Retail Sales in May: Tariff Impact on Consumer Demand in H2 2025

According to a recent survey conducted by 7thonline, 34% of retail leaders are concerned about declining consumer spending for this year—and this fear isn’t unfounded. May’s retail sales data was released this week, declining more than expected with the biggest drop in four months. However, apparel sales tell a different story. 

Excluding automobiles, gasoline, building materials and food services, May’s “core” retail sales increased .4%, after an upwardly revised .1% fall in April, suggesting a modest pick up in consumer spending this quarter; clothing sales rose by 10bps between April and May. However, downside risks to consumer spending are rising: slower labor market, student loan repayments resuming, tariff-induced stock market volatility, etc. While tariffs have had a clearer impact on large-ticket items, markets are signaling a slowdown for the second half of the year as tariffs begin to weigh on disposable incomes, according to Michael Pearce, deputy chief economist at Oxford Economics. 

7thonline’s survey of 100+ retail executives revealed that 73% of leaders are expressing concern over rising tariffs over the next year, with over 1 in 3 confessing their first response to new tariffs would be to adjust product pricing. Some retailers have been transparent about their plans to hike prices but others have not yet disclosed their strategies. 

“Past experience suggests the biggest price rises will come in July, though the full impact of the tariffs likely will emerge across the whole of the remainder of the year,” said Samuel Tombs, chief US economist at Pantheon Macroeconomics.

Despite distress around consumer spending, price adjustment is the go-to move due to low margins—over 75% of retailers said that they would be unable to absorb more than a 25% increase in tariff costs. 7thonline CEO, Max Ma, shared with Sourcing Journal that because margins are slim, navigating spending discretion amid increased tariffs is especially challenging but “many retailers…are pressuring their suppliers to lower prices, so they’re trying to do it on both sides.”

Here are five more strategies retailers and wholesalers can adopt to offset the cost of tariffs: https://www.7thonline.com/post/five-tariff-strategies-for-retail

While tariff news and fears may have come off their peak, the effects are still yet to be fully seen. To learn more about how your team can use AI to navigate shifting consumer demand, email us at info@7thonline.com or book a demo with our team.

Inside Retail Strategy: How Executives Are Adapting to Demand, Tariffs and Technology

Key Takeaways

  • 33% of retail executives are currently using AI to analyze data/forecast demand.
  • Over 1 in 5 retail executives lack confidence in their supply chain’s ability to handle disruptions.
  • 73% of retail executives express concern about additional increases in tariffs over the next 12 months.
  • 35% of retail executives say their first response to a new tariff increase would be to adjust product pricing. 

Evolving demand, rising tariffs and rapid advancements in AI are reshaping the retail landscape. This report analyzes how retail leaders are adapting their strategies in 2025, drawing on insights from a survey of over 100 retail executives. From supply chain confidence to technology adoption, the findings offer a look into the challenges and priorities shaping today’s retail strategy.

Demand Is Shifting—and Retailers Are Feeling the Pressure

While 36% of executives say demand has increased, a larger share (39%) report a decline. With 1 in 10 admitting their forecasting is poor and concerns mounting over consumer spending and rising costs, retail leaders are navigating a highly complex demand landscape.

As consumer demand shifts, retailers are seeing the strongest growth through branded ecommerce channels, with 33% reporting increased activity on their own sites. This suggests that more consumers are seeking direct-to-brand experiences, while traditional in-store retail and social commerce are capturing a smaller share of emerging demand.

Retailers Are Reinforcing Supply Chains—But Confidence Remains Mixed

More than 1 in 5 retail executives say they’re not confident in their supply chain’s ability to manage disruptions. To reduce risk, many are cutting inventory levels, diversifying suppliers and making infrastructure investments aimed at improving flexibility and resilience.

To reduce inventory risk, retailers are taking tactical steps like cutting inventory levels and diversifying suppliers—but their long-term focus is shifting toward smarter merchandise planning. More responsive pricing strategies (20%) and speed to market (14%) top the list of investment priorities, reflecting a push to become more agile amid ongoing supply chain uncertainty.

