Download the full POV here (pdf)
Navigating 2025
Direct to Consumer & E-Commerce
The first quarter of 2025 has proven challenging for retail and direct to consumer companies for a variety of reasons. We prepared a POV based on the current consumer behavior trends and state of e-commerce. Below are some initial insights as well as some strategic options to help combat declines in consumer confidence and a slump in demand.
Current Challenges & Headwinds
- Chinese competitors like Temu and Shein are cutting ad spend by 19–31%. This could be an opportunity for US brands or a sign of decline in overall demand
- Tariffs now apply to imports under $800 as of May 2025
- Widespread consumer and SMB concern: declining Q1 sales, rising prices (25–55%+), delayed orders
- Major budget chains (e.g., Wendy’s, McDonald’s) report sales declines
- Consumer sentiment is at its lowest since 2020
- Smaller retailers are hit harder; Amazon sellers are stockpiling inventory
- Companies like Apple face massive tariff impacts ($900M in Q2)
- “Trading down” trend: consumers shifting to cheaper alternatives and used products
- E-commerce boom from 2021–2022 is leveling off to baseline growth in 2025
Strategic Recommendations
- Abandon year-over-year comparisons; set new, realistic goals
- Make surgical cuts to ad spend while protecting brand visibility
- Shift focus from ad-driven growth to controllable factors
- Improve SEO, UX, email marketing, social content, and referrals
- Refresh outdated product content and imagery
- Offer smaller, budget-friendly products and loyalty discounts
- Update audience targeting
- Outsource to control costs & gain ability to pivot during demand spikes
- Conduct audits to stay aligned with market changes
- Review competitive landscape changes