Retailers slow expansion as economic pressures bite

Global retailers are pulling back from aggressive expansion as economic and geopolitical pressures intensify. New research found that fewer than one in six retail executives are pursuing strong growth strategies.

The study, produced by Incisiv and Manhattan Associates with input from 336 C-suite retail executives across EMEA, Latin America, Asia-Pacific and the United States, found most businesses are focusing instead on selective expansion, cost control and operational efficiency.

More than three-quarters of respondents identified geopolitical instability and trade disruption as key forces shaping strategy. Another 72% pointed to inflation and margin pressure as structural constraints on decision-making.

The findings suggest retailers are still investing, but with greater caution and narrower priorities. Customer experience and personalisation led areas of increased investment at 72%, followed by AI and advanced technology at 58% and supply chain at 56%.

That spending has yet to solve a broader problem around execution speed. Seven in ten executives said they cannot move from decision to execution as quickly as competitors, highlighting a gap between strategy and operational delivery.

Execution gap

The research points to a sector trying to balance short-term pressure with long-term change. Retailers have less visibility over costs and demand while also adapting to shifts in how consumers discover and buy products.

Nearly all executives surveyed, 98%, said they were concerned that AI-driven search is reducing brand visibility. The finding reflects a broader concern that control over customer discovery is shifting away from retailers' own channels and towards algorithm-led platforms.

Incisiv Chief Insights Officer Gaurav Pant said the central issue was not whether retailers were still investing, but whether they could turn those decisions into results quickly enough.

"With external pressures unlikely to ease in the near term, the focus is on making smarter, more targeted bets that deliver both resilience and long-term value. What stands out from the research is the gap between intent and execution. Closing that gap will be critical for retailers looking to stay competitive in a more demanding environment," Pant said.

The study also examined how retail leaders expect their businesses to develop over the rest of the decade. More than 80% said both physical stores and owned online platforms will remain critical to their business by 2030, even as newer routes such as retail media and AI-driven discovery gain ground.

Investment focus

The results indicate that many retailers are not abandoning expansion entirely, but are becoming more selective about where they deploy capital. The emphasis on customer experience, AI and supply chain suggests boards are backing projects they believe can protect margins or improve customer retention.

Manhattan Associates said the industry has struggled to turn those ambitions into integrated retail models. Its Unified Commerce Benchmark found that only 7% of retailers have reached what it defines as unified commerce leadership, although those businesses are growing at nearly twice the rate of the least mature peers.

Katie Foote linked that challenge to the need for retailers to connect customer-facing systems with inventory, order and fulfilment data.

"As customer expectations rise, personalisation is no longer a nice-to-have. Shoppers expect retailers to know them, anticipate their needs and deliver seamlessly across every channel. That only happens when retailers can apply AI to real-time inventory, order and fulfilment data. Unified commerce is what brings those pieces together, turning AI from a promise into the kind of connected experience that builds loyalty and drives profitable growth. This becomes even more important with the current macroeconomic trends and volatile global environment," said Katie Foote, Senior Vice President and Chief Marketing Officer at Manhattan Associates.

The survey covered executives from food and grocery, apparel and footwear, and specialty and department stores. Respondents ranged from companies with annual revenue below USD $250 million to retailers generating more than USD $20 billion.

Industry leaders said the tougher backdrop has changed the assumptions behind retail strategy. Businesses now have to respond to persistent instability rather than temporary disruption.

"The operating environment for retail has fundamentally changed. Geopolitical instability and inflationary pressures are now the norm, shaping the day-to-day reality for businesses across every market. Retailers are having to rethink how they grow, where they invest and how quickly they can respond. That's exactly why World Retail Congress matters. It brings together leaders from across the industry to share what's working, the challenges they're facing and how they're adapting to a much more uncertain landscape," said Ian McGarrigle, Chair of World Retail Congress.