Tariff Pressures Are Forcing Retailers to Rethink

With 73% of retail executives expressing concern about rising tariffs over the next year, many are already weighing how to manage increased costs. From passing costs onto consumers to renegotiating supplier terms, retailers are navigating complex decisions in an uncertain economic environment.

Half of retail executives have yet to take specific action in response to rising tariff costs, but among those who have, the most common strategies include passing costs to customers (24%) and absorbing them internally (22%). Most retailers say they could only absorb a 25% tariff increase or less before needing to raise prices, and 35% say their first response to a new increase would be to adjust product pricing—highlighting how limited their flexibility truly is.

Retailers Are Cautiously Exploring AI—But Barriers Remain

A third of retail executives are already using AI to forecast demand, and 34% expect it to play a major role in sustaining or growing profits within the next two years. While most are maintaining their current tech investments, adoption is still limited by internal expertise gaps, budget constraints and uncertainty about ROI.

Retailers are exploring a range of AI applications, with marketing, inventory management and pricing optimization leading the way. Only 16% are currently using AI for demand forecasting—despite growing recognition of its potential. 

What’s Ahead for Retail Strategy

Retailers are balancing immediate pressures with long-term priorities—from managing tariff impacts to cautiously adopting innovative technology such as AI. As 2025 unfolds, building flexibility, improving forecasting and investing in strategic planning will be key to staying competitive.

Methodology

7thonline surveyed 105 retail executives about their retail strategy from June 2-11, 2025. Of the respondents that disclosed their job title, 53% were C-suite executives, 16% were owners and 8% were directors. 

7thonline is a leading AI-powered retail planning and forecasting software, enabling more effective planning, demand forecasting and inventory optimization for leading retailers and wholesalers. With embedded business intelligence and rich analytics, the solution offers complete demand visibility and planning capabilities at the most granular level. To learn more about our suite of solutions, book a demo or email us at info@7thonline.com. 

Behind the Software: Selling Retail Planning Software with Lauren Taubes

7thonline Director, Lauren Taubes sits down with Sue Firth on The Executive Edge to talk about balance as a working mom selling retail planning software. With over 20 years of experience in fashion tech, spanning trend forecasting to ERP systems and now 7thonline, Lauren is passionate about helping fashion companies optimize their processes.

“I want people’s lives to be better, faster and easier. I want to sell them something that makes their jobs day-to-day within the fashion industry more effective, more efficient.” – Lauren Taubes

lauren taubes in a business meeting

Key Takeaways: Life and Selling Retail Planning Software

  1. Technology Innovation: Small to medium fashion companies can significantly benefit from moving beyond Excel-based planning to sophisticated SaaS solutions
  2. Work-Life Integration: Success comes from finding supportive environments that understand the realities of being a working parent
  3. Relationship-First Sales: Building genuine connections and providing value leads to long-term success, even when immediate deals don’t close
  4. Industry Expertise: Deep knowledge of your sector combined with genuine passion creates authentic sales conversations
  5. Supply Chain Reality: Modern consumer expectations require sophisticated planning and forecasting to maintain satisfaction

Maximizing Capital for Retailers with Supply Chain Issues and the Amazon Effect

Sue: It’s not just the customer journey, it’s the data analytics of working out how shoppers are going to buy the product at full price. It’s understanding people and their buying processes so that the client, the company that makes the product in this case, gets the maximum capital.

Lauren: These big fashion, apparel, footwear companies globally, you want to make sure that what they produce, they don’t have too much or too little inventory. If you have too much, it’s sitting in the warehouse. Or too little inventory, and you’ve lost sales because you don’t have enough to put them on your shelves or your ecommerce site or the major department store you sell into. The current job I’m at (7thonline), really helps people plan more efficiently to make sure the customer has what they want at the end, and not overspend or underspend and make too much or too little.”

Sue: On the consumer side, shoppers are frustrated with long and delayed deliveries—even with tracking apps. Known as the Amazon effect, expectations for delivery times have changed to be almost instantaneous, and this has shifted down to even the younger generations. 

