and EU imports, with China threatening tariffs on EU imports of dairy, alcohol, pork and other products. China passed new legislation on tariffs set to take effect on Dec. 1, 2024. 

Retailers in turn are embracing initiatives such as split shoring to counter the impact of trade wars and mitigate supply chain risk, which carries its own challenges, such as higher costs.

Inflationary Pressure 

Inflation, a huge global challenge in recent years, has now eased, with most economists predicting that in 2025 inflation will approach most central bank targets. However, prices for food, energy, and many consumer goods remain high. Cost pressures are still a major concern for consumers, who have shifted to more cost-effective products and shopping habits. McKinsey reported that 80% of U.S. consumers and 88% of Gen Z and millennials are trading down to more value-oriented products.

Retailers need to continue addressing this ongoing challenge through cost reduction, but also innovation in every area of the business, from customer acquisition and retention to operations.

Written by: Author Unknown, for MH&L.