Pulse Report: Retail, Q1 2025

Discover the latest trends shaping the retail industry, from shifting consumer expectations to the rise of digital shopping experiences. Our retail-focused Pulse Report dives into how customers are interacting with brands online and in-store, highlighting key factors like convenience, personalization, and trust. Uncover the drivers behind consumer loyalty and how innovative retailers can set themselves apart in an increasingly competitive market.

These data points highlight the importance of trust, product quality, and the strategic presence of brands in both online and physical retail environments.

A transformative start to 2025

The first quarter of 2025 has brought transformative changes to the retail industry, driven by heightened consumer expectations, rapid technological advancements, and a continued focus on sustainability. Building on insights from Q4 2024, the trends in Q1 2025 reveal a landscape where innovation is essential for success. This report delves into these shifts, supported by visual data, to provide actionable insights for retailers navigating this dynamic environment.

Personal recommendations gain ground

Consumers are increasingly prioritizing trust over numbers when choosing brands for the first time. In Q1 2025, personal recommendations surged to 34%, up from 20% in Q4 2024, while reliance on product ratings declined to 41% (from 61%). During this period of collecting data, many respondents were likely holiday shopping, therefore they sought out recommendations or wishlists from family and friends. This reflects a shift toward authenticity and direct connections. To capitalize, brands should encourage word-of-mouth advocacy through loyalty programs and community-building efforts.  

Other influencing factors also experienced notable changes. The importance of a brand’s reputation remained relatively stable, inching up from 18% to 19%, suggesting that brand trust continues to play a supporting role in consumer choice. However, endorsements from influencers, while still a minor factor, grew significantly, increasing from 1% in Q4 2024 to 6% in Q1 2025. This growth highlights the gradual, but impactful, role of influencer marketing in shaping first-time purchase decisions, particularly among younger and digitally savvy audiences. Again, seasonal gift giving being top of mind likely influencing the rise in recommendations. These shifts underscore a more personalized and relational approach to consumer decision-making in 2025.

The rise of direct-to-consumer channels

The Q1 2025 data highlights a notable shift in consumer preferences for purchasing from direct-to-consumer (DTC) brands compared to Q4 2024. The percentage of consumers more likely to buy from a brand that is only available on its own website increased from 10% in Q4 2024 to 25% in Q1 2025. This significant jump reflects the growing appeal of exclusivity and the trust consumers place in DTC brands' ability to provide a seamless, direct shopping experience. At the same time, brands with their own physical stores also experienced a modest increase in preference, rising from 26% to 29%, showing that brick-and-mortar presence still plays a key role in building brand credibility.

Conversely, the share of consumers preferring brands sold by other retailers, whether online or in-store, declined sharply from 64% in Q4 2024 to 46% in Q1 2025. This trend underscores the importance for brands to invest in their own e-commerce platforms and exclusive distribution channels to capture the loyalty of today’s discerning shoppers. The shift also signals the potential for growth in direct-to-consumer strategies as a long-term driver of competitive advantage in retail.

Quality vs. price: what drives repeat purchases? 

The data illustrates a subtle, but important, shift in factors influencing repeat purchases from brands. The quality of the product remains the most influential factor, although its importance decreased from 63% in Q4 2024 to 54% in Q1 2025. This suggests that while product quality is still paramount, other factors are beginning to carry more weight in the decision-making process. Notably, price or promotional offers saw a significant increase in influence, rising from 31% in Q4 2024 to 40% in Q1 2025. This shift indicates that consumers are becoming more cost-conscious, potentially influenced by economic factors or competitive pricing strategies during this past holiday shopping season. 

Other factors, such as availability or convenience, saw a slight increase in importance, moving from 3% to 4%, reflecting the ongoing demand for seamless and hassle-free shopping experiences. Customer service or support remained consistent at 2%, suggesting it is a stable but less critical factor for repeat purchases. These findings underscore the need for brands to maintain product quality while also focusing on competitive pricing and promotions to retain loyal customers. The increasing emphasis on price highlights the potential for brands to drive repeat business through well-timed discounts and value-driven offers.

Skepticism toward AI: a growing concern

Consumer trust in AI is waning, with agreement on its effectiveness dropping to 52% (from 57%). Key concerns include data privacy, ethics, and underwhelming performance. Additionally, respondents may not have agreed that AI is best used when shopping for other people. AI can be great at personal recommendations, but when shopping for gifts, algorithms may need additional context. Brands can build trust through transparency, human oversight, and AI education campaigns that showcase benefits. Emphasizing reliability and ethical usage will resonate with skeptical audiences.

The neutral responses remained relatively stable, rising slightly from 30% in Q4 2024 to 31% in Q1 2025. This indicates a consistent segment of consumers who remain uncertain about AI’s capabilities or impact. These findings highlight an urgent need for brands to address consumer concerns by emphasizing transparency in AI-driven processes, improving AI performance, and educating users on the benefits of AI. As trust erodes, brands that can successfully demonstrate ethical and reliable AI usage are likely to gain a competitive advantage in building stronger customer relationships.

Personalization satisfaction soars, but challenges remain

Coming out of the peak shopping season, consumers showed greater satisfaction with the personalization they received while shopping in Q1 2025 compared to Q4 2024. The visual data reveals a higher proportion of positive feedback for tailored shopping experiences. This improvement likely reflects advancements in retailers' ability to deliver relevant recommendations and offers during the holiday season. However, the consistent presence of neutral and dissatisfied segments indicates room for improvement, particularly in ensuring that personalization meets individual preferences.

Expectation of personalization features

When asked about which shopping features they expect to be personalized—such as product recommendations, offers, search results, and pickup options—consumers in Q1 2025 selected fewer features compared to Q4 2024. This drop may indicate a reduction in consumer expectations for personalization, possibly due to the holiday gift shopping season, inconsistent experiences, or unmet promises. Retailers may address this by setting clear expectations and consistently delivering on their personalization strategies to build consumer confidence.

Generational gaps in personalization demands

Older shoppers (ages 65+) reported the highest levels of satisfaction with the personalization they received, while younger shoppers (ages 18–34) were more critical, often feeling that retailers fell short of their expectations. The visual breakdown highlights a clear generational divide, with younger demographics placing higher demands on personalization. Retailers aiming to engage younger audiences should prioritize more dynamic and data-driven personalization strategies to cater to their needs, while continuing to maintain strong engagement with older, more satisfied age groups.

Looking ahead: opportunities in Q2 2025

As the retail industry advances, several areas hold significant potential for growth. The adoption of AI and AR technologies is projected to rise by 12% in Q2 2025, as consumers demand more personalized and immersive experiences. Emerging markets, particularly in Southeast Asia and Latin America, offer opportunities for expansion as digital retail infrastructure improves in these regions. Visualizations of projected growth trends and regional market potential provide a roadmap for future strategies.

Final thoughts: navigating the road ahead

Q1 2025 highlights the retail industry's adaptability amid shifting consumer expectations. Retailers that embrace omnichannel integration, sustainable practices, and technology like AI and AR will lead the way. By aligning strategies with these trends, brands can thrive in an increasingly competitive landscape.

Methodology

This quarter, the UserTesting Retail Pulse surveyed 403 participants, compared to 404 participants last quarter, both sourced from the UserTesting Network.

Participants were screened based on their recent in-store shopping activity and purchases made across multiple brands or retailers.