Lauren: With the issues of supply chain, what our planning solution does, we make sure that they have the right amount of products to get it in transit and there on time for shoppers.

Key to Success & Work-Life Balance

Sue: What do you feel were the ultimate ingredients for success?

Lauren: My parents (my dad was actually always in sales), customer success, building relationships and rapport, passion to connect with people, desire to make a difference by supporting the fashion industry. I always knew I would be driving my own success, being motivated to do the best I can at any organization. Being surrounded by like-minded individuals, a clear path and having experts around me.

Sue: Success and having children, it’s not by accident that you find many women struggle big time to balance this. What about yourself?

Lauren: When I had my first daughter, I was really fortunate that the owners of the organization really supported me. Also at small businesses! They really supported me with fluidity, made sure I was okay and set me up for success managing a brand-new baby before going back to work. It’s a fine line, I always like to say that I’m always running—there’s always something to do whether for work or for personal reasons. One of my top priorities when selecting a role is to make sure that there is that flexibility to support my two children.

Listen to the full podcast here: https://suefirthltd.com/finding-work-life-balance-with-lauren-taubes/

7thonline is a leading retail planning software, enabling more effective planning, demand forecasting and inventory optimization. To learn more, email us at info@7thonline.com or book a demo with our team.

Why AI Data-Driven Retail is the Future—and How to Get There

Merchandise assortment planning has undergone a major transformation over the past few decades—from manual processes and spreadsheets like Excel to various planning systems. Tech advancements in retail added some structure but many still relied on guesswork, labor-intensive processes and siloed data.

As the retail landscape became more complex (such as with the rise of omnichannel) and consumer expectations rose, the need for sophisticated tech solutions became even more pronounced. That growing complexity paved the way for artificial intelligence to transform how retail brands think about their merchandising strategy.

business meeting over graphs on a computer

Why Retailers Still Struggle: Common Pain Points

Despite advances in technology, many retailers continue to face stubborn pain points leading to off-the-mark inventory decisions. Data is often fragmented and scattered across teams and systems, resulting in information overload without actionable insight. Adding to the challenge: the expansion of omnichannel operations, global supply chain disruptions, tariffs, market saturation, waning brand loyalty and more. The stakes are too high for patchy assortment strategies. 

In 2023, the fashion industry produced between 2.5 and 5 billion units of excess stock. That’s up to $140 billion in lost sales, according to Business of Fashion. Meanwhile, consumers are frustrated—brands are losing out on an average of 20 percent in monthly profit due to out-of-stock sizing, a shopper’s biggest complaint.

The AI Advantage: Balancing Art and Science

Retailers are increasingly turning to data-driven tools to overcome these challenges—and strike the right balance between demand, availability and profitability with AI-powered tools. A recent study found that 75 percent of fashion executives plan to adopt advanced analytics and AI to automate key processes, from forecasting to inventory allocation, in 2025. These proactive strategies are already delivering results for forward-thinking brands; they reported AI has improved stockouts by as much as 25 percent. AI enhances the art of merchandising and strengthens it through powerful data-backed insights. Creativity and brand identity still matter, but now they’re supported by real-time, data-informed decision-making.

Data-Driven Retail Decisions and AI-Powered Merchandising

AI enables a more agile, responsive approach to inventory planning. It processes vast datasets in real time, revealing insights that manual processes would miss or take weeks to uncover. Forecasting becomes more precise by analyzing historical trends at a granular level. Risk is reduced as production decisions are informed by what actually sells, cutting down on waste and markdowns. And with full visibility across channels, teams can better align around performance metrics for DTC, wholesale and ecommerce. A single source of truth empowers smarter collaboration across departments from design and production to planning and finance. 

As manual errors decline and efficiency improves with smarter planning, customer satisfaction rises. Meeting demand with the right products in the right sizes at the right locations ultimately drives profitability and strengthens brand performance.

Steps to Perfecting Merchandise Assortment with AI

Perfecting merchandise assortment with AI begins with smarter planning. Retailers must analyze past sales and behavioral data to uncover not just what sold, but why. AI uncovers deeper insights, including customer affinities and regional preferences, to guide more targeted assortment decisions.

