First Half of 2025 Outlook: Small Retailers Edition

The first half of 2025 brought both opportunities and challenges for small retailers. Consumer spending remains positive, but growth is slowing compared to prior years. Inflation has cooled from pandemic highs, yet costs for essentials like food, housing, and shipping continue to squeeze both shoppers and store owners.

Key insights from the white paper:

• Consumer Demand – Retail sales are still rising, up about 3–4% year-over-year, but shoppers are cautious and saving more. Value and loyalty will matter more than ever.

• Inflation & Prices – Costs are up around 2.5% annually. Many small businesses (60%) have already raised prices, but careful pricing strategies and efficiency are critical to staying competitive.

• Labor Market – Unemployment is near historic lows, making hiring tough. Small businesses may need creative staffing approaches or added perks to retain workers.

• Tariffs & Supply Chains – New tariffs have pushed costs higher and created supply chain challenges, with nearly half of small businesses adjusting suppliers this year.

• Financing – Loan rates remain elevated (6.6–11.5%). Locking in fixed rates or exploring SBA programs can help manage borrowing costs.

• Local Opportunities – In southern Illinois, nearly $900M in tourism spending in 2023 has boosted local shops. Retailers who tap into visitor traffic can find growth opportunities despite national headwinds.

Bottom line: Small retailers in 2025 face modest growth, tighter margins, and labor challenges. Staying adaptable by managing costs, diversifying suppliers, and connecting with local demand will be key to weathering uncertainty and finding opportunity.