Let me say it plainly: 2025 is shaping up to be a challenging year for ecommerce brands. Inflation is up. Discretionary spending is down. Consumer confidence is low. That’s not a recipe that’s traditionally good for many businesses. But what does it really mean?
I am not an economist, nor do I play one on TV. I connect the dots and call it as I see it. When inflation was reportedly down I looked around and saw plenty of things continuing to increase. I felt little, if any, relief. I saw discretionary spending among friends, family, and vacation goers begin to slow. That micro view was telling and was slowly emerging at the macro level.
That was all before tariffs, potential trade wars, and geopolitical instability we currently find ourselves in. So what do I see coming for ecommerce brands in 2025 and how can they adapt to grow, or worst case, stay afloat this year?
Let me explain and explore.
State of The Consumer and Spending
We feel it: consumers are on edge. Prices on everyday goods and services continue to increase, tariffs are expected to increase prices further, discretionary spending is decreasing, government layoffs are adding to unemployment numbers, and overall consumer confidence is low. February’s Consumer Confidence Report was ugly. March was even worse, showing a decrease of 7.2 points in the Consumer Confidence Index, the biggest drop since we were in the throes of the pandemic. Maybe more concerning, the Expectation Index dropped by 9.6 points, finishing at 65.2. A score under 80 typically signals a recession is on the way — something even the President couldn’t rule out.
Over the past year-plus, we’ve seen consumer shopping habits shift toward a value-first mindset with purchases, trading down, often to private labels, when value aligns. This shift to value-minded shopping has resulted in consumers spending a larger share of their wallets with stores, meaning there are fewer purchases to go around. This trend of consolidated shopping was on full display during BFCM week this past holiday shopping season, which saw overall order volumes dip while the average order value increased 55% year-over-year, increasing from $152.54 to $235.94.
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These changes have benefited large, price-focused retailers like Amazon and Walmart. Walmart, in particular, has seen its share of higher-income households increase from this change, indicating that families of all incomes are feeling the squeeze. But even these brands aren’t immune. Walmart, Target, Amazon, Costco, Lowes, and even airlines are forecasting a further pullback on spending in 2025.
Then there are tariffs. We don’t quite know the full impact tariffs will have on spending, but brands are expected to raise prices to maintain profits. Target has publicly said prices will increase on many products, from produce to clothing. Companies like Walmart may have enough buying power to mitigate some price increases, but they won’t be immune. Reciprocal tariffs imposed on US exports will further impact domestic prices.
Shoppers have turned to stores like Amazon, Temu, and Shein to save money, but many products sold on those platforms are made in China and, ad of May 2, no longer qualify for the de minimis exemption, exposing them to price increases. In response, Temu and Shein have already announced they will raise prices as of late April.
Though US consumers trust Temu less than Amazon, sometimes money talks — but only so much. Nearly 20% of shoppers said they’d stop purchasing products on Temu if prices went up significantly. This could quickly become a reality if there are substantial changes to de minimis exemptions, which the President has talked about.
My view: inflation isn’t going anywhere anytime soon. Groceries and insurance will continue to gouge Americans’ wallets. Unemployment will increase, and consumers will spend less.
My theme for this year is to capture every … sale … possible.
What Can Brands Do?
Overall consumer confidence may be fading but that doesn’t mean brands can’t take steps to build value and establish trust. By staying laser-focused on the customer and delivering exceptional experiences, brands can force shoppers to think twice before purchasing from other stores. Here are three simple ways brands can protect themselves from a downturn.
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1. Utilise High-ROI and First-Party Marketing Channels
The bigger the ROI the bigger the profits. One of the consistently best ROI marketing channels is email at 68:1. Email open rates continue to increase year over year, ending 2024 at a healthy 26%. We’ve also seen click-to-conversion rates increase, indicating that when consumers find something they want to purchase, they do so.
In addition to email, SMS is another first-party channel that consumers increasingly prefer. In 2024, Omnisend’s US customers generated $25 million in SMS-generated sales. Conversion rates for scheduled SMS campaigns finished the year better than those for email campaigns. Brands should capitalise on both channels’ effectiveness and continue growing their email and SMS lists.
2. Rely on Automations
Email and SMS automation helps brands capture every possible sale because they are sent based on users’ actions at high-intent stages of the shopping journey, such as visiting a product page or abandoning a shopping cart. Automated emails generate 37% of all email marketing sales and only 2% of sends.
As we navigate through 2025, a post-purchase messaging strategy will be critical for customer retention and capturing every possible sale. Brands should create a series of messages that enhance customers’ experiences, such as how-to, tips and tricks, and customer service-oriented messages. These can be the difference between a repeat sale and a lost customer.
3. Reinforce Brand Value
Shoppers are value-driven, but this can mean more than price. It can be a combination of differentiators such as product quality, customer service, and shipping and return policies. Brands should actively promote these differentiators on websites, email messages, and social media platforms. Constant reinforcement can help shoppers see the overall value, even if a brand and its products aren’t the lowest prices.
Looking ahead
In the best-case scenario, geopolitical tensions will stabilise, inflation will recede, and consumer confidence will rise. Worst case, we enter a full-blown recession causing economic ripples around the globe. In either case, ecommerce is strong and resilient. Brands making the effort now to prove their value to consumers and to create a stellar purchase experience will be the ones that grow during these challenging times. We did it before, we’ll do it again.
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