Next, teams must align around common inventory goals, lead times and budget constraints. When all departments operate from the same playbook, planning becomes proactive rather than reactive.

Then, it’s all about placement, which products to put where, when. AI enables retailers to determine the most optimal localized assortment mix, determined by each SKU’s propensity to sell at each location, based on demand drivers like weather patterns. By combining push strategies, using preset rules like store size and sales volume, with pull strategies driven by real-time demand, retailers ensure each store has the essential stock.

Once inventory runs out, it’s time to replenish. AI also enhances replenishment strategies; when items sell, inventory can be shifted from other locations or reordered as needed. This adaptability reduces the risk of overproduction and keeps shelves stocked.

Continuous Optimization: Analyze, Forecast, Repeat

Assortment planning doesn’t end once the product lands in shoppers’ hands. AI thrives on continuous data feedback, improving forecasting models with every cycle. Over time, planning becomes more accurate, responsive and aligned with customer demand.

Perfecting your merchandise assortment with AI isn’t about removing human insight—it’s about unlocking its full potential. By turning complex data into clear direction, AI helps retailers thrive in a world where speed, precision and personalization are no longer optional—they’re essential.

Read the full article here: https://issuu.com/mannpublicationsmagazines/docs/fm_june_july_full?fr=sNzA3ZTg2MDI5NTU

7thonline is a leading AI-powered retail planning and forecasting software, enabling more effective planning, demand forecasting and inventory optimization for leading retailers. With embedded business intelligence and rich analytics, the solution offers complete demand visibility and planning capabilities at the most granular level. To learn more about our suite of solutions, book a demo or email us at info@7thonline.com.

Retail and Manufacturing Operations: The Possibility of Reshoring with AI & Automation

The conversation around bringing fashion and apparel manufacturing back to the United States has grown louder in recent months as tariff news continues to hit the stands—especially as 97% of goods in the industry are imported. For many, the idea seems aspirational; limited by high labor costs, outdated infrastructure and a lack of technical workforce, the barriers appear to be high. But we’re at a critical inflection point. Automation and artificial intelligence (AI) have matured to the point where reshoring is not only possible—it is practical given the right circumstances.

Our CEO, Max Ma, shared his opinion on reshoring for fashion and apparel with Sourcing Journal: https://sourcingjournal.com/topics/technology/reshoring-immigration-technology-manufacturing-trump-made-in-america-1234749503/

There was a time when regions across the country were thriving apparel production hubs. Factories operated efficiently, often powered by skilled immigrant labor and close ties to local retailers. That ecosystem didn’t vanish because it was inherently flawed, it shifted overseas due to cost advantages. Today, however, the dynamics have changed. Labor costs in countries like China have risen significantly, while regulatory burdens and global instability have introduced new risks into extended supply chains.

Meanwhile, pockets of domestic production still exist. Lower-cost regions such as South Carolina maintain infrastructure and history in apparel manufacturing, and niche factories continue to operate in urban centers like Brooklyn, New York. The conditions for regrowth are in place. What is needed is an alignment in policy, technology and the industry’s commitment.

The Role of AI in a Reshoring Revolution

Automation and AI are the great equalizers in the reshoring conversation. Dark factories have been seen in other industries—so it’s not unfounded that they could be possible for fashion as well but it’s unlikely apparel manufacturing will be entirely human-free; significant portions of the production process from fabric cutting, dyeing, material transport and even quality control, can be automated today. These advancements dramatically reduce dependency on manual labor while increasing output consistency.

Beyond the factory floor, AI-driven platforms like 7thonline are already transforming how retailers plan and manage inventory. By automatically generating merchandise plans based on historical data and predictive analytics, retailers can reduce overproduction, avoid lost sales and respond more quickly to changing demand. These benefits are particularly compelling when paired with shorter, domestic supply chains.

When production happens thousands of miles away, a single purchase decision can take months to reach the sales floor. The risk of misalignment is high. Reshoring, supported by intelligent planning systems, drastically reduces that lag and associated costs.

Policy Must Match Industry Momentum

For this reshoring vision to become a reality at scale, government support is essential. Other countries that have successfully built automated manufacturing sectors, such as Japan, South Korea and China, have done so with significant public investment. These governments have subsidized robotics, funded workforce training and created tax incentives to attract industrial development.

The United States should review success stories and take inspiration while following suit. Subsidies for automation equipment, tax incentives for reshoring investments and grants for workforce development would create a more level playing field. These policies should be considered industrial aid because they are strategic investments that can lead to job creation, higher tax revenue and greater national resilience.

Looking Ahead: A Smarter Supply Chain

The time to act is sooner rather than later. The fashion and retail industries are under immense pressure to improve speed to market, reduce waste and operate more sustainably. Especially as tariff uncertainty continues to hit the newsstands. A smarter, more localized supply chain that’s enabled by automation and powered by AI is the solution.

As we look to the future, the question is no longer whether reshoring is possible. The question is: are we ready to do the work collectively, across sectors and with government support to make it happen? With the right combination of policy, technology and willpower, we can build a new era of American manufacturing. One that is more intelligent, responsive and resilient than ever before.

7thonline is a global leader in AI-native demand planning and inventory management solutions, offering retailers and wholesalers innovative functionality that optimizes their supply chains and drives profitability across all key channels. To learn more about our merchandise software solution, contact the team at info@7thonline.com or book a demo.

Escape from Excel

Boost sales, improve margins and maximize profits. Learn how retailers can utilize AI and demand planning software to escape from Excel hell.

Maximize Your Market Share with Micro Merchandising

Micro merchandising ensures stores have the assortment mix the local market wants—in the right color, the right size, at the right price. Through precise planning, demand forecasting, and inventory optimization, products can sell at the highest possible margin.

Maximize Inventory Productivity with Multi-Channel Demand Planning

At 7thonline, we understand the challenges brands face in maximizing inventory productivity across wholesale and direct-to-consumer (DTC) channels. 7thonline’s DTC Demand Planning is ‘Store-Based’ (Yin), while its Wholesale Demand Planning is ‘Account-Based’ (Yang), for a comprehensive and complete view of Corporate Demand. The two approaches are equally vital to your business yet when they are integrated as part of a whole, the combined benefits are significant.

digital sales forecast

Through decades of collaboration with clients like Patagonia, Canada Goose, PVH, Under Armour, Oakley and VF Corp, we have learned, refined and developed an end-to-end multi-channel demand planning technology that is purpose-built for inventory management, planners and account executives/salespeople.

Unfortunately, many people think they can manage wholesale with Excel or treat it the same as retail by using a ‘store-based’ solution, which leads to overstock and lost sales. Recently, several leading, innovative brands have approached 7thonline seeking a technology that can help them overcome the unique challenges of wholesale channel demand planning.

  • Traditional demand planning tools were originally developed as ‘store-based’ solutions for CPG and food and beverage. After all, these are the largest consumer consumption categories so it makes sense.
  • However, while ‘store-based’ approaches are great for DTC brick and mortar, they cannot be retrofitted to work for wholesale demand planning—period.
  • Our wholesale demand planning is purpose-built as an ‘account-based’ system which is the only way to effectively manage wholesale.
  • It enables Account Executives (AEs) to take early demand signals from customers and provides demand visibility across all accounts.
  • It also enables quick order aggregation from brick-and-mortar and other channels, as well as effective planning for future demand with the aid of ML&AI forecasting.

Available to Sell (ATS) Reports can be created instantaneously versus aggregating bookings from hundreds of Excel worksheets. As mentioned earlier and in stark contrast, our approach to DTC demand planning is ‘store-based’. Utilizing both strategies for multi-channel demand planning is crucial for success.

7thonline’s unique approach of combining Yin and Yang has enabled brands to have a holistic view of demand planning across all channels, helping them drive revenue growth for nearly 25 years.

To learn more about 7thonline’s multi-channel capabilities, book a demo or email us at info@7thonline.com.