The Australian Retail Outlook 2025 report has dropped, and it’s packed with insights that could shape the way small businesses operate this year.

With shifting consumer expectations, economic pressures, and digital advancements all playing a role in shaping how businesses operate,  small business retailers need to get a handle on the trends to stay ahead.

Here’s what you need to know.

1. Shoppers are spending smarter

With the cost-of-living crisis continuing to bite, consumers are becoming more selective about where and how they spend their money. According to the report, 46 per cent of shoppers are cutting back on spending, and 22 per cent are switching to home-brand products to save cash. What does this mean for small retailers? The rise of budget conscious consumers means that competitive pricing and flexible payment options will be a key element of success.

Image source KPMG Australian Retail Outlook 2025 report

2. Online vs in-store: the hybrid shopper rules

Forget the old ‘online vs brick-and-mortar’ debate—most shoppers now expect a seamless experience across both. A massive 85 per cent of consumers regularly switch between shopping online and in-store, meaning small retailers need to ensure their digital presence matches their in-store experience.

3. Social commerce is booming (especially for Zoomers)

If you’re not selling through social media yet, you might be missing out. The report highlights that social commerce—shopping via platforms like Instagram and TikTok—is surging, particularly among younger consumers. With many shoppers now using social media as their primary discovery channel, small retailers should consider investing in social media-friendly storefronts and content.

4. Sustainability matters, but at the right price

Consumers want sustainability but they don’t want to pay extra for it. While 62 per cent prefer sustainable packaging, only 21 per cent are willing to pay more for it. Small retailers can gain an edge by making eco-friendly practices a standard part of their business rather than a ‘premium’ feature.

Image source: KPMG Australian Retail Outlook 2025 report

5. Fast, free delivery and click-and-collect a must-have

Same-day delivery and click and collect once the domain of big department stores is now expected everywhere. With eCommerce booming consumers expect fast and reliable delivery from all retailers. This means small business retailers will need to ensure their logistics are up to scratch of they want to compete with the big leagues.

6. AI and personalisation are on the rise

Personalised shopping experiences are in high demand, with 59 per cent of consumers favouring loyalty rewards like discounts and cashback. AI-driven recommendations, tailored promotions, and seamless omnichannel experiences can help small retailers build stronger relationships with their customers.

2025 is shaping up to be a year of change, but for small business owners who adapt to these trends, it’s also full of opportunity. By embracing digital transformation, optimising customer experience, and keeping a watchful eye on consumer behaviour, small retailers can set themselves up for retail success in the year ahead.

You can check out the full report here